Economic Assessment of the Role of Nuclear and Renewables in Future Decarbonized Electricity Markets

This study investigates and compares the profitability and welfare effects of investing in zero-carbon generation technologies (i.e., solar PV, onshore and offshore wind and nuclear) within the context of future low-carbon electricity systems. Using a partial equilibrium model calibrated to the electricity markets in Northwest Europe, a Monte Carlo cost simulation and a scenario-based sensitivity analysis, the analysis reveals that investments in renewables outperform investments in nuclear power when looking at the profitability and the aggregated financial welfare effects on other market participants. However, the profitability of nuclear power is less sensitive to changes in the electricity market and investments in additional capacity. Although investments in additional nuclear capacity result in a higher reduction of life-time greenhouse gas emissions and require less grid expansions than comparable investments in renewables, overall investments in nuclear result in more negative welfare effects than investments in renewables.

JEL Classification: Q41, Energy: Demand and Supply; Prices; D58, Computable and Other Applied General Equilibrium Models