Nuclear reactors’ construction costs: the role of lead time, standardization and technological progress

This paper provides the first comparative analysis of nuclear reactor construction costs in France and the United States. Studying the cost of nuclear power has often been a challenge, owing to the lack of reliable data sources and heterogeneity between countries, as well as the long time horizon which requires controlling for input prices and structural changes. We build a simultaneous system of equations for overnight costs and construction time (lead-time) to control for endogeneity, using expected demand variation as an instrument. We argue that benefits from nuclear reactor program standardization can arise through short term coordination gains, when the diversity of nuclear reactors’ technologies under construction is low, or through long term benefits from learning spillovers from past reactor construction experience, if those spillovers are limited to similar reactors. We find that overnight construction costs benefit directly from learning spillovers but that these spillovers are only significant for nuclear models built by the same Architect-Engineer (A- E). In addition, we show that the standardization of nuclear reactors under construction has an indirect and positive effect on construction costs through a reduction in lead-time, the latter being one of the main drivers of construction costs. Conversely, we also explore the possibility of learning by searching and find that, contrary to other energy technologies, innovation leads to construction costs increases