Chile’s Electricity Conundrum

By Edward K.

In discussing the Future of Chile’s Power, we did a simple calculation in class to determine the overnight cost per megawatt-hour of building a new power plant. It looks like this when assuming a 10% discount rate and an asset life of 40+ years:

EK 1

According to the values in the table above, building hydro power seems like the most economic decision on a cost per MWh basis. However, as we discussed in class, hydro power faces a variety of risks including unpredictable droughts, difficulty obtaining overland transmission access from the South, and political gridlock. This leaves two real options on the table: nuclear and coal.

Following the 2004 gas crisis, many generation companies in Chile began investing in coal-fired assets. But was/is this really a prudent decision in the long run? In addition to carbon dioxide, coal power plants emit large amounts of sulfur dioxide, mercury, and other hazardous air particles. While carbon dioxide is a global example of tragedy of the commons (i.e. a ton of CO2 emitted in Chile leads to the same amount of greenhouse gases for the entire world as a ton of CO2 emitted in China), acid rain caused by sulfur dioxide and the deaths caused by hazardous air particles is a very local problem.

This leaves one economically and environmentally viable generation technology: nuclear. One of the largest hurdles however is that Chilean generation firms have yet to build a commercially viable nuclear power plant. In addition, conventional nuclear power plants are over 2,000 MW in size; this is similar in size to the HidroAysen project and would therefore lead to similar new transmission issues.

Keeping all this in mind, Chilean generation firms should take a serious look at nuclear small modular reactors (SMRs). These plants are under 300 MW in size. They require far less land than conventional nuclear power plants, would not require a dramatic new build of transmission lines, and are much safer in earthquake prone Chile due to their small size. It also makes environmental sense: SMRs have zero greenhouse gas emissions, they do not cause flooding in pristine natural environments, and they can be built in already existing industrial zones.

But perhaps most importantly, SMRs make economic sense. The mPower reactor from Babcock & Wilcox, which has a commercial partnership with the Tennessee Valley Authority, has an overnight cost of $5,000 kW. Estimates for other SMRs range from $4,000/kW to $5,000 kW. When comparing these numbers with scrubbed “clean” coal plants, there is a clear argument to be made for SMRs:

EK2

According to the World Nuclear Association, developing nations are at the forefront of commercial SMR development. Chinergy is developing twin 250 MW reactors in China, arguably the most advanced SMR project in the world. Russia already has four small SMRs in operation. The Chilean government and the country’s generation companies should strongly consider the economic and environmental benefits of SMRs, and create an innovative path towards energy independence.

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One Response to “Chile’s Electricity Conundrum”

  1. Last spring the “Terrapower” case was part of the IBEE class. This is a small nuclear reactor technology. A related post is here in the blog: https://innovbusenergyenviro.wordpress.com/2013/02/19/vc-and-nuclear-the-next-frontier-or-a-recipe-for-losing-money/

    The tag cloud nuclear also brings up several angles on the issue.
    https://innovbusenergyenviro.wordpress.com/tag/nuclear/

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