Lecture 4: The Capital Cost of Nuclear Power

The economic viability of nuclear power hinges on construction duration and financial modeling. While "overnight cost"—the price of hardware excluding financing—provides a baseline for technology comparison, lengthy build times exponentially increase the total investment due to interest accumulation and inflation.

• Overnight cost — This metric represents hardware expenses alone, removing financial charges like interest to allow for standard technology comparisons [50:44].

• Inflation factors — Monetary policy aims to keep currency value slightly decreasing, which motivates spending and complicates cost projections for long-term projects [06:16].

• Construction duration — Delays in building nuclear facilities cause capital charges to compound heavily, often resulting in final costs 2–3 times higher than the original hardware budget [1:16:14].

• Data reliability — The Energy Information Administration provides standardized survey-based costs, though these figures often struggle to account for the financial risks associated with newer or infrequent projects [42:21].

• Spending intensity — Financial models use a parabolic curve to estimate spending rates over a project's timeline, integrating these values with interest and inflation to determine total investment [1:06:20].

• Estimator bias — Predictions from technology vendors often skew lower than final project costs, which historically run much higher than initial optimistic projections [56:17].

• How do construction delays impact the long-term price of electricity generated by nuclear power?

• What are the differences between nominal and real dollar calculations in large-scale infrastructure projects?