Can Renewables Integration Costs and Externalities Leave Room for Nuclear in Decarbonized Power Systems?

Ange Blanchard ()
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Ange Blanchard: Chaire économie du climat - CEC - Chaire économie du climat, LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay

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Abstract: This paper examines whether the integration costs and externalities associated with variable renewable energy sources (VREs) can justify new investments in nuclear power in future low-carbon electricity systems. An analytical model is developed to compare the marginal system-levelized cost of electricity (LCOE) of VREs and nuclear power across a range of renewable penetration levels. Results indicate that nuclear remains economically relevant only when assuming relatively low overnight construction costs (below €5,000/kW) and favorable financing conditions (discount rates under 3%). Under these conditions, nuclear's optimal share reaches up to 18% of total generation. Conversely, recent Western projects, with costs exceeding €8,000/kW, lie well outside this viability region, even when accounting for VRE integration costs at high penetration levels. Sensitivity analysis further shows that construction costs and discount rates exert similar elasticities (-2.1) on nuclear's equilibrium share, implying that improvements in both cost control and financing conditions are jointly required. Overall, while VRE integration costs can open a narrow economic window for nuclear, sustained declines in storage and renewable costs may close it again, underscoring the fragility of nuclear's competitiveness in future power systems.

Keywords: Renewables; Nuclear Energy; Integration costs (search for similar items in EconPapers)
Date: 2025-11-06
Note: View the original document on HAL open archive server: https://hal.science/hal-05353977v1
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