Loan Guarantees and other Random Thoughts

I noticed an article talking about a recently awarded loan guarantee, not the much talked about Plant Vogtle guarantee for $8.3 billion, but rather the much smaller amount of $1.37 Billion to BrightSource Energy for a solar plant in the California desert. At first blush it would appear that the critics who say nuclear is too expensive are right. So, as usual, I decided to “do the math”. Interesting results.

A quick calculation of funding by installed MW would seem like a reasonable initial comparison. This yields about $3.5 million per MW installed for solar and $3.6 million per MW installed for nuclear. Pretty comparable numbers and would imply that the DOE is funding both at approximately the same level.

There is a problem with the approach however. The BrightSource Energy facility is scheduled to be 392 MW installed. If this is being reported as is typical of solar facilities, that would be the maximum production at peak sun hours. Actual generation averaged over time would be much less than that, at best something less than 30% of the installed value. Using 30%, the MW generated would be just under 118 MW.

Nuclear also does not operation continuously. To estimate expected operation of these two units we can look at current operation of the other two Vogtle units, as of September 2009 the two averaged 91% capacity factor for the prior year. This is inline with the fleet average. The plant design of choice at Vogtle is two units of the AP1000 that is rated for 1150 MW per unit. Using a 90% capacity factor, the MW generated would be 2070 MW.

Looking at these differences in capacity factor makes it clear that installed MW are not all equal to one another. The amount of power generated is what really matters. So, to compare the real costs, one must compare generated MW against one another instead of installed MW.

Repeating the same calculation as before with MW generated yields a very different comparison. This time, the solar loan guarantees are at just over $11.5 million per MW generated. Where the nuclear loan guarantees are just over $4 million per MW generated.

I have been generous in the assumed capacity factor for the solar facility and under estimated that same in the nuclear facility, and still end up with solar power costing nearly three times nuclear power for each MW of generation. To put it another way, to get equivalent generation would require more than $24 Billion in loan guarantees.

Further, the solar facility has an estimated life cycle of thirty years, according to the BrightSource website. The nuclear facilities in operation today are projecting a life cycle of at least sixty years or double the life time. So looking at lifetime generation, even after spending three times as much upfront, only half as much total energy would be generated.

Loan guarantees are not necessarily true costs and all of us working in the energy field understand that they do not represent the costs to the government. However, they serve as a good proxy for understanding the costs of a particular option and allow for a basis of comparison based on a relatively neutral (the DOE) best estimate of the costs for these sources of energy.