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on Project, Program and Portfolio Management |
| By: | Nuttall, W.J.; Taylor, S |
| Abstract: | This paper considers the key economic risks associated with nuclear power. The authors observe that the bulk of the risks of a nuclear power station project fall during the roughly five year period of plant construction. This window of risk follows a lengthy siting process and comes before power station operations lasting up to sixty years. As a consequence of the nature of the economic risks, operational nuclear power plants are more attractive targets for initial investment than new build projects. The authors suggest that the first glimmers of a US nuclear renaissance were visible in 2000 when dramatically higher prices were achieved for second-hand nuclear power plants following a period of depressed prices in the 1990s. The paper closes with a consideration of the prospects for nuclear new build in both Europe and the United States and the key financial and economic factors that could drive such developments differently in each case. |
| Keywords: | Finance, Nuclear Power, Electricity Generation, Economic Risk, Energy Policy |
| JEL: | G31 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0829&r=ppm |
| By: | Newbery, D. |
| Abstract: | State-owned electricity companies typically set prices that are too low to finance new investment when needed, and which create additional problems where private investment is sought. The paper asks to what extent this can be attributed to historic cost accounting, and finds that provided the required rate of return is appropriately set, this seems unlikely to be the main cause of under-pricing, although inflation in a period of excess capacity can amplify such under-pricing. It seems more likely that the main problem is a failure to charge an appropriate riskadjusted rate of return. The paper concludes by suggesting how such companies can move to a more efficient price structure, provided the correct cost of capital is recognised in the regulated pricing structure. |
| Keywords: | Electricity investment, pricing, accounting, cost of capital |
| JEL: | L32 L51 L94 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0830&r=ppm |