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The French nuclear bet

Quentin Perrier ()

No 2017.01, Policy Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: After the first oil shock, France fully engaged in the world’s largest nuclear program, ordering 36 reactors within two years. These reactors are now reaching the end of their lifetime, so a new policy must be defined: Should they be retrofitted or decommissioned? What are the prospects for nuclear afterwards? The best economic decision crucially depends on the future costs of nuclear, demand levels and CO2 price, which are all subject to significant uncertainty. To deal with these uncertainties, we apply the framework of Robust Decision Making to determine which plants should be retrofitted. We build an optimization model of investment and dispatch, calibrated for France. Then we use it to study 27 retrofit strategies for all combinations of uncertain parameters. Based on nearly 3,000 runs, our analysis reveals one robust strategy, which is to shut down from 7 to 14 of the oldest 14 reactors, and then extend the lifetime of all remaining reactors. Departing from cost-minimization strategies and from the French official scenarios, this provides a hedge against unexpected high retrofit cost, decreasing demand or low CO2 price. But we also show how this strategy remains vulnerable to a combination of these three elements, which helps understand and put numbers on the current debate. In the longer term, we show that the optimal share of nuclear in the power mix decreases. If the cost of new reactors (EPR or else) remains higher than 80 €/MWh, this optimal share drops below 40% in 2050. A combination of variable renewables, hydropower and gas becomes competitive, even if the price of CO2 reaches 200 €/tCO2.

Keywords: Electricity; Nuclear; Investment; Uncertainty; Robust Decision Making (search for similar items in EconPapers)
JEL-codes: Q41 Q48 C61 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-reg
Date: 2017-02
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Working Paper: The French Nuclear Bet (2017) Downloads
Working Paper: The French Nuclear Bet (2017) Downloads
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