Load-following with nuclear power: Market effects and welfare implications

This paper analyses the economic factors that drive nuclear power load-following in future European electricity systems. A power plant dispatching model is built to simulate deregulated markets, in order to identify to what extent additional flexibility is needed from nuclear power due to more renewables. We contribute to the literature with an economic perspective of the nuclear load-following by means of numerical simulations of several European power systems that will pursue the nuclear policy in 2050. Results show that intermittency would make flexible nuclear reactors cycling more often and retire earlier. The highest requirements for flexibility would be in systems with high shares of nuclear, renewables or coal-fired plants (Central-Western Europe and certain Central-Eastern European countries) and in systems with low grid interconnections (Western Europe and South-West). Load-following implies lower capacity factors for nuclear plants, except for Central-Western Europe where operating flexibly would allow reactors to supply more output than in steady-state mode. The lowest generation cost is found in Nordic countries where most of the flexibility is provided by hydro-units, and hence nuclear power plants operate mostly baseload. Ensuring flexibility becomes financially interesting when nuclear power plants are not the marginal technology setting the clearing price; in this way the infra-marginal rent allows operators to capture high revenues. It is shown that nuclear flexibility is profitable from a broader social welfare perspective, such as safe baseload units' operation, renewables' integration, system operators' balancing, and consumer's price.