Available via license: CC BY-NC-ND 4.0
Content may be subject to copyright.
Available online at www.sciencedirect.com
Nuclear Energy and Technology 3 (2017) 176–182
www.elsevier.com/locate/nucet
Criteria of return on investment in nuclear energy
V. V. Kharitonov
∗, N.N. Kosterin
National Research Nuclear University “MEPhI” (Moscow Engineering Physics Institute) 31 Kashirskoe shosse, Moscow 115409 Russia
Available online 24 August 2017
Abstract
Analytical relationships between the investment performance criteria (net present value ( NPV ), levelized cost of electricity ( LCOE ),
internal rate of return ( IRR ), discounted payback period ( T
PB
), and discounted costs ( Z )) and basic engineering-economic parameters of
nuclear reactors (capital costs K , annual operating costs Y , annual revenue R , NPP construction T
C and operation T
E periods), characterizing
the NPP profitability and competitiveness at the microeconomic level, are defined for the first time. The power function of discounted cash
flows was used in calculations.
It is shown that the joint analysis of the entire set of investment efficiency criteria (not only LCOE as it is often done) can help
avoid contradictions in assessing the NPP project profitability and formulate optimal requirements on the reactor engineering and economic
parameters. The obtained analytical expressions provide solutions not only of the traditional «direct problem» (assessing efficiency criteria
according to the forecasted capital and operating costs and profit stream) but, which is of equal importance, the solution of the «inverse
problem»: assessing restrictions on capital and operating costs, i.e. identifying «investment corridors», based on the desired values of efficiency
criteria.
The investment risk assessment results obtained by Monte-Carlo method are presented in order to account for the inherent uncertainties
in the forecasts of long-term cash flow during the NPP construction and operation required for assessing the efficiency of investments. The
calculation results of probability distributions of the investment efficiency (profitability) criteria are presented for the specified ranges of
uncertainties the forecasted cash flow. It is shown that the risk of project unprofitability can be quite high. In order to reduce investment
risks, it is necessary to justify the changes in basic reactor parameters (decrease in K , Y , T
C and increase in R and T
E
) and uncertainty ranges
in the initial data.
Copyright © 2017, National Research Nuclear University MEPhI (Moscow Engineering Physics Institute). Production and hosting by
Elsevier B.V. This is an open access article under the CC BY-NC-ND license. ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )
Keywords: Investment efficiency criteria; Nuclear energy; Nuclear power reactor; Capital and operating costs; Revenues; Discount rate; NPP competitiveness;
Monte-Carlo method.
Introduction
The conditions of stiff competition between the companies
offering Generation III and Generation III + nuclear power re-
actors are currently being shaped on the global oligopolistic
NPP construction market [1–3] . A number of criteria (indica-
tors) are used for assessing competitiveness of different reac-
tor design projects which can be subdivided into the following
levels: microlevel, mesolevel and macrolevel [4,5] . However,
∗Corresponding author.
E-mail address: vvkharitonov@mephi.ru (V.V. Kharitonov).
Peer-review under responsibility of National Research Nuclear University
MEPhI (Moscow Engineering Physics Institute).
Russian text published: Izvestiya vuzov. Ya d e r n a y a Energetika (ISSN
0204-3327), 2017, n.2, pp. 157–168.
the primary “nucleus” of the system of indicators of competi-
tiveness of the NPP construction project is the set of technical
and financial parameters of the nuclear power reactor which
ensures investment attractiveness of the project, i.e. its guar-
anteed return on investment or profitability (microlevel).
After publication in 2000 of IAEA guidelines [6] on the
economic assessment of tender offers as pertains the NPP
construction on the basis of “discounted cost of electricity”
during the whole lifecycle of electric power generation facil-
ity LCOE (levelized cost of electricity) the LCOE value rep-
resenting the minimum cost of produced and delivered elec-
tricity becomes both in Russian and in foreign literature the
main criterion of competitiveness of construction of power
plants of different types [7–12] . However, the so-called “net
present value” NPV [1,13–18] serves as the principal crite-
http://dx.doi.org/10.1016/j.nucet.2017.08.006
2452-3038/Copyright © 2017, National Research Nuclear University MEPhI (Moscow Engineering Physics Institute). Production and hosting by Elsevier
B.V. This is an open access article under the CC BY-NC-ND license. ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )
V. V. Kharitonov, N.N. Kosterin / Nuclear Energy and Technology 3 (2017) 176–182 177
Fig. 1. Base layout of expected annual cash flows within the investment
project (power plant construction and operation) throughout the whole life-
cycle duration Т .
rion of profitability of investment project. In this case, other
auxiliary criteria such as the levelized cost of electricity
LCOE , internal rate of return ( IRR ) and discounted payback
period ( T
PB
) follow from the mathematical definition of the
net present value. Emphasis laid in a number of publica-
tions solely on the levelized cost of electricity, which is, of
course, a very convenient parameter for comparison of dif-
ferent power generation facilities, may result in the contro-
versy with the criterion of profitability of the project NPV .
In a number of studies, for instance, in [11,12,19,20] , NPV ,
LCOE and IRR criteria are discussed in the economic analysis
of NPP projects, but, however, their mutual interference has
not yet been investigated.
Therefore, the purpose of the present study is the deter-
mination of the analytical interrelation between technical and
financial parameters of nuclear reactors and the criteria of
efficiency of investments in NPP construction characterizing
competitiveness (payback) of NPP on microeconomic level.
Results of assessment of investment risks for NPP construc-
tion project using Monte-Carlo method are presented in con-
nection with uncertainties inherent in the long-term forecast-
ing of cash flows during construction and operation of NPPs
required for assessing efficiency of investments.
Net present value
Net present value NPV (in rubles) is the “net discounted
profit” [1,6,8,13–16] accrued (summed up) during the whole
lifecycle Т (years). Taking into account that annual monetary
expenditures (runoffs) C
t
= K
t
+ Y
t (RUR/year) are divided for
the sake of convenience of analysis into the following two
components –capital costs K
t and operating costs Y
t (for
example, as in Fig. 1 ), general expression for NPV is split
into two parts with different limits of summation as follows:
N P V =
T
t=1
R
t
−C
t
(1 + p)
t
= −
T
C
t=1
K
t
(1 + p)
t
+
T
T
C
+1
R
t
−Y
t
(1 + p)
t
. (1)
Here, R
t
–C
t is the net profit during year t defined as the
difference between the expected annual revenue flow R
t and
the expected costs flow C
t
. Each annual difference ( R
t
–C
t
)
is reduced to the starting moment by multiplication by the
reduction factor (present value index) (1 + р )
–t
. The value р
(1/year) is the discount rate (norm). This value characterizes
the annual profitability of the project similarly to the prof-
itability (interest rate) of a bank account (deposit) and must
exceed the cost of capital attracted as investments. There exist
numerous guidelines on the selection of discount rates tak-
ing into account inflation, investment risks and other factors
influencing the profitability of the project [6,8,11,12,17,18] .
Similar discount rates equal to 3, 5 (or 7) and 10%/year are
often used abroad for preliminary comparative assessments of
different power generation projects [9,19,18] . It is clear from
formula ( 1 ) that capital costs are taken into account only dur-
ing the period of construction of the object covering the time
period with duration equal to T
С
, i.e. the period from t = 0 to
t = T
С (see Fig. 1 ), while operating costs Y
t
, as well as rev-
enues R
t are accounted only during the process of operation
with duration equal to T
E
, i.e. from the time moment t = T
С
to t = T
≡T
С
+ T
E
. The moment to which reduction is made
in formula ( 1 ) is the first year of the project. The first year
of operation of the object is taken in a number of publica-
tions as the year to which the reduction is made. Result of
NPV calculation is not dependent on the choice of the year
to which the reduction is made.
Investments with the highest positive net present value
( non-negative, i.e. with accrued profit ) are preferable . In other
words, investment costs for the construction of NPP must be
covered and repaid from the revenues coming from generated
and sold electricity. Consequently, the sign of NPV criterion
means that the project is profitable ( NPV > 0) or loss-making
( NPV < 0) by the end of its lifecycle. When NPV = 0 the cost
of the project is paid back only by the moment of completion
of its lifecycle which may exceed 100 years for NPP.
Let us note that the purpose of NPV is solely for deter-
mining the conditions of project’s profitability. Distribution of
profit generated in the process of implementation of invest-
ment project is a completely different task not addressed in
the present study (see Refs. [14,15,21,22] ).
Let us examine first the ideal (best) scenario of the project
in the approximation “fast construction when Т
С
→ 0 and ex-
tended period of operation when Т ≈Т
E
→ ∞ ”, which pro-
vides clear and straightforward relations for the criteria. Let
us assume for the sake of simplicity that annual revenues
and operating costs are constant and are equal, respectively,
to R
t
= R and Y
t
= Y (base option). Then, the first sum on
the right side of ( 1 ) is the total capital costs (–K ), while the
second sum represents the infinite converging geometric pro-
gression with progression ratio equal to q = (1 + p )
–1 and the
sum of the progression equal to ( R –Y )/ p . As the result, for
the given technical and financial parameters of power reactor
( K , Y , R ) we obtain the highest value for NPV :
N P V ≤−K + (R −Y ) /p. (2)
In the general case for specific duration of NPP construc-
tion Т
С (year) and operation Т
E (years), we obtain from ( 1 )
instead of ( 2 ) the following expression which is convenient
178 V. V. Kharitonov, N.N. Kosterin / Nuclear Energy and Technology 3 (2017) 176–182
for subsequent analysis:
N P V = −K ·f
K
+
(
R −Y
)
·f
Y
/p ≤−K +
(
R −Y
)
/p. (3)
Here dimensionless coefficients f
K
≤1 and f
Y
≤1 are de-
termined taking into consideration the duration of NPP con-
struction and operation by the following formulas:
f
K
=
1
K
T
C
t=1
K
t
(1 + p)
t
;f
Y
=
p
R −Y
T
T
C
+1
R
t
−Y
t
(1 + p)
t
, (4)
where R and Y are the revenues and operating costs during
the first year of reactor operation. In a particular case when
annual costs and revenues are constant (as in Fig. 1 ) the sums
in ( 4 ) represent sums of geometric progressions, so that co-
efficients take on the form of explicit analytical functions of
durations of NPP construction ( Т
С
) and operation ( Т
E
) and of
cash flow discount rate ( р ):
f
K
=
1 −(1 + p)
−T
C
p T
C
;f
Y
=
1 −(1 + p)
−T
E
(1 + p)
T
C
(5)
Here, the condition f
K
> f
Y is always satisfied and, there-
fore, inequality in ( 3 ) is also satisfied. In ideal case of
( Т
С
→ 0, Т
E
→ ∞ ) we obtain f
K
= f
Y
= 1 independently of the
discount rate. For instance, if Т
С
= 6 years, Т
E
= 60 years and
р = 10%/year we obtain f
K
= 0.726 and f
Y
= 0.563. With de-
creasing discount rate, the factor f
K monotonously increases
tending to unity and coefficient f
Y passes through the maxi-
mum and tends to zero for р → 0 (as ≈рТ
E
).
Numerical example . Let reactor with 1000 MW power can
produce 7 billion kW/hours of electricity during one year
with installed capacity duty factor ICDF = 0.8. Selling elec-
tricity at 50 $/(MW hour) the NPP will collect annually rev-
enues R = 350 million $/year. For operating costs equal to
Y = 150 million $/year and discount rate equal to р = 10%/year
the project of NPP with such reactor will be profitable for cap-
ital costs less than K < 2 billion $ in ideal case. If construction
of the reactor lasts Т
С
= 6 years and the reactor is in opera-
tion during Т
E
= 60 years than, according to ( 3 ) and ( 5 ) the
project will be profitable at K < 1.4 billion $, ( f
K
= 0.726 and
f
Y
= 0.563) for р = 10%/year. If the reactor costs 5 billion $
then profitability is reached when only very low-profit loans
are accessible ( р < 3%/year, f
K
= 0.903 and f
Y
= 0.695). As it
is clear, extension of duration of NPP construction signifi-
cantly aggravates the overall efficiency of investments (even
disregarding potential penalties, interest payable, etc.).
Thus, the main criterion of efficiency of investments NPV
determined by expressions (1–3) must be positive (greater
than zero) for the purpose of ensuring profitability of the in-
vestment project. To what extent it must be greater than zero?
Auxiliary and more convenient criteria of efficiency following
from the definition of NPV , namely, the discounted payback
period Т
PB
, levelized cost of electricity LCOE and internal
rate of return IRR , allow finding the answer to this question.
Let us examine interrelations between these criteria and NPV ,
discount rate and technical and financial parameters of reac-
tors ( K, Y, R, Т
С
, Т
E
).
Fig. 2. Example of dependence of net present value NPV of investment
project on the duration of lifecycle Т (years).
Discounted payback period
The criterion in question is determined by the sequential
calculation of NPV ( t ) as the function of time (duration of life-
cycle Т ). As it is shown in Fig. 2 , by the moment of comple-
tion of NPP construction ( Т = Т
С
) the value of NPV reaches
the largest negative value because of the incurred capital costs.
After that with increasing time Т > Т
С negative value of NPV
decreases due to the termination of capital investments and
start of accrual of revenues from sales of the production, and
by the time moment Т
PB the curve NPV ( Т ) passes through
zero. This is the moment (point) of breakeven and started
payback of the project. Further increase of duration of lifecy-
cle of the project (operation of the power plant) results in the
increase of positive value of NPV reaching the largest value
by the moment of completion of NPP operation. Investment
project with the shortest payback period ( period when return
on investments begins ) is the best . In the general case, it is
sufficient for numerical calculation of Т
PB to replace in the
second term in the sum in expressions ( 1 ) or ( 4 ) the upper
summation limit Т with Т
PB and set NPV to be equal to zero.
In particular case when annual costs and revenue are con-
stant (see Fig. 1 ), we obtain, using relations ( 3 ) and ( 4 ), ex-
plicit interrelation between the payback period of the project
= Т
PB
–Т
С and technical and financial parameters of the re-
actor and with NPV in the following form:
=
−ln
1 −K
(1+ p)
T
C
−1
(R−Y ) T
C
ln (1 + p)
;N P V
K ·f
K
=
1 −(1 + p)
−T
E
1 −(1 + p)
−−1
(6)
Setting the target value of the payback period (calculated
from the beginning of reactor operation) = Т
PB
–Т
С we can
obtain from ( 6 ) the value of NPV > 0 required for achieving
this purpose. Ratio NPV /( Kf
K
) is called the discounted profit
investment ratio of the project. In accordance with relation
( 6 ) for NPV = 0 the project starts to pay back at the mo-
ment of completion of its lifecycle = Т
E
. With reduction
of the desired payback period duration ( < Т
E
) the required
V. V. Kharitonov, N.N. Kosterin / Nuclear Energy and Technology 3 (2017) 176–182 179
Fig. 3. Dependence of the profit investment ratio of the project NPV /( Kf
K
) on
the duration of payback period (from the beginning of operation, years)
and the discount rate р for the duration of NPP operation Т
E
= 60 years.
Calculation was performed using ( 6 ).
value of NPV increases ( Fig. 3 ). For instance, in order for the
payback period to stay within = 15 years from the begin-
ning of operation (duration of which Т
E
= 60 years and the
period of reactor construction is equal to Т
С
= 6 years) the
value of NPV must be larger than 0.43 K (taking into account
f
K
≈0.726) at р = 10%/year, and for р = 3%/year the required
NPV increases by 3.4 times to reach NPV > 1.46 K (taking
into account f
K
≈0.903).
For high capital costs, such big values of NPV cannot be
achieved because of the restrictions on the revenues from sales
of electricity. This is the “price” to be paid for the desired
reduction of the payback period of the project.
Internal rate of return IRR
As it follows from expressions ( 1 )–( 3 ) the value of NPV
significantly reduces with increase of discount rate. Maximum
possible discount rate for which NPV = 0 at the end of lifecy-
cle is called the internal rate of return IRR , i.e. for р = IRR
we obtain NPV = 0 and Т
PB
= Т
С
+ Т
E
. It is important to un-
derline that in order to achieve breakeven of the project the
discount rate can vary within the limits from zero to IRR . IRR
is also important for assessment of upper level of interest rate
for the borrowed funds (credit). Correspondingly, the higher
is the IRR value the more possibilities exist to find the re-
quired amount of investment funds on the market. The higher
is the value of IRR and the difference ( IRR–p ) the more pos-
itive the value of NPV appears to be and the more stable is
the project (lesser risks).
In the general case, the value of IRR can be determined
by iteration numerical calculation. In particular case, when
annual costs and revenues are constant (see Fig. 1 ), there
exists analytical relation between the internal rate of return
and technical and financial parameters of the reactor which is
found by us using relations ( 3 ) and ( 5 ) by replacing р with
IRR in the last formula:
I RR ·f
K
(
I RR
)
/ f
Y
(
I RR
)
=
(
R −Y
)
/K. (7)
In ideal case of “fast construction and extended operation”
when f
K
/ f
Y
≈1 we obtain from ( 7 ) or directly from ( 2 ):
I RR ≤(
R −Y
)
/K ;N P V/K = I RR/p −1 . (8)
As it is clear, internal rate of return IRR linearly in-
creases with increasing difference ( R –Y ) between the rev-
enues and operating costs (i.e. with increasing annual profit)
and hyperbolically decreases with increasing capital costs K .
For instance, for NPP at K = 2.5 billion $, Y = 150 million
$/year and R = 400 million $/year we obtain IRR ≤0.1/year
(10%/year). If NPP power unit costs K = 5 billion $, then, with
all remaining conditions being equal, IRR ≤5%/years, which
requires more cheap credits not attainable in many banks.
Explicit analytical dependence of NPV on IRR and dura-
tions of NPP construction Т
C and operation Т
E can be ob-
tained in the case when annual costs and revenues are con-
stant (see Fig. 1 ) using expressions ( 3 ) and ( 5 ). As the result,
we have:
N P V
K ·f
K
=
(1 + I RR)
T
C −1
1 −(1 + I RR)
−T
E
·1 −(1 + p)
−T
E
(1 + p)
T
C −1
−1 . (9)
For the preset value of IRR determined by the ratio
( R –Y )/ K , higher NPV values are required in the general case
as compared with the ideal case.
Discounted cost of electricity
Annual revenues R from sales of electricity entered into
the expression for NPV can be represented in the form of
the product of annual output of the electric power plant Е
(kW hour/year) by the per unit price P of sold (delivered)
production (RUR/(kW hour)): R = Е• P . Evidently, the less is
the selling price, the less are the revenues and the NPV value.
Minimal possible price of the product at which NPV = 0 and
the project reaches breakeven by the end of its lifecycle is
called the per unit present value of the product or present
cost of production (in our case min P
≡LCOE ). The project for
which the present ( discounted ) cost of electricity is minimal
below the market price is preferable . In accordance with ( 3 )
we have:
LCOE =
(
p
EF
K + Y
)
/E ≥(
pK + Y
)
/E ;
N P V = Z ·(
P/LCOE −1
)
. (10)
Here р
EF
= р f
K
/ f
Y
≥р is the effective “rate of depreciated
capital costs”; Z = Kf
K
+ ( Y/p ) f
Y are the discounted costs dur-
ing the whole lifecycle period; dimensionless coefficients f
K
and f
Y are determined by expressions ( 4 ) or ( 5 ). Let us note
that reduced costs Z are widely applied for comparison of
projects with similar type of products, for instance, for com-
parison of different electric power plants. The project with
minimal reduced costs, which ensures the largest NPV value
and the lowest value of reduced cost of electricity with all
remaining conditions being equal, is considered to be prefer-
able .
180 V. V. Kharitonov, N.N. Kosterin / Nuclear Energy and Technology 3 (2017) 176–182
Fig. 4. Dependence of net present value NPV of the investment project
(RUR) on the price of sold electricity P (RUR/(kW hour)). LCOE is the
levelized cost of electricity ( 10 ).
It follows from the last expression in ( 10 ) that the value
of NPV is determined by the following two parameters: total
reduced costs Z and excess of the selling price P over LCOE
(i.e. the “margin”) ( Fig. 4 ). LCOE value must be less than
the electricity tariff P, acting in the region in question. In the
opposite case, the project of NPP (or thermal power plant, or
solar electric power plant, etc.) is loss-making. It follows from
the definition of LCOE that projects with high capital costs
typical for NPPs can be successful ( have the lowest LCOE )
at low discount rates ( small pK ) , i.e. in the case when cheap
credits are accessible .
For instance, let Е=7 billion kW hour/year, Y=0.15 billion
$/year and K = 3 billion $. If the reactor is under construction
during Т
С
= 6 years and is in operation during Т
E
= 60 years,
then for р = 5%/year coefficients f
K
= 0.846 and f
Y
= 0.706,
which gives as the result р
EF
≈6%/year, Z ≈4.65 billion $
and LCOE ≈47 $/(MW hour) (by approximately 9% more ex-
pensive than in the ideal case). For selling price of elec-
tricity P = 55 $/(MW hour) the value of IRR will amount to
only about 6.5%/hour the payback period ≈26 years and
NPV ≈0.78 billion $. In the example under discussion the in-
ternal rate of return only slightly exceeds the discount rate
which makes the project fairly risky.
Risks of the investment project
Accuracy of estimation of criteria of efficiency of invest-
ments depends on the accuracy of forecasting the cash flows
K
t
, Y
t and R
t during all phases of lifecycle of the power plant.
By setting a certain range of possible values of technical and
financial parameters of the reactor and conditions of its op-
eration ( Table 1 ) it is possible using Monte-Carlo method to
estimate the dispersion of criteria of efficiency of investments
in NPP relative to the base values ( Fig. 5 , Table 2 ), i.e. to
Tab l e 1
Initial data for analysis of risks of investment project of the NPP with one
power unit.
Item no. Parameter Base
value
Lower
boundary
Upper
boundary
1 Installed power of the
reactor (electric), MW
1170
2 Duty factor 0.88 0.60 0.93
3 Annual production of
electricity Е, billion
kW hour/year
9 6.1 9.5
4 Capital costs К, billion $ 5 3 7
5 Operating costs Y , million
$/year
150 100 200
6 Duration of construction of
the power unit Т
С
, years
6 4 10
7 Duration of operation of the
power unit Т
E
, years
60 30 75
8 Discount rate р , %/year 7 3 15
9 Selling price of electricity P ,
$/(MW hour)
72 45 85
10 Annual revenue R= EP ,
million $/Year
650 277 810
estimate risks of the project. Hypothetical project of NPP with
one power unit and parameters presented in Table 1 was ex-
amined as an example. Probabilistic distribution of the value
of each of the initial eight parameters was accepted in the
form of widely spread PERT β-distribution described, for in-
stance, in [1] . The range of variation of each of the eight
parameters was set arbitrarily as an example but, however,
from the range of realistic values.
More than 1 million numerical experiments (project sce-
narios) were performed by Monte-Carlo method and proba-
bilistic distributions of criteria were obtained with areas under
curves of distributions of NPV and LCOE equal to unity. As
it follows from Fig. 5 , dispersions of efficiency criteria rela-
tive to base values and, therefore, risks of the project under
examination are high enough. Thus, area under the curve of
NPV distribution in the zone of negative values (towards left
from NPV = 0) exceeds the area under the curve within the
zone of positive values, i.e. the probability of the project to
make losses exceeds the probability of its profitability. The
most probable value of NPV lies within the zone of negative
values ( Fig. 5 a). Probability of excess over the base value of
cost of electricity is also high ( Fig. 5 b). The most probable
value of the internal rate of return is less than 8%/year.
What is the way for reducing risks of the project? The ob-
tained analytical expressions for the efficiency criteria allow
implementing analysis of sensitivity of the criteria to the ini-
tial (design) technical and financial parameters of the reactor.
Following this, by searching possibilities for entering correc-
tions (changes) in the initial data of the investment project and
reducing the uncertainties of its base technical and financial
parameters, it is possible to achieve enhancing the efficiency
of investments and reducing economic risks associated with
the project.
V. V. Kharitonov, N.N. Kosterin / Nuclear Energy and Technology 3 (2017) 176–182 181
Fig. 5. Probabilistic distributions of the net present value ( NPV , billion $) and levelized cost of electricity ( LCOE , cent/(KW hour)) for the investment project
of NPP with one power unit with parameters from Tab l e 1 . Calculation was performed using formulas ( 3 ), ( 5 ) and ( 10 ) by Monte-Carlo method. Letter σ
stands for the standard deviation. Base value of the criterion is taken from Tabl e 2 .
Tab l e 2
Calculation of criteria of efficiency of investments in the NPP with one power
unit (for base values from Table 1 and discount rate р = 7%/year).
Efficiency criterion In the
approximation of
Т
С
= 0, Т
E
= ∞
For Т
С
= 6 years,
Т
E
= 60 years
Discounted costs Z , billion $ 7.1 5.37
Net present value NPV ,
billion $
2.1 0.704
Levelized cost of electricity
LCOE , $/(MW hour)
55 64
Fraction of capital costs in
LCOE , %
70 74
Internal rate of return IRR ,
%/year
10 8.1
Payback period Т
PB
, years 17 33
Payback period after the
beginning of operation ,
years
17 27
Conclusion
Analytical relationships between the investment perfor-
mance criteria ( NPV , LCOE , IRR , T
PB
, Z ) and basic engineer-
ing and economic parameters of nuclear reactors ( K , Y , R , T
C
,
T
E
), characterizing the NPP competitiveness at the microeco-
nomic level, are defined for the first time. The power discount
function of cash flows was used in the calculations. Joint anal-
ysis of the whole complex of efficiency criteria (and not only
LCOE ) and their dispersion (for instance, using Monte-Carlo
method) allows escaping controversies in the assessment of
profitability of the NPP project and formulating optimal re-
quirements on the technical and financial parameters of reac-
tors for enhancing their competitiveness including the reduc-
tion of economic risks.
The obtained analytical expressions allow solving not only
the traditional “direct problem” (assessing the performance
criteria according to the forecasted capital and operating costs
and profit stream) but, which is of equal importance, solving
the “inverse problem” of assessing the restrictions on capital
and operating costs, i.e. identifying “investment corridors”.
References
[1] V. V. Kharitonov , Dynamics of nuclear energy development. Economic
Models, MEPhI Publ., Moscow, 2014, p. 328. (in Russian) .
[2] The Generation IV International Forum. Available at https://www.gen- 4.
org/ gif/ jcms/ c _ 9260/ public (accessed 25.03.2017).
[3] M.N. Strikhanov (Ed.), Nuclear Power Engineering. Problems. Solu-
tions. Part 1, CSPiM Publ., Moscow, 2011, p. 424. (in Russian) .
[4] G.B. Kleiner (Ed.), Mesoeconomy of Development, Nauka Publ.,
Moscow, 2011, p. 805. (in Russian) .
[5] Chernyakhovskaya Y. V. Integrated sales of nuclear power plants: how
it works? Report July 8 2016 at the “Kurchatovsky Institute”. Avail-
able at http:// www.nrcki.ru/ pages/ main/ 5509/ 5566/ 7513/ index.shtml (in
Russian).
[6] Economic evaluation of bids for nuclear power plants, 396, IAEA, Vi-
enna, 2000, p. 224. 1999 Ed. Technical Report Series.
[7] Cost estimating guidelines for generation IV nuclear energy systems,
2007, p. 181. GIF/EMWG/2007/004. Revision 4.2. September 26 .
[8] INPRO Methodology for Sustainability Assessment of Nuclear Energy
Systems: Economics. INPRO Manual, IAEA, Vienna, 2014, p. 92. IAEA
Nuclear Energy Series No. NG-T-4.4 .
[9] International Energy Agency (IEA), Nuclear Energy Agency (NEA).
OECD, 2015, p. 212.
[10] T. Danilova , Atomny Ekspert 26–27 (5–6) (2014) 9–15 (in Russian) .
[11] Economic analysis for the Paksh II nuclear power project. A
rational investment case for Hungarian state resources. Available
at http://www.kormany.hu/download/a/84/90000/2015%20Economic%
20analysis%20of%20Paks%20II.pdf (accessed 09.2015).
[12] M. Carlo , Prog. Nucl. Energy 73 (2014) 153–161 .
[13] V. V. Kharitonov , N.A. Molokanov , Economicheskie Strategii (5) (2012)
6–16 (in Russian) .
182 V. V. Kharitonov, N.N. Kosterin / Nuclear Energy and Technology 3 (2017) 176–182
[14] V. V. Kharitonov , N.A. Molokanov , Economicheskie Strategii (6–7)
(2012) 94–107 (in Russian) .
[15] V. V. Kharitonov , N.A. Molokanov , Economichesky Analiz: Teo riy a i
Praktika 319 (16) (2013) 38–51 (in Russian) .
[16] V. V. Kharitonov , U.N. Kurelchuk , Gorny zhurnal (9) (2014) 100–106
(in Russian) .
[17] W. Berens , P. M . Hawranek , Manual for the Preparation of Industrial
Feasibility Studies, UNIDO, Vienna, 1991, p. 386 .
[18] P.L . Vilensky , V.N. Lifshits , S.A. Smolyak , Theory and Practice, Delo.
Academiya Narodnogo Khozyaystva Publ., Moscow, 2008, p. 1104. (in
Russian) .
[19] Nucl. Energy Agency (2015) 248. Available at https://www.oecd-nea.
org/ ndd/ pubs/ 2015/ 7195- nn- build- 2015.pdf.
[20] R. Lovering Jessica , A. Yip , T. Nordhaus , Energy Policy (91) (2016)
371–382 .
[21] A.V. Klimenko , Izvestiya vuzov. Ya d e r n aya Energetika. (4) (2013)
17–28 (in Russian) .
[22] F.N. Karhov , Problemy prognozirovaniya (4) (2014) 26–37 (in Russian) .
