Cost-Benefit Analysis (CBA) is an economic appraisal tool which can be used to inform an investment decision, for instance, the construction of a nuclear power plant. In a CBA, the costs and benefits are accounted for as fully as possible, allowing estimation of the net economic benefit associated with the project relative to a without-the-project scenario, or an alternative investment proposal. This publication suggests an approach for conducting a CBA for a nuclear newbuild project as part of a feasibility study. It presents a CBA framework which is built around four key steps to characterize a project: the project’s objectives, alternatives to the project, and the broad context; a financial analysis, including estimates of costs and profitability; an economic analysis, taking a broader view to include additional benefits and costs to society; and a sensitivity and risk analysis to assign a confidence level to key financial and economic indicators and identify the circumstances in which the project will generate value. The publication includes a case study to illustrate the framework’s application and describes, for example, the methodology used for valuing environmental benefits, such as emissions and pollution reduction. The publication is aimed at all stakeholders involved in the planning and decision-making on a nuclear new build project.

• 1. Introduction
  • 1.1. Background
  • 1.2. Objective
  • 1.3. Scope
  • 1.4. Structure
  • 1.5. Users
• 2. An Introduction to cost–benefit analysis
  • 2.1. General definition of cost–benefit analysis
  • 2.2. Key principles of cost
    • 2.2.1. Incremental approach
    • 2.2.2. Long term perspective
    • 2.2.3. Monetizing social costs and benefits
    • 2.2.4. Discounting to obtain net present value
    • 2.2.5. Microeconomic perspective
    • 2.2.6. Common mistakes in cost–benefit analysis
  • 2.3. Limitations and alternative methods
  • 2.4. Seven step process
• 3. Application of cost–benefit analysis in the case of nuclear projects
  • 3.1. Selected remarks on specificities of nuclear new build projects
  • 3.2. Steps 1–4: Preparatory steps
    • 3.2.1. Step 1: Analysis of the context
    • 3.2.2. Step 2: Definition of the objectives, project identification and choice of the counterfactual
    • 3.2.3. Step 3: Technical feasibility
    • 3.2.4. Step 4: Environmental impact assessment
  • 3.3. Step 5: Financial analysis
    • 3.3.1. Reference period (or time horizon)
    • 3.3.2. Private costs
    • 3.3.3. Operating revenues
    • 3.3.4. Financial performance indicators
  • 3.4. Step 6: Economic analysis
    • 3.4.1. Fiscal corrections
    • 3.4.2. Conversion of market prices to shadow prices
    • 3.4.3. Inclusion of externalities
    • 3.4.4. Economic performance indicators
  • 3.5. Step 7: Sensitivity and risk analysis
    • 3.5.1. Sensitivity tests
    • 3.5.2. Scenario analysis
    • 3.5.3. Probabilistic risk analysis
• 4. Illustrative case study
  • 4.1. The fictitious country: Ladonia
    • 4.1.1. Country
    • 4.1.2. Economy
    • 4.1.3. Power grid
    • 4.1.4. Climate policies
  • 4.2. The nuclear power project
    • 4.2.1. Project objectives
    • 4.2.2. Demand and supply analysis
    • 4.2.3. Options analysis
    • 4.2.4. Project identification
    • 4.2.5. Counterfactual scenario
  • 4.3. Cost–benefit analysis
    • 4.3.1. Financial profitability
    • 4.3.2. Socioeconomic analysis
    • 4.3.3. Socioeconomic desirability
  • 4.4. Sensitivity and risk analysis
    • 4.4.1. Sensitivity tests
    • 4.4.2. Scenario analysis
  • 4.5. Concluding remarks
• 5. Conclusion
• Appendix IDISCOUNT RATES
• Appendix IIWILLINGNESS TO PAY APPROACH FOR EVALUATING DIRECT AND EXTERNAL EFFECTS
• Appendix IIIEXTERNAL COSTS OF ELECTRICITY
• Appendix IVFINANCIAL PROFITABILITY
• Appendix VSOCIOECONOMIC DESIRABILITY
• Appendix VIIAEA NUCLEAR POWER COST–BENEFIT ANALYSIS TOOLKIT
• REFERENCES
• GLOSSARY
• LIST OF ABBREVIATIONS
• CONTRIBUTORS TO DRAFTING AND REVIEW
• STRUCTURE OF THE IAEA NUCLEAR ENERGY SERIES