CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

CBO

The CostEffectiveness of 

Nuclear Power for 

Navy Surface Ships

MAY 2011
Pub. No. 4028
The Congress of the United States O Congressional Budget Office

A

STUDY

CBO

The Cost-Effectiveness of Nuclear Power 

for Navy Surface Ships

May 2011
CBO

Notes

All years referred to are federal fiscal years, which run from October 1 to September 30.

Numbers in the text and tables may not add up to totals because of rounding.

On the cover—A portion of the Bataan amphibious ready group, accompanied by a 

Ticonderoga class cruiser; photo by Corporal Theodore W. Tirchie, U.S. Marine Corps.
Preface

CBO

In recent years, the Congress has shown interest in powering some of the Navy’s future 

destroyers and amphibious warfare ships with nuclear rather than conventional (petroleumbased) fuel. At the request of the former Chairman of the Subcommittee on Seapower and 

Projection Forces of the House Committee on Armed Services, the Congressional Budget 

Office (CBO) has estimated the difference in life-cycle costs (the total costs incurred for a 

ship, from acquisition through operations to disposal) between powering those new surface 

ships with nuclear reactors and equipping them with conventional engines.

R. Derek Trunkey and Matthew Goldberg of CBO’s National Security Division wrote the 

study under the general supervision of J. Michael Gilmore (formerly of CBO) and David 

Mosher. Eric J. Labs, also of the National Security Division, provided projections of the 

Navy’s future fleets. Raymond Hall of CBO’s Budget Analysis Division prepared the estimates 

of acquisition costs under the general supervision of Sarah Jennings. Ron Gecan, Heidi 

Golding, Deborah Lucas, Damien Moore, Dawn Sauter Regan, and Jason Wheelock, all of 

CBO, contributed to the analysis, and Ron Gecan and Steven Weinberg developed CBO’s 

forecasts of oil prices. Donald Birchler of the CNA Corporation reviewed the study. (The 

assistance of an external reviewer implies no responsibility for the final product, which rests 

solely with CBO.)

Leah Mazade edited the study, Christine Bogusz proofread it, and Jeanine Rees prepared it for 

publication. Maureen Costantino designed the cover. Monte Ruffin produced the initial print 

copies, Linda Schimmel coordinated the print distribution, and Simone Thomas prepared the 

electronic version for CBO’s Web site (www.cbo.gov).

Douglas W. Elmendorf

Director

May 2011

Contents

CBO

Summary and Introduction 1

CBO’s Analysis and Findings 2

Costs Under CBO’s Projected Trajectory for Oil Prices 5

Costs Under a Higher Projected Trajectory for Oil Prices 7

Costs with Increased Energy Use by Destroyers 7

Other Considerations 7

Comparing CBO’s Analysis with the Navy’s Study of Nuclear Power for 

Future Surface Combatants 8

The Basis for CBO’s Cost Estimates 9

Acquisition and Other Onetime Costs 9

Fuel 12

Personnel 12

Other Operations and Support 13

Disposal 13

Comparing the Costs of Alternative Propulsion Systems Using 

Present-Value Calculations 13

Appendix: Supplementary Calculations Using an Alternative Discount Rate 17
VI THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Tables

1. Estimated Life-Cycle Costs for a Nuclear Versus a Conventionally Powered 

Fleet, Calculated as Present Values Using Risk-Adjusted Discount Rates 6

A-1. Estimated Life-Cycle Costs for a Nuclear Versus a Conventionally Powered 

Fleet, Calculated as Present Values Using Treasury Rates for Discounting 19

Figures

1. Candidate Ships for Nuclear Propulsion Systems 3

2. Break-Even Rates for Oil Prices at Which Life-Cycle Costs, 

Discounted Using Risk-Adjusted Rates, Are Equal for a 

Nuclear and a Conventionally Powered Fleet 8

A-1. Break-Even Rates for Oil Prices at Which Life-Cycle Costs, 

Discounted Using Treasury Rates, Are Equal for a 

Nuclear and a Conventionally Powered Fleet 20

Boxes

1. Destroyers and Amphibious Ships in the Navy’s Fleet 4

2. Fluctuating Oil Prices 14
CBO

The Cost-Effectiveness of Nuclear Power for 

Navy Surface Ships

Summary and Introduction

The U.S. Navy plans to build a number of new surface 

ships in the coming decades, according to its most recent 

30-year shipbuilding plan.1

 All of the Navy’s aircraft carriers (and submarines) are powered by nuclear reactors; its 

other surface combatants are powered by engines that use 

conventional petroleum-based fuels. The Navy could save 

money on fuel in the future by purchasing additional 

nuclear-powered ships rather than conventionally powered ships. Those savings in fuel costs, however, would be 

offset by the additional up-front costs required for the 

procurement of nuclear-powered ships. 

To assess the relative costs of using nuclear versus conventional propulsion for ships other than carriers and submarines, the Congressional Budget Office (CBO) developed a hypothetical future fleet, based on the Navy’s 

shipbuilding plan, of new destroyers and amphibious 

warfare ships that are candidates for nuclear propulsion 

systems. Specifically, CBO chose for its analysis the 

Navy’s planned new version of the DDG-51 destroyer 

and its replacement, the DDG(X); the LH(X) amphibious assault ship; and the LSD(X) amphibious dock landing ship. CBO then estimated the life-cycle costs for 

each ship in that fleet—that is, the costs over the ship’s 

entire 40-year service life, beginning with its acquisition 

and progressing through the annual expenditures over 

40 years for its fuel, personnel, and other operations and 

support and, finally, its disposal. CBO compared lifecycle costs under two alternative versions of the fleet: 

Each version comprised the same number of ships of each 

class but differed in whether the ships were powered by 

conventional systems that used petroleum-based fuels or 

by nuclear reactors.

Estimates of the relative costs of using nuclear power versus conventional fuels for ships depend in large part on 

the projected path of oil prices, which determine how 

much the Navy must pay for fuel in the future. The 

initial costs for building and fueling a nuclear-powered 

ship are greater than those for building a conventionally 

powered ship. However, once the Navy has acquired a 

nuclear ship, it incurs no further costs for fuel. If oil 

prices rose substantially in the future, the estimated savings in fuel costs from using nuclear power over a ship’s 

lifetime could offset the higher initial costs to procure the 

ship. In recent years, oil prices have shown considerable 

volatility; for example, the average price of all crude oil 

delivered to U.S. refiners peaked at about $130 per barrel 

in June and July 2008, then declined substantially, and 

has risen significantly again, to more than $100 per barrel 

in March of this year. 

CBO regularly projects oil prices for 10-year periods as 

part of the macroeconomic forecast that underlies the 

baseline budget projections that the agency publishes 

each year.2

 In its January 2011 macroeconomic projections, CBO estimated that oil prices would average 

$86 per barrel in 2011 and over the next decade would 

grow at an average rate of about 1 percentage point per 

year above the rate of general inflation, reaching $95 per 1. For details of that plan, see Department of the Navy, Report to 

Congress on Annual Long-Range Plan for Construction of Naval Vessels for FY 2011 (February 2010); see also Congressional Budget 

Office, An Analysis of the Navy’s Fiscal Year 2011 Shipbuilding Plan 

(May 2010).

2. For CBO’s most recent economic projections, see Congressional 

Budget Office, The Budget and Economic Outlook: Fiscal Years 

2011 to 2021 (January 2011).
2 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

barrel (in 2011 dollars) by 2021.3

 After 2021, CBO 

assumes, the price will continue to grow at a rate of 1 percentage point above inflation, reaching $114 per barrel 

(in 2011 dollars) by 2040.4

If oil prices followed that trajectory, total life-cycle costs 

for a nuclear fleet would be 19 percent higher than those 

for a conventional fleet, in CBO’s estimation. Specifically, 

total life-cycle costs would be 19 percent higher for a fleet 

of nuclear destroyers, 4 percent higher for a fleet of 

nuclear LH(X) amphibious assault ships, and 33 percent 

higher for a fleet of nuclear LSD(X) amphibious dock 

landing ships.

To determine how sensitive those findings are to the trajectory of oil prices, CBO also examined a case in which 

oil prices start from a value of $86 per barrel in 2011 and 

then rise at a rate higher than the real (inflation-adjusted) 

growth of 1 percent in CBO’s baseline trajectory. That 

analysis suggested that a fleet of nuclear-powered destroyers would become cost-effective if the real annual rate of 

growth of oil prices exceeded 3.4 percent—which implies 

oil prices of $223 or more per barrel (in 2011 dollars) in 

2040. Similarly, a fleet of nuclear LH(X) amphibious 

assault ships would become cost-effective if oil prices 

grew at a real annual rate of 1.7 percent, implying a price 

of $140 per barrel of oil in 2040—about the same price 

that was reached in 2008 but not sustained for any length 

of time. A fleet of nuclear LSD(X) amphibious dock 

landing ships would become cost-effective at real annual 

growth rate of 4.7 percent, or a price in 2040 of $323 per 

barrel.

In addition to the uncertain future path of oil prices, 

questions remain about the amount of energy that the 

new surface ships will use, which could be substantially 

higher or lower than projected. Energy usage is a particularly significant factor for ships such as destroyers that 

require large amounts of energy for purposes other than 

propulsion. Employing an approach similar to that used 

to assess sensitivity to oil prices, CBO estimated that providing destroyers with nuclear reactors would become 

cost-effective (given CBO’s baseline trajectory for oil 

prices) only if energy use more than doubled for the 

entire fleet of destroyers. 

The use of nuclear power has potential advantages besides 

savings on the cost of fuel. For example, the Navy would 

be less vulnerable to disruptions in the supply of oil: The 

alternative nuclear fleet would use about 5 million barrels 

of oil less per year, reducing the Navy’s current annual 

consumption of petroleum-based fuels for aircraft and 

ships by about 15 percent.5

 The use of nuclear power also 

has some potential disadvantages, including the concerns 

about proliferating nuclear material that would arise if 

the Navy had more ships with highly enriched uranium 

deployed overseas. CBO, however, did not attempt to 

quantify those other advantages and disadvantages.

CBO’s Analysis and Findings

Between 2016 and 2040, the Navy plans to build 

39 DDG-51 Flight III destroyers (a “flight” is a variant) 

and their replacements, the DDG(X) class of ship;6

5 LH(X) amphibious assault ships; and 12 LSD(X) 

amphibious dock landing ships (see Figure 1 and Box 1). 

CBO’s main analysis compared the costs for a fleet of 

those 56 ships under two alternative propulsion technologies: nuclear power and conventional fuel. CBO did not 

consider any other class of surface ship for its analysis. 

Aircraft carriers are already nuclear powered, and the littoral combat ship—a relatively small high-speed ship 

meant for close-to-shore operations and the only other 

major combat ship that the Navy is planning to procure 

in substantial numbers over the next 30 years—is too 

small to accommodate a nuclear reactor. Moreover, CBO 

assumed that only new classes of ships would be considered candidates for nuclear systems. Thus, in constructing its hypothetical fleet, CBO assumed that the specifications for classes of ships currently in production would 

not be changed, nor would existing ships be retrofitted 

with nuclear reactors.

3. Oil prices in the first four months of 2011 have averaged about 

$10 per barrel more than in CBO’s January forecast for this year 

and could be higher or lower over the rest of the year. CBO 

expects to update its macroeconomic forecast in August. 

4. CBO forecasts oil prices in part on the basis of futures markets in 

oil. For a discussion of that approach, see Congressional Budget 

Office, The Budget and Economic Outlook: Fiscal Years 2006 to 

2015 (January 2005).

5. Those fuel-reduction findings are based on CBO’s analysis and on 

data provided to CBO by the Defense Logistics Agency in April 

2011. See also Ronald O’Rourke, Navy Ship Propulsion Technologies: Options for Reducing Oil Use—Background for Congress, 

Report for Congress RL33360 (Congressional Research Service, 

January 26, 2007).

6. The DDG-51 Flight III destroyer would, among other changes, 

incorporate the new Air and Missile Defense Radar that is now 

under development. The new radar is larger and more powerful 

than the radars on the earlier DDG-51s.
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 3

CBO

Figure 1.

Candidate Ships for Nuclear Propulsion Systems 

(Number of ships in the fleet)

Source: Congressional Budget Office based on Department of the Navy, Report to Congress on Annual Long-Range Plan for Construction of 

Naval Vessels for FY 2011 (February 2010).

Note: CBO modified the Navy’s shipbuilding plan slightly to accommodate the possibility of nuclear reactors, applying the same changes to 

the plan in evaluating both conventional and nuclear fuel alternatives. Specifically, CBO’s modified plan would delay the purchase of 

the first DDG-51 Flight III destroyer (a “flight” is a variant) from 2016 to 2018 to allow time for integrating a nuclear reactor into that 

hull. CBO’s modification would also replace the LHA-6 amphibious assault ship that the Navy plans to purchase in 2021 with the first 

hull in the LH(X) class in order to make the latter ship a candidate for nuclear power. 

2010 2016 2022 2028 2034 2040 2046 2052 2058 2064 2070 2076 2082

0

5

10

15

20

25

30

35

40

DDG-51

DDG(X)

2010 2016 2022 2028 2034 2040 2046 2052 2058 2064 2070 2076 2082

0

1

2

3

4

5

6

2010 2016 2022 2028 2034 2040 2046 2052 2058 2064 2070 2076 2082

0

2

4

6

8

10

12

14

Destroyers

LH(X) Amphibious Assault Ships

LSD(X) Amphibious Dock Landing Ships
4 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Source: Congressional Budget Office.

Note: Ship silhouettes are not to scale.

Box 1.

Destroyers and Amphibious Ships in the Navy’s Fleet

Arleigh Burke Class 

Destroyer

(DDG-51)

The DDG-51 Arleigh Burke class destroyers (along with the CG-47 Ticonderoga class 

cruisers) serve a variety of roles in the Navy’s fleet. They defend aircraft carriers and 

amphibious ships against threats posed by other surface ships, aircraft, and submarines. 

Increasingly, they will provide ballistic missile defense for the fleet as well as for major 

theaters of operations such as Europe and Northeast Asia. They also perform many day-today missions, such as patrolling sea lanes, providing overseas presence, and conducting 

exercises with allies. In addition, they are capable of striking land targets with Tomahawk 

missiles. The Navy considers the DDG-51 class so effective that it plans to modify the 

design into a configuration called Flight III (ships currently under construction are called 

Flight IIAs), beginning in the middle part of this decade. The upgraded DDG-51 design 

will have a more powerful radar along with increased shipboard power and cooling capabilities and will provide a ballistic missile defense capability greater than that provided by 

DDG-51 Flight IIAs. The existing DDG-51s displace about 9,500 tons, but the Flight III 

configuration is likely to weigh more than 10,000 tons.

Wasp Class Amphibious 

Assault Ship

(LHD)

The Navy’s two types of amphibious assault ships (also known as helicopter carriers)—the 

LHA-1 and LHD-1—are the second-largest types of ship in the fleet (behind aircraft carriers). The new LHA-6 America class is replacing the Tarawa class LHA-1s. The first LHA-6 

is still under construction and will displace about 45,000 tons. A future class of this type of 

ship, currently designated the LH(X), will be designed and built in the 2020s to replace 

the Wasp class LHDs as they retire. Amphibious assault ships form the centerpiece of 

amphibious ready groups and can each carry about half the troops and equipment of a 

Marine expeditionary unit, which is typically composed of about 2,200 marines. The ships 

also can carry as many as 30 helicopters and 6 fixed-wing Harrier jump jets, or up to 

20 Harriers.

Whidbey Island Class

Dock Landing Ship

(LSD)

The Navy has four other classes of amphibious warfare ships, and such ships are divided 

into two types: amphibious transport docks (LPDs) and dock landing ships (LSDs). Two of 

those ships together provide the remaining transport capacity for a Marine expeditionary 

unit in an amphibious ready group. LPDs and LSDs are quite similar to each other; one 

major difference is that the LPDs have a hangar to embark helicopters whereas the LSDs do 

not, although they do have a helicopter landing area. The Navy’s 12 LSDs are divided into 

two classes—the LSD-41 Whidbey Island and the LSD-49 Harpers Ferry—and displace 

16,000 to 17,000 tons. The LSD-49 has a smaller docking well than the LSD-41 has in 

order to carry more troops and equipment; the LSD-41 has a larger docking well for conducting amphibious operations. The Navy plans to build one more LPD in 2012 but is not 

planning a direct successor to that class of ships. The service does plan to build a new class 

of LSDs, designated the LSD(X), beginning in 2017 to replace the existing LSDs as they 

retire. The design and capabilities of the new class are unknown at this time, although the 

Navy’s 2011 shipbuilding plan implies that they will be similar to existing LSD class ships.
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 5

CBO

CBO’s analysis was also based on several assumptions 

about the reactors the Navy would use if it chose the 

nuclear power alternative and the implications of the 

reactors for a ship’s size. CBO assumed that the Navy 

would design a new reactor for use in the destroyers and 

LSD class ships because existing reactors would not be 

optimally sized for those ship types. CBO further 

assumed that in the LH(X) amphibious assault ships, the 

Navy would use one of the reactors that power its aircraft 

carriers.7

 Yet even if the Navy outfitted the destroyers and 

amphibious dock landing ships with a new, smaller reactor, the use of nuclear power would require an increase of 

about 2,000 tons in the DDG-51’s displacement, or 

weight (an increase of 20 percent relative to the current 

size of that ship), and a similar increase in the LSD(X)’s 

displacement (an increase of 11 percent), by CBO’s estimates.8

 The LH(X), in contrast, could accommodate a 

nuclear reactor without any substantial increase in the 

ship’s displacement.

In comparing life-cycle costs for the fleet of ships under 

the alternative propulsion systems, CBO used a presentvalue approach that adjusted for market risk. CBO first 

calculated costs over a 40-year service life for each of 

the 56 ships chosen for the analysis and then summarized 

those costs as a present value—a single amount that 

expresses the stream of annual costs for the ships in terms 

of an equivalent lump sum spent at the start of the 

analysis period. To arrive at that present value, CBO 

discounted future costs for the fleet (converted them to 

current dollars) using a discount rate that takes into 

account that money in hand now is worth more than 

the same amount received in the future and that the 

cash flows face market risk (the risk of losses that cannot 

be avoided by diversifying investments and for which 

investors require compensation). Specifically, CBO used 

a discount rate for the fleet’s future costs equal to the 

estimated return that a private investor would require 

on a project of similar risk and duration, discounting 

the life-cycle costs for all ships in each class under the 

nuclear-fleet alternative and comparing those totals 

with the corresponding discounted amounts under the 

conventional-fleet alternative. 

The results of CBO’s cost-effectiveness analysis depend 

heavily on what happens to oil prices over the next 

70 years. CBO thus calculated costs for its hypothetical 

fleet under a trajectory for oil prices derived from its current macroeconomic projections and also under variations of that trajectory. (For details of CBO’s approach, 

see “The Basis for CBO’s Cost Estimates” on page 9.) It 

also noted certain noncost factors (for example, the ability of nuclear-powered ships to operate independently of 

logistics ships that supply oil) that might be important 

but that could not be fully accounted for. In addition, 

CBO compared its analysis and results with those from 

an earlier study conducted by the Navy to assess the 

advantages and disadvantages of extending nuclear power 

to a wider range of Navy ships.

Costs Under CBO’s Projected Trajectory for 

Oil Prices

A nuclear-powered fleet comprising the three classes of 

ships considered in the analysis would cost the Navy 

more than a conventionally powered fleet under CBO’s 

projected trajectory for oil prices (see Table 1). According 

to CBO’s projections, the prices that U.S. refiners pay for 

oil will rise from $86 per barrel in 2011 to $95 per barrel 

(in 2011 dollars) in 2021, and then continue to escalate 

at a real annual rate of 1 percent thereafter. Under that 

projected price path, the present-value costs in 2011 

for a nuclear-powered fleet would be higher than those 

for a conventionally powered fleet by about $14 billion 

(19 percent) for destroyers, $0.6 billion (4 percent) for 

LH(X) amphibious assault ships, and nearly $5 billion 

(33 percent) for LSD(X) amphibious dock landing ships. 

7. Each of the Navy’s current aircraft carriers (with the exception of 

U.S.S. Enterprise) uses two nuclear reactors of a design known 

as the A4W. The Navy’s newest aircraft carrier, U.S.S. Gerald R. 

Ford, will also use two reactors of a new design, designated the 

A1B. An LH(X) amphibious ship, which is slightly less than half 

the size of a nuclear-powered aircraft carrier, could accommodate 

one of the A1B reactors to be used in the Gerald R. Ford. However, 

outfitting a destroyer or an LSD(X) amphibious ship with an 

A1B-sized reactor would require a significant increase in the size 

of those ships to accommodate the reactor and its cooling and 

other support systems. Nor could those ships be outfitted with the 

nuclear reactors that the Navy currently installs in its Virginia class 

submarines, because those reactors would be too small to adequately power a destroyer or an LSD(X). CBO assumed that the 

Navy would instead design a new reactor for its destroyers and 

LSD(X) ships.

8. Navy officials, in a personal communication in April 2011, provided CBO with an estimate of 3,000 tons for the increase in the 

displacement of the DDG-51 or the LSD that would be necessary 

to accommodate a nuclear reactor. However, CBO estimates, on 

the basis of other data provided by the Navy and various projected 

changes in design, that a new reactor would require an increase of 

only 2,000 tons in the ships’ displacement. The use of existing 

reactors would require a greater increase in size, which in turn 

would boost the fleet’s total costs more than would the design of a 

new reactor. In other words, if the Navy was going to put a 

nuclear reactor on its new destroyers and amphibious dock landing ships, designing a new reactor, by CBO’s estimates, would be 

more cost-effective than using an existing reactor. 
6 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Table 1.

Estimated Life-Cycle Costs for a Nuclear Versus a Conventionally Powered Fleet, 

Calculated as Present Values Using Risk-Adjusted Discount Rates

(Billions of 2011 dollars)

Source: Congressional Budget Office.

Notes: Total costs for each type of ship consist of the sum of the discounted value of the life-cycle costs for each ship of that type considered 

in CBO’s analysis—that is, for 39 destroyers, 5 amphibious assault ships, and 12 amphibious dock landing ships. (Life-cycle costs are 

costs over a ship’s entire 40-year service life, beginning with its acquisition and progressing through the annual expenditures over 

40 years for its fuel, personnel, and other operations and support and, finally, its disposal.) Details of CBO’s present-value calculations 

and discounting methods are discussed in the text.

A conventionally powered DDG-51 Flight III destroyer (a “flight” is a variant) is expected to have a full-load displacement (weight) of 

10,000 tons; CBO assumed that a nuclear-powered DDG-51 would displace 12,000 tons. CBO also assumed that the replacement class,

the DDG(X), would displace 11,000 tons if conventionally powered and 13,000 tons if nuclear powered; that the LSD(X) amphibious

dock landing ship would displace 18,000 tons if conventionally powered and 20,000 tons if nuclear powered; and that the LH(X) 

amphibious assault ship would displace 45,000 tons in either case (the ship would have adequate capacity to accommodate nuclear

reactors with no increase in displacement).

n.a. = not applicable; * = between zero and $50 million.

a. CBO allocated the total $1 billion cost to develop a new nuclear reactor equally among the 51 destroyers and LSD(X)s under the nuclearfleet alternative. No costs were allocated to the LH(X)s; CBO assumed those ships would be outfitted with one of the A1B reactors that the 

Navy plans to use in the new Gerald R. Ford class (CVN-78) of aircraft carriers.

b. CBO allocated the total $500 million cost to certify an additional nuclear shipyard equally among all 56 ships under the nuclear-fleet 

alternative.

Acquisition

Develop a new nuclear

reactora n.a. 0.8 n.a. 0 n.a. 0.2 n.a. 1.0

Certify an additional

nuclear shipyardb n.a. 0.4 n.a. * n.a. 0.1 n.a. 0.5

Procure ships 36.6 55.0 6.2 8.2 6.3 11.3 49.2 74.5 ____ ____ ___ ___ ___ ____ ____ ____

Subtotal 36.6 56.2 6.2 8.2 6.3 11.6 49.2 76.0

Fuel 10.4 0 2.1 0 1.9 0 14.4 0

Personnel 19.6 24.1 4.2 4.9 4.8 6.1 28.6 35.1

Other Operations and

Support 5.5 5.5 1.6 1.6 1.9 1.9 9.0 9.0

Disposal * 0.4 * 0.1 * 0.2 * 0.7 ____ ____ ____ ____ ____ ____ ______ ______

Total 72.1 86.1 14.2 14.8 14.8 19.8 101.1 120.7

Memorandum:

Number of Ships Built 39 39 5 5 12 12 56 56

Destroyers

DDG-51 and DDG(X)

Nuclear Conventional

Dock Landing Ships All Ships

LSD(X) Amphibious

Assault Ships

LH(X) Amphibious

Conventional Nuclear Conventional Nuclear Conventional Nuclear
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 7

CBO

The main reason is that the reduction in the Navy’s costs 

for conventional fossil fuel that the use of nuclear power 

would lead to would not be large enough to compensate 

for the increase in the acquisition costs for nuclearpowered ships. Moreover, such ships require larger and 

more highly trained crews than their conventional counterparts do, so their personnel costs would be greater as 

well. Other differences in costs between the fleets do not 

make up a significant percentage of total costs. (The costs 

for designing a new reactor for the destroyers and the 

LSD(X) ships, certifying a third commercial shipyard 

for nuclear work—discussed later—and disposing of 

nuclear reactors at the end of the ships’ service lives 

would each be less than 1 percent of the nuclear fleet’s 

total discounted costs.)

Costs Under a Higher Projected Trajectory for 

Oil Prices

If oil prices followed the path that CBO has forecast, a 

nuclear fleet would be more expensive than a conventional fleet. The trajectory of oil prices, however, is highly 

uncertain. If the price of oil rose more rapidly over the 

service lives of those ships than CBO has projected, conventionally powered ships could become more expensive 

than nuclear-powered ships; that is, the higher cost of 

petroleum for conventional ships would begin to overtake 

the higher cost of acquisition for nuclear ships. 

CBO thus considered a case in which the price of oil 

grows at a rate higher than the 1 percent real growth in 

CBO’s baseline, starting from the same value of $86 per 

barrel in 2011. A fleet of nuclear destroyers would 

become cost-effective only if the real rate of growth of oil 

prices exceeded 3.4 percent per year over the 2012–2084 

period (see Figure 2); that projected rate would imply a 

price for oil (in 2011 dollars) of $223 per barrel or more 

in 2040 and higher prices in later years. Similarly, a fleet 

of nuclear LH(X) amphibious assault ships would 

become cost-effective at an annual real growth rate for oil 

prices of 1.7 percent, or a price of $140 per barrel in 

2040, and a fleet of nuclear LSD(X) amphibious dock 

landing ships would become cost-effective at a real 

growth rate of 4.7 percent per year, or a price of $323 per 

barrel. Under an assumption that the prices of goods used 

to build and operate ships would not systematically vary 

with economic conditions (meaning that the appropriate 

discount rate would not need to take market risk into 

account), the rates of growth of oil prices at which 

nuclear propulsion would become cost-effective would be 

slightly higher (see the appendix for details).

Costs with Increased Energy Use by Destroyers

Another key factor about which there is considerable 

uncertainty is the amount of energy that new surface 

ships would use during their operations—particularly 

ships that, like destroyers, require large amounts of 

energy for purposes other than propulsion. Changes in 

those amounts could have a substantial effect on the relative costs of nuclear and conventional power. Power use 

could be lower on conventional ships if the Navy used a 

hybrid electric drive to reduce fuel consumption. Alternatively, and probably more likely, power use could be 

higher because of the new ships’ larger radars, new 

weapon systems, other electronic systems, and a possible 

boost in the ships’ steaming hours. However, those effects 

on the costs of the nuclear fleet would be relatively small. 

For example, if the DDG(X) were to consume 50 percent 

more energy than the current generation of destroyers, 

the percentage by which the cost of a fleet of nuclear 

destroyers would exceed the cost of a conventional fleet 

would decline from 19 percent to 16 percent.9

 Using an 

approach similar to the one it used to assess sensitivity to 

oil prices, CBO estimated that providing destroyers with 

nuclear reactors would become cost-effective (given 

CBO’s baseline trajectory for oil prices) only if energy use 

more than doubled for the entire fleet of destroyers. 

Other Considerations

Some observers argue that compared with conventionally 

powered ships, nuclear-powered ships are a better option 

for the Navy even if they cost more.10 Nuclear ships may 

be able to steam faster and operate a larger, more powerful radar (which, like the propulsion system, would rely 

9. In April 2011, the Navy indicated to CBO that power use by the 

DDG(X) might be 50 percent greater, according to preliminary 

analyses, than would have been projected on the basis of historical 

antecedents, in part because of additional missile defense missions. If the use of power by the DDG-51 Flight III ships matched 

CBO’s projections and power use for the follow-on DDG(X) class 

was 50 percent greater than that for the current DDG-51s, the 

effect on the discounted present value of costs would be small—

because the DDG(X) would constitute only part of the destroyer 

fleet, because CBO’s estimates already account for some growth in 

energy use, and because DDG(X) operations would occur further 

in the future and receive relatively less weight in the estimates. 

10. For a summary of some of those arguments—though not an 

endorsement of them—see Hans M. Kristensen, William M. 

Arkin, and Joshua Handler, Aircraft Carriers: The Limits of Nuclear 

Power, Neptune Papers No. 7 (June 1994); and Government 

Accounting Office, Nuclear or Conventional Power for Surface 

Combatant Ships? PSAD 77-74 (March 21, 1977).
8 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Figure 2.

Break-Even Rates for Oil Prices at Which Life-Cycle Costs, Discounted Using 

Risk-Adjusted Rates, Are Equal for a Nuclear and a Conventionally Powered Fleet

(Relative discounted cost, nuclear power to conventional power, as a percentage)

Source: Congressional Budget Office.

Notes: The break-even rate is the annual rate at which the price of oil must increase above general inflation, starting in 2011, so that life-cycle 

costs for ships equipped with nuclear propulsion systems equal 100 percent of the life-cycle costs for the same ships with conventional propulsion systems. CBO estimated break-even rates of 4.7 percent for LSD(X) amphibious dock landing ships, 3.4 percent for 

destroyers, and 1.7 percent for LH(X) amphibious assault ships.

Total costs for each type of ship consist of the sum of the discounted value of the life-cycle costs for each ship of that type considered 

in CBO’s analysis—that is, for 12 amphibious dock landing ships, 39 destroyers, and 5 amphibious assault ships. (Life-cycle costs are 

costs over a ship’s entire 40-year service life, beginning with its acquisition and progressing through the annual expenditures over 

40 years for its fuel, personnel, and other operations and support and, finally, its disposal.) Details of CBO’s discounting method and 

selection of rates are discussed in the text. 

a. Includes DDG-51 Flight III (a “flight” is a variant) and DDG(X) destroyers.

on the reactor for energy); they may also be capable of 

operating for longer periods without restocking supplies 

or fuel. The extent of those potential advantages would 

depend on how the nuclear ships operated. On the one 

hand, such ships might need to restock perishable food or 

fuel for aircraft even if they did not require fuel for propulsion. Or nuclear ships might operate in battle groups 

with conventional ships and be tied to the conventional 

ships’ operating schedules. On the other hand, nuclearpowered surface combatants might be more effective than 

conventional ships as escorts to nuclear carriers because 

the carriers would no longer be tied to the operating 

schedules of their escorts. CBO, however, was unable to 

quantify such considerations or account for them in its 

cost comparison.

Comparing CBO’s Analysis with the Navy’s Study of 

Nuclear Power for Future Surface Combatants

The Navy has also studied the possibility of using nuclear 

power in some of its future destroyers and amphibious 

warfare ships, the current versions of which are powered 

by conventional gas turbines.11 The Navy found that for a 

likely range of oil prices, the costs for nuclear-powered 

ships would exceed the costs for equivalent ships with 

conventional power plants—the same conclusion that 

CBO reached. Unlike CBO’s study, however, the Navy’s 

LH(X) Amphibious

Assault Ships

LSD(X) Amphibious

Dock Landing Ships

Real (Inflation-Adjusted) Annual Rate of Increase in the Price of Oil Beyond 2011 (Percent)

Destroyersa

0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

0

20

40

60

80

100

120

140



= Break-Even Rate

$86

Corresponding Price per Barrel of Oil in 2040 (2011 dollars)

$115 $152 $202 $268 $353 $465

11. Section 130 of the Fiscal Year 2006 National Defense Authorization Act (Public Law 109-163) directed the Navy to examine the 

effectiveness of applying nuclear power to surface combatants 

(cruisers and destroyers) and amphibious warfare ships. For the 

Navy’s response, see Naval Sea Systems Command, Report to Congress on Alternative Propulsion Methods for Surface Combatants and 

Amphibious Warfare Ships (January 2007).
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 9

CBO

analysis compared individual ships equipped with the 

two types of power plants without regard to the phased 

introduction of ships into the fleet. That is, the study did 

not account for the fact that even if oil prices were 

assumed to grow quite rapidly, the potential savings from 

moving to a nuclear-powered fleet would accrue largely in 

the future—because the new ships would require decades 

to be fully phased in to the fleet. Nor did the Navy’s study 

account for the time value of money—the analysis did 

not compare costs calculated in terms of their present values. If it was, indeed, cost-effective to gradually shift a 

class of ships to nuclear power, the savings would increase 

as more nuclear ships were built over time. However, 

under CBO’s present-value approach, the savings in fuel 

costs associated with the ships that entered the fleet in 

later years were heavily discounted because the savings 

accrued so far into the future.

The Basis for CBO’s Cost Estimates

In calculating the overall costs of a fleet of new surface 

combatants under alternative propulsion systems, CBO 

used several different models to project costs over the 

ships’ service lives. CBO began, however, with some general assumptions that were independent of how a ship 

was powered. First, CBO assumed that the ships chosen 

for its analysis would each take 5 years to build and have 

a service life of 40 years. Second, funds for procurement 

would be appropriated for the first of the new ships in 

2016, although funding for research, development, testing, and evaluation would be provided sooner. Third, the 

first of the new ships would enter the fleet in 2023; the 

last of them would be procured in 2040, enter the fleet in 

2045, and be retired in 2084.

CBO grouped its estimates of life-cycle costs for the new 

ships into the following categories:

 Acquisition and other onetime costs;

 Fuel;

 Personnel;

 Other operations and support (for example, maintenance); and

 Disposal.

In its calculations, CBO first considered costs incurred in 

earlier Navy shipbuilding programs that had produced 

ships similar to those in its hypothetical fleet. It then 

adjusted some of those cost elements for differences in 

the ships’ displacement (weight). CBO used separate 

models to estimate acquisition costs and the different 

categories of operating costs (fuel, personnel, and maintenance); inputs for the models included historical operating costs and operating profiles (for example, quarterly 

averages of steaming hours under way and steaming 

hours not under way) from the Navy’s Visibility and 

Management of Operating and Support Costs 

(VAMOSC) system.12 So that expenditures made in different years and with different amounts of price risk (the 

risk associated with the amount of the cash outlays that 

the government will make in the future) could be appropriately compared, CBO expressed the total cost of the 

fleet under each alternative propulsion system as a present 

value in 2011.

Acquisition and Other Onetime Costs

CBO estimated acquisition costs for the new ships using 

a model that encompasses expenditures for research, 

design, and engineering as well as for actual construction. 

The model takes into account the effects of learning (unit 

costs—the costs of each ship constructed—decline as 

more ships of the same class are built in a continuous production run over a period of time) and production rates 

(unit costs are reduced when multiple ships of the same 

class are built concurrently in the same shipyard).

The model also reflects CBO’s expectation that the costs 

of labor and materials in the naval shipbuilding industry 

will rise more rapidly than will general inflation during 

the first 35 years of the analysis—the period during 

which all of the ships that CBO considered would be 

authorized and funding would be provided by the Congress.13 In particular, CBO projects that the composite 

growth of shipbuilding costs will outpace inflation (as 

measured by the gross domestic product price index) by 

an average of 1.9 percentage points per year between 

2011 and 2017 and by about 1.5 percentage points per 

year from 2018 through 2045. (Although CBO’s analysis 

considered operating and disposal costs for ships during a 

12. The Navy’s VAMOSC management information system 

(www.ncca.navy.mil/services/costtools.cfm#VAMOSC) collects 

and reports on historical operating and support costs and related 

information for the Navy’s and the Marine Corps’ weapon 

systems. 

13. See Congressional Budget Office, An Analysis of the Navy’s Fiscal 

Year 2011 Shipbuilding Plan, pp. 12–13. 
10 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

period that extended to 2084, shipbuilding inflation is 

germane only through 2045—because all of the ships 

would be built by then.) Thus, in CBO’s estimation, a 

ship costing $2.5 billion to build in 2011, for example, 

would cost $3.4 billion (in 2011 dollars) to build in 

2030.14

Additional Acquisition Costs for Nuclear-Powered Ships. 

The Navy could apply different solutions to providing 

the three classes of new ships with nuclear propulsion systems, but for its analysis, CBO assumed the following:

 The Navy would use one of the twin A1B reactors that 

will power the new Ford class (CVN-78) of nuclear 

aircraft carriers to power the LH(X) amphibious 

assault ships, and 

 The Navy would design a new reactor—smaller than 

the A1B reactor but larger than the reactor in the 

Virginia class submarines—for the destroyers and 

LSD(X) amphibious dock landing ships. That activity 

would entail a onetime cost of about $1 billion, by the 

Navy’s estimates.15

In CBO’s estimation, the acquisition-cost premium for a 

nuclear versus a conventional ship would average about 

$1 billion per hull, but it would vary by the class of ship. 

The initial fuel core for a modern reactor lasts for the life 

of the ship, and the U.S. government already owns 

enough nuclear material to supply all of the ships considered in this analysis. Moreover, unlike the case with aircraft carriers, which the Navy expects to serve in the fleet 

for 50 years, the ships that CBO considered would 

require no additional outlays for midlife refueling. Thus, 

CBO estimated that the acquisition-cost premium for a 

nuclear ship would be about $1.1 billion per destroyer, 

$0.8 billion per LSD(X), and $0.9 billion per LH(X); 

those amounts represent some additional expenditures 

for nuclear fuel together with the cost of the nuclear 

reactor and its cooling and other support systems, and the 

associated greater displacement of the destroyers and 

LSD(X) ships if they are nuclear powered.

The Navy has not built nuclear-powered surface ships for 

several decades but has substantial experience in procuring and operating other types of nuclear-powered ships. 

Therefore, the costs for nuclear ships should be no less 

certain than those for conventional ships. The engine 

technologies for both are “mature.” The technology likely 

to be used for the new ships if conventional propulsion 

systems are chosen—the General Electric LM2500 gas 

turbine, a derivative of the General Electric TF39 aircraft 

engine—has been used on the Navy’s Spruance class 

destroyers (first commissioned in September 1975) and 

Oliver Hazard Perry class frigates (first commissioned in 

December 1977). In addition, the Navy has over 50 years 

of experience in building a series of ever-evolving nuclear 

propulsion systems.16

Any difficulties associated with outfitting a new class of 

ships with nuclear propulsion would probably be limited 

to the lead ship of a class. The costs of a lead ship are 

notoriously difficult to predict because many of the problems that arise during production of a new class or flight 

(variant) of vessels are resolved during construction of 

that ship; in many cases, costs drop precipitously for the 

second ship of a class or flight and then generally follow a 

smooth, gradual downward curve for the duration of the 

production run. CBO did not attempt to quantify or 

account for the unpredictability of the cost of the lead 

ships. Rather, because nuclear fuel is already available in 

sufficient quantity, CBO treated the price of oil—a commodity that cannot be fully stockpiled in advance—as the 

only significant source of uncertainty in the cost of propulsion systems for the ships in this analysis. (However, 

CBO’s analysis also incorporated uncertainty in the cost 

of building the nonpropulsion parts of the ships, as discussed below.)

14. CBO does not expect shipbuilding costs to continue forever to 

grow at a faster rate than the costs of goods and services in the 

economy as a whole; if that were to happen, the price of ships 

would eventually outstrip the Navy’s ability to pay for them, even 

in very small numbers. 

15. The Navy provided CBO with data on design costs in February 

2009. CBO adjusted those data and divided the $1 billion cost 

equally among each of the destroyers and LSD(X)s in the hypothetical fleet. It allocated no additional design costs to the LH(X)s.

16. The Navy commissioned its first nuclear-powered submarine, 

U.S.S. Nautilus (SSN-571), in September 1954; that boat went to 

sea for the first time in January 1955. The Navy commissioned its 

first nuclear-powered surface ships, the cruiser U.S.S. Long Beach

(CGN-9) and the aircraft carrier U.S.S. Enterprise (CVN-65), in 

September 1961 and November 1961, respectively. For additional 

details, see Ronald O’Rourke, Navy Nuclear-Powered Surface Ships: 

Background, Issues, and Options for Congress, Report for Congress 

RL33946 (Congressional Research Service, June 10, 2010).
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 11

CBO

Additional Onetime Costs for a Nuclear-Powered Fleet.

Building nuclear-powered ships for CBO’s hypothetical 

fleet might require an additional shipyard to be certified 

for nuclear construction. Two commercial shipyards are 

currently certified to build nuclear-powered ships: General Dynamics Electric Boat (which has traditionally built 

nuclear submarines but not surface ships) and Newport 

News Shipyard. The Navy plans to build the 56 ships 

considered in this analysis in any case. The question is 

whether the two shipyards could handle the workload 

involved in building 56 nuclear destroyers and amphibious warfare ships over the next 30 years in addition to the 

construction of carriers and submarines that the Navy is 

planning. Simple arithmetic implies that an average of 

about two new ships would begin construction each year, 

but each ship would remain under construction for about 

six years. During the peak shipbuilding years, as many as 

18 of the 56 ships might be in one stage of construction 

or another.

The two shipyards that traditionally build conventional 

destroyers—General Dynamics Bath Iron Works and 

Ingalls Shipyard—have the capacity to build that many 

ships in a year. Just a few years ago, Bath Iron Works had 

8 destroyers in various stages of construction, and Ingalls 

Shipyard had 10 ships (including 2 commercial vessels) in 

progress. The trend in the shipyards is toward building 

ships on land in so-called super- or megamodules, which 

require considerably less pier space (a rate-limiting factor) 

for much of the construction period.17 Further, the shipyards have the capacity to handle even more ships than 

the statistics cited above; even if pier space or other 

aspects of the shipyards’ physical plants had to be 

increased, the costs of doing so would be small relative to 

the procurement and operating costs that dominate this 

analysis. Another factor in such construction is the 

amount of labor required. To build more ships, the shipyards also might have to increase their workforces. CBO 

included the recurring costs of employing those workers 

in its estimates of procurement costs but not any onetime costs to recruit and train additional workers. Again, 

however, those costs would be small in the context of procurement and operating costs for the ships.

Although the two existing nuclear-certified shipyards 

may have sufficient capacity to build the 56 ships in 

CBO’s hypothetical fleet, the Navy might choose instead 

to certify one of the other commercial shipyards, such as 

Bath Iron Works or the Ingalls Shipyard, for nuclear 

work. The shipyard not selected for certification could 

still build modules that would be integrated into ships at 

one of the certified shipyards. For example, if Bath Iron 

Works was certified for nuclear work, the Navy might 

contract with the Ingalls Shipyard to build one-third of a 

ship while Bath built the other two-thirds—not unlike 

the contract arrangement used for the DDG-1000 

destroyer program today. Or the arrangement could be 

reversed, with Ingalls certified as the nuclear shipyard.18

CBO assumed for its analysis that the Navy would certify 

one additional shipyard at an estimated cost of about 

$500 million.19

Costs for Other Supporting Infrastructure and Logistics. 

The Navy’s existing shore infrastructure, including maintenance and repair facilities, currently supports nuclearpowered aircraft carriers and submarines. CBO assumed 

that it would be sufficient to accommodate the additional 

nuclear ships that would be built under the nuclear-fleet 

alternative and did not include any additional infrastructure costs for support of the 56 new ships.

CBO estimated that, on balance, the Navy’s need for 

combat logistics ships—which resupply other ships with 

fuel for use by the ships themselves and by naval aircraft, 

and with ammunition, food, and other supplies—would 

be about the same whether or not the Navy switched to 

nuclear power for its new surface combatants. If the Navy 

made that shift, deliveries of petroleum-based fuel at sea 

would decline only slowly because the fleets of destroyers, 

17. The Navy notes that, rather than saving pier space, the primary 

benefit of modular construction is efficiency.

18. The Ingalls Shipyard has some experience with nuclear-powered 

vessels, having built 12 nuclear submarines, the last one being the 

U.S.S. Parche (SSN-683), which was procured in 1968 and 

entered service in 1974. In addition, Ingalls has overhauled or 

refueled 11 nuclear-powered submarines. However, the Ingalls’ 

nuclear-certified facility was decommissioned in 1980; its experience in nuclear work might or might not be a factor in the Navy’s 

selection of another shipyard for nuclear certification—that is, if 

one was selected at all. See O’Rourke, Navy Nuclear-Powered 

Surface Ships.

19. The Navy provided data to CBO in February 2009 on the cost 

of certification. CBO adjusted those data and allocated the 

$500 million certification cost equally among the ships in its 

hypothetical nuclear fleet.
12 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

LH(X) ships, and LSD(X) ships would not become allnuclear until the 2040s. In the meantime, the Navy plans 

to build 53 (conventionally powered) littoral combat 

ships in addition to the two that have already been completed, and all of those ships would continue to require 

fuel to be delivered at sea. CBO further assumed that, 

compared with what was required for conventional ships, 

nuclear ships would require the same degree of restocking 

of commodities, other than ships’ fuel; nuclear ships 

might even require greater amounts of those stores, in 

view of the larger crews that CBO expects would be 

needed aboard the nuclear-powered ships (discussed 

below).

Fuel

CBO estimated rates of fuel consumption for conventionally powered ships in its hypothetical fleet by using 

historical data for selected Navy surface ships. Such ships 

consume fuel while they are under way and, to a lesser 

extent, while they are not under way. (For example, fuel 

may be converted to electricity to provide such services as 

lighting and climate control while a ship is in port.) 

Where necessary, CBO adjusted underway fuel consumption to reflect differences in displacement between the 

ships in the hypothetical new fleet and the ships selected 

as historical antecedents.

In general, a larger ship consumes more fuel than a 

smaller one and thus offers a greater opportunity to save 

money by replacing conventional engines with nuclear 

reactors. Yet how much fuel a ship consumes depends not 

only on the ship’s size but also on the design of its hull 

and its mission (for example, the distances it is expected 

to travel during a typical deployment and the size of the 

radar and other electronics). For example, the DDG-51 

Flight III destroyer is the smallest ship that CBO considered in this analysis—the destroyer displaces (weighs) 

10,000 tons as opposed to the LSD(X), which displaces 

18,000 tons, and the LH(X), which displaces 45,000 

tons. But the destroyer consumes more fuel per ton per 

hour when under way than do the larger ships. Thus, 

replacing the destroyer’s conventional power plant with a 

nuclear reactor would become cost-effective under a 

lower projected trajectory for oil prices than would be the 

case for the somewhat larger LSD(X). 

Oil prices have been volatile over the past few decades 

and are difficult to predict (see Box 2). After peaking at 

almost $130 per barrel in June and July 2008, they 

had plummeted by December 2008 to about $36 per 

barrel; they then began to grow again and by March 2011 

exceeded $100 per barrel.20 CBO’s macroeconomic projections as of January 2011 show oil prices rising to 

$95 per barrel (in 2011 dollars) by 2021.21 Thereafter, 

CBO assumed, prices would escalate at a real annual rate 

of 1 percent. CBO also considered other trajectories for 

the price of oil to estimate the break-even rate of growth 

that would render the two types of propulsion systems 

equally costly. 

The cost of the fuel delivered to Navy ships comprises 

many elements besides the price of crude oil. CBO thus 

used a method developed by the Navy for calculating a 

“fully burdened” cost of fuel—one that includes the price 

of crude oil refining, delivery of the fuel using the Navy’s 

supply ships, necessary shore facilities, and administrative 

services through the Department of Defense’s supply system. Extrapolating from the Navy’s calculations, CBO 

projected the fully burdened cost of fuel (which comprises both a fixed- and a variable-cost component) on 

the basis of its historical relationship to the price of crude 

oil. For example, a price of $86 per barrel of crude oil 

would imply a fully burdened cost of $178 per barrel—or 

a burden rate of 107 percent.22 If oil prices followed 

CBO’s projected trajectory—increasing to $95 per barrel 

in 2021 and then continuing to escalate at a real rate of 

1 percent per year—prices would reach $114 per barrel 

by 2040 (in 2011 dollars). By extension, the burdened 

price in 2040 would be $222, and the burden rate would 

be 95 percent.

Personnel

CBO also applied the notion of fully burdened costs to 

its estimates of expenditures on military personnel for 

the hypothetical fleet; in that case, its calculations 

20. CBO used the average monthly price of imported oil delivered to 

U.S. refineries in its analysis.

21. Prices in the first four months of this year have averaged $10 per 

barrel more than CBO forecast in January, and they could be 

higher or lower during the rest of the year. CBO expects to update 

its macroeconomic projections in August. 

22. The burden rate, reflecting the costs above the base cost of the 

fuel, is calculated in this instance as 178 divided by 86 minus 

1.00. 
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 13

CBO

encompassed basic military pay, withholding taxes paid 

by the federal government, housing benefits, current and 

future health benefits, retirement benefits, tax advantages, 

and veterans’ benefits.23 CBO estimated the costs in each 

category using data from 2010 and then projected the 

growth in each using rates consistent with its long-term 

economic projections (overall real growth of about 1 percent per year).24 For nuclear-powered ships, CBO 

adjusted personnel costs in two ways: It increased basic 

military pay by 10 percent to reflect the mix of higherlevel skills appropriate to a nuclear vessel, and it added 

35 crew members to each ship’s complement to support 

the operation of the reactor.

Other Operations and Support

CBO estimated average maintenance costs for the three 

kinds of ships by using historical data for similar ship 

classes and then adjusting those data for the differences in 

the ships’ displacement. CBO’s estimates allowed for 

overhauls and other periods when the ships might be 

unavailable because of maintenance—that is, periods 

when they would spend a minimal number of hours 

under way.

Disposal

CBO modeled disposal costs for conventional ships as a 

function of their displacement; for example, it would cost 

about $1 million to dispose of a conventional destroyer 

but about $9 million to dispose of the much larger 

LH(X) amphibious ship. For nuclear-powered ships, 

CBO estimated, on the basis of data provided by the 

Navy, that it would cost an additional $140 million to 

dispose of a single reactor from a nuclear-powered ship of 

any of the types considered in this analysis.25

Comparing the Costs of Alternative 

Propulsion Systems Using PresentValue Calculations

The total estimated costs for CBO’s hypothetical fleet 

under both the conventional and nuclear power alternatives depend on the estimated future costs for building 

and operating the ships in the fleet and the discount rates 

used to convert those costs to present values—a standard 

method for valuing an extended stream of future cash 

flows. CBO thus estimated projected future costs in 

terms of 2011 dollars; it also used risk-adjusted discount 

rates that attach a market price to the risk associated with 

the amount of the cash outlays that the government will 

make in the future. That “fair-value” approach measures 

what a private entity in a competitive market would need 

to be paid to voluntarily assume the costs and risks that 

the government is assuming on behalf of taxpayers. Such 

an approach provides a more complete measure of the 

economic cost associated with the two alternatives than 

does a calculation that treats the government’s capacity to 

bear market risk as having no cost. Although the government can borrow at rates that include no extra compensation for bearing market risk, its ability to do so depends 

on taxpayers—who back the debt and thus bear that 

risk.26

23. See Congressional Budget Office, Evaluating Military Compensation (June 2007). Veterans’ benefits and some tax advantages for 

military personnel (certain allowances they receive are not subject 

to federal income tax) are not included in the defense budget but 

are instead reflected in higher outlays for other federal departments or in lower tax revenues. CBO has nonetheless included 

those elements in its estimates because they reflect actual costs to 

U.S. taxpayers.

24. See Congressional Budget Office, The Long-Term Budget Outlook

(June 2010, revised August 2010).

25. The Navy provided CBO with data on disposal costs in February 

2009. Other estimates are available but would not substantially 

change CBO’s findings; see, for example, Ronald O’Rourke, 

Navy Ship Acquisition: Options for Lower-Cost Ship Designs, Report 

for Congress RL32914 (Congressional Research Service, December 11, 2006), p. 16. In 2005, the Navy provided O’Rourke with 

an estimate of $70 million (in 2011 dollars) for deactivating, dismantling, and disposing of a retired nuclear-powered submarine; 

according to the Navy, work related to the reactor compartment 

would constitute roughly half of that total, or $35 million. The 

Navy also provided O’Rourke with a projection of about $1.1 billion (in 2011 dollars) for deactivating the nuclear-powered carrier 

U.S.S. Enterprise (CVN-65) in 2013. Work related to the ship’s 

eight nuclear reactors accounted for about $730 million of the 

total.

26. CBO has applied the fair-value approach in other contexts; see, 

for example, Congressional Budget Office, Fannie Mae, Freddie 

Mac, and the Federal Role in the Secondary Mortgage Market

(December 2010); The Budgetary Impact and Subsidy Costs of the 

Federal Reserve’s Actions During the Financial Crisis (May 2010); 

and Costs and Policy Options for Federal Student Loan Programs

(March 2010).
14 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Continued

Box 2.

Fluctuating Oil Prices

In comparisons of the cost-effectiveness of using conventional versus nuclear propulsion for the Navy’s 

planned fleet of new surface combatants, an important consideration is the future price of oil. The Congressional Budget Office (CBO) regularly projects oil 

prices over a 10-year period as part of the macroeconomic forecast that underlies its baseline budget 

projections.1

 However, for its analysis of conventional 

versus nuclear propulsion, CBO had to consider the 

trajectory of oil prices over a much longer period—a 

total span of 75 years, with the Navy’s new surface 

ships expected to be built over the next 35 years and 

then operated for 40 more years. Such a long forecasting horizon increases the uncertainty inherent in 

projections of oil prices.

Oil prices can be volatile even over short periods; in 

recent years, they have fluctuated widely. For example, the average price of all crude oil delivered to U.S. 

refiners generally declined throughout the 1990s 

(albeit with some variability) to about $12 per barrel 

(in 2011 dollars) in December 1998. It then rose to 

$38 in September 2001; fell again to $19 per barrel 

in December 2001; and subsequently, from that 

point to the middle of 2008, increased nearly sevenfold, peaking at almost $130 per barrel in June and 

July of that year (see the figure to the right).2

 The 

average price then fell to $36 per barrel in December 

2008 and began to climb again, reaching a monthly 

average of more than $100 per barrel in March 

2011.3

 Over longer periods, the real (inflationadjusted) price of oil has generally increased: The real 

price was higher in the decade that began in 2001 

than in the preceding decade.

The primary reason for short-term fluctuations in oil 

prices is that the quantity of oil supplied and the 

quantity demanded are generally not very responsive 

to short-lived price pressures. That means that, in the 

face of an unexpected shortage or surplus of oil, 

prices may move sharply up or down in order to 

rebalance supply and demand in the world market. 

For example, the total supply of oil is strongly influenced by the nations that make up the Organization 

of Petroleum Exporting Countries, or OPEC.4

OPEC controls essentially all of the spare oil production capacity in the world; if it decides to curtail its 

members’ output, the nations outside of OPEC are 

seldom able to boost production in the short run to 

alleviate the shortage. Moreover, if prices rise rapidly, 

it takes time for industry and consumers to significantly lessen their demand. For example, the transportation sector accounts for about 75 percent of all 

petroleum consumed in the United States, and drivers (including commercial truckers) are reluctant or 

unable to quickly reduce the number of miles they 

drive.5

 In the longer run, the demand for oil in the 

transportation sector is more responsive to oil prices 

because businesses can change the way they transport 

their goods (for example, they can ship fewer goods 

by air), and consumers can choose more fuel-efficient 

vehicles or modify their commuting patterns.

1. For CBO’s most recent economic projections, see Congressional Budget Office, The Budget and Economic Outlook: 

Fiscal Years 2011 to 2021 (January 2011).

2. The average price of all oil imported and delivered to U.S. 

refiners is the measure of oil prices that is calculated by the 

Energy Information Administration, the Department of 

Energy’s statistical agency (see www.eia.doe.gov/dnav/pet/

pet_pri_rac2_dcu_nus_m.htm), and used by CBO in its 

macroeconomic forecast.

3. West Texas Intermediate crude oil, which is another benchmark for oil prices, peaked at a daily price of about $145 per 

barrel in July 2008 and, after declining from that high point, 

had by the end of April 2011 again risen to more than $110 

per barrel. (West Texas Intermediate is a high-quality light 

sweet crude oil produced in North America.) See Department of Energy, Energy Information Administration, “Petroleum and Other Liquids” (May 2, 2011; www.eia.doe.gov/

dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=D). 

4. For additional information on the factors that influence 

oil prices, see Department of Energy, Energy Information 

Administration, Oil Prices and Outlook (updated December 17, 2010; www.eia.gov/energyexplained/

index.cfm?page=oil_prices).

5. See Congressional Budget Office, Effects of Gasoline Prices on 

Driving Behavior and Vehicle Markets (January 2008). 
THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 15

CBO

Box 2. Continued

Fluctuating Oil Prices

Monthly Average Price for All Oil Imported and Delivered to U.S. Refiners

(2011 dollars per barrel)

Source: Congressional Budget Office based on data from Department of Energy, Energy Information Administration, “Petroleum 

and Other Liquids” (www.eia.doe.gov/dnav/pet/pet_pri_rac2_dcu_nus_m.htm).

CBO bases its 10-year forecasts of oil prices partly on 

transactions in the futures market for oil (a market 

for commitments to deliver oil in the future), which 

reflects the developments that investors expect in the 

worldwide supply of and demand for oil.6

 In CBO’s 

most recent forecast, oil prices after 2013 grow at a 

rate about 1 percentage point higher than that for 

inflation through 2021. CBO assumed for this study 

that the same trend would continue through 2084.7

That projection of long-term price growth is consistent with an outlook in which the world economy 

continues to expand and the increasing growth in the 

global demand for crude oil is satisfied by generally 

harder-to-access and higher-cost supplies. But oil 

market trends are uncertain. The rate of growth of oil 

prices that CBO has forecast—1 percentage point 

above inflation—might be lower if world demand 

grew more slowly than projected or if new oil reserves 

were discovered. Alternatively, real prices could rise 

faster if the growth in worldwide demand was greater 

than expected or if producers had more difficulty 

keeping pace with that growth. The policies and stability of OPEC will also influence future prices and 

are difficult to predict.

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

0

20

40

60

80

100

120

140

6. For a specific discussion about projecting oil prices using data 

from futures markets, see Congressional Budget Office, 

The Budget and Economic Outlook: Fiscal Years 2006 to 2015

(January 2005).

7. To reflect the uncertainty in that projected trajectory for oil 

prices, CBO conducted a sensitivity analysis to determine 

how much faster the price of oil would have to rise to overturn the conclusion of the main analysis that conventionally 

powered ships are more cost-effective than nuclear-powered 

ships. (See “Costs Under a Higher Projected Trajectory for 

Oil Prices” on page 7.) As a point of comparison, the Department of Energy’s Energy Information Administration (EIA) 

publishes 25-year projections of oil prices. (For its most 

recent estimates, through 2035, see “Annual Energy Outlook—2011: Reference Case Tables,” April 26, 2011; 

www.eia.gov/forecasts/aeo/tables_ref.cfm.) As of January 

2011, CBO’s and EIA’s projections of long-term growth in 

prices were similar; however, EIA projected higher rates of 

growth than CBO did for years up to and including 2021, 

whereas for years after 2021, EIA projected lower rates of 

growth, relative to CBO’s estimates.
16 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Under the fair-value approach, CBO used discount rates 

for the federal government’s estimated future costs that 

took into account that the prices of the inputs used to 

build and operate ships—such as steel, labor, and fuel—

would vary with economic conditions. Like the stock 

market, the prices of those inputs tend to be procyclical: 

That is, they move with the business cycle and are higher 

when the economy is strong and lower when the economy is weak. The positive relationship between the prices 

of inputs for ships and the stock market means that those 

prices are more likely to be high when economic 

resources (for example, the revenues of private firms) are 

relatively plentiful and low when such resources are relatively scarce. If input prices tended to be higher when 

economic resources were scarce, then an adjustment for 

market risk would increase the discounted costs. However, because input prices tend to be lower when economic conditions are generally worse and savings on such 

inputs are particularly valuable, an adjustment for market 

risk lowers the discounted costs of building and operating 

ships. That is, risk-adjusted discount rates are higher than 

the rates on Treasury securities, so the present value of the 

costs is lower than if no adjustment for market risk had 

been made.

CBO used a real discount rate of 4 percent in computing 

the present value of construction and operating costs 

other than those for fuel under the two propulsion alternatives. The rate has two components: a short-term rate 

of 2 percent (CBO’s estimate of the real rate on shortterm Treasury securities) and a “risk premium” of 2 percent.27 CBO’s choice of rates was based in part on an 

analysis of the historical cost of capital for the U.S. maritime industry. The rate also reflects a slight downward 

adjustment to account for the weaker correlation with the 

business cycle of the Navy’s purchases of ships and ship 

support services—weaker, that is, than the business cycle’s 

correlation with the overall activity of the maritime 

industry.

Similarly, CBO based the discount rate that it applied to 

future purchases of oil on its estimate of the rate of return 

that private-sector investors would require for holding 

stocks in oil companies. Although the price of oil, like 

that of other inputs, tends to increase with the strength of 

the overall economy, the relationship historically has been 

significantly weaker than the ties between the economy’s 

robustness and the costs associated with building and 

operating ships. CBO thus used a discount rate of 3 percent for future oil purchases; the rate combines a shortterm real rate of 2 percent and a risk premium of 1 percent. In determining that risk premium, CBO used information on the prices of oil futures contracts and forecasts 

of future oil prices, and analyzed historical data on the 

correlation of oil prices with market risk.28

To determine whether the results of its analysis were sensitive to the choice of discount rates, CBO also compared 

the life-cycle costs for nuclear-powered and conventionally powered fleets using a real long-term discount rate of 

3 percent for all cash flows (see the appendix). That rate 

corresponds to CBO’s projection of the real rate of return 

on 30-year Treasury bonds. (Coincidentally, it is also 

identical to CBO’s estimate of the required return on 

investments in oil.)29 In that case, too, the costs for a fleet 

of conventionally powered ships would be significantly 

lower than the costs for a fleet of nuclear-powered ships.

27. CBO’s methodology for estimating discount rates is based on 

the capital asset pricing model, which is commonly used by 

private-sector analysts to select discount rates for long-run investment projects. For a discussion of the model, see Stephen Ross, 

Randolph Westerfield, and Jeffrey Jaffe, Corporate Finance (New 

York: McGraw-Hill/Irwin, 2009).

28. Kenneth J. Singleton, in a March 2011 unpublished manuscript 

(“Investor Flows and the 2008 Boom/Bust in Oil Prices”; 

www.stanford.edu/~kenneths/OilPub.pdf), discusses estimating 

risk premiums on the basis of information about expected future 

oil prices and the forward price curve for oil prices.

29. The return on Treasury bonds is consistent with CBO’s long-term 

macroeconomic forecast of interest rates. The required return on 

oil investment, though numerically the same, was calculated by 

using a different methodology (described above), which adds a 

risk premium to an estimate of short-term interest rates.
CBO

Appendix: 

Supplementary Calculations Using an 

Alternative Discount Rate

In its main analysis comparing the cost-effectiveness of 

using nuclear versus conventional power for the Navy’s 

planned fleet of new surface ships, the Congressional 

Budget Office (CBO) calculated the costs for all the ships 

as a present value—a single amount that expressed the 

stream of the ships’ annual costs in terms of an equivalent 

lump sum spent at the start of the analysis period. In 

those calculations, future costs were “discounted” (converted into current dollars) using a rate that took into 

account two factors: Money in hand is worth more than 

the same amount received in the future, and the cash 

flows face market risk. (Market risk is the risk of losses 

that investors cannot avoid by diversifying holdings and 

for which they require some compensation.) In particular, 

CBO used discount rates for future financial costs equal 

to the estimated return that a private investor would 

require on a project of similar risk and duration: a real 

(inflation-adjusted) discount rate of 3 percent in computing the present value of conventional fuel costs and a real 

discount rate of 4 percent in calculating construction and 

operating costs (for both nuclear and conventional ships) 

other than those for fuel. 

In an alternative analysis, CBO recalculated the cost 

comparison using Treasury rates for discounting—specifically, using a real discount rate of 3 percent for all categories of costs. That rate is based on CBO’s forecast of 

the rates of return on long-term (30-year) Treasury 

bonds; that it is identical to the discount rate CBO used 

to compute the present value of conventional fuel costs in 

the main analysis is coincidental. (CBO determined the 

discount rates for its main analysis by entirely different 

methods, as discussed in “Comparing the Costs of Alternative Propulsion Systems Using Present-Value Calculations” on page 13.) This alternative calculation does not 

take the cost of market risk into account; rather, it reflects 

the compensation that investors would require to make 

long-term investments that they believe entail no risk of 

loss from defaults. It also reflects the method of discounting (and, over the past decade, the approximate discount 

rate) used by executive branch agencies.1

Using the same rate (3 percent) to discount all costs—

rather than applying a lower adjustment for risk (that is, a 

lower discount rate) to fuel costs than to other types of 

costs, as in the main analysis—leads to different estimates 

of the comparative cost-effectiveness of nuclear versus 

conventional power but the same net result: Nuclear 

ships would be more expensive unless oil prices sustained 

rapid growth through 2084. Under the alternative 

approach of discounting all costs at 3 percent, nuclear 

power would be even more expensive than conventional 

power relative to the findings from the main analysis, 

because the fuel savings would no longer be discounted at 

a rate lower than that used for other costs. As a corollary, 

the price of oil would have to grow more rapidly than in 

the trajectory presented in the main text before the costs 

for conventional fuel began to overtake the higher acquisition costs associated with nuclear-powered ships, thus 

making the use of nuclear propulsion cost-effective.

1. For general information, see Office of Management and Budget, 

Guidelines and Discount Rates for Benefit-Cost Analysis of Federal 

Programs, Circular A-94 (October 29, 1992); for more specific 

information on past years’ discount rates, see the table titled 

“Budget Assumptions: Nominal Treasury Interest Rates for 

Different Maturities (from the annual budget assumptions for the 

first year of the budget forecast)” in Appendix C of the circular 

(http://www.whitehouse.gov/sites/default/files/omb/assets/a94/

dischist.pdf). 
18 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

CBO assumed for this alternative analysis that the 

price of oil would follow the same projected trajectory 

that CBO used for the main analysis: Oil prices start at 

$86 per barrel in 2011 and grow at a rate about 1 percentage point per year above that of general inflation. 

In CBO’s estimation, the present-value costs in 2011, if 

calculated using Treasury rates for discounting, for a 

nuclear-powered fleet relative to a conventionally powered one would be about $20 billion (22 percent) higher 

for destroyers, $1.4 billion (8 percent) higher for LH(X) 

amphibious assault ships, and $6.6 billion (35 percent) 

higher for LSD(X) amphibious dock landing ships (see 

Table A-1). For the sake of comparison, the findings from 

CBO’s main analysis, which used risk-adjusted discount 

rates, were that costs would be higher for a nuclearpowered fleet by about $14 billion (or 19 percent) for 

destroyers, by $0.6 billion (4 percent) for LH(X) amphibious assault ships, and by nearly $5 billion (33 percent) 

for LSD(X) amphibious dock landing ships. The costs for 

conventional fuel that are avoided by the use of nuclear 

power—costs that are now, in this alternative analysis, 

discounted at the same rate as other costs and thus relatively smaller—would not be large enough to compensate 

for the increased acquisition costs of nuclear-powered 

ships.

In addition to the case just described, CBO also considered one in which the price of oil again starts from the 

value of $86 per barrel in 2011 but then increases over 

time at a fixed rate that exceeds the rate of general inflation by some amount greater than 1 percentage point. In 

CBO’s estimation, a fleet of nuclear destroyers would 

become cost-effective under such a price path (and the 

alternative discount rate assumption) if the real annual 

rate of growth in oil prices exceeded 3.9 percent (see 

Figure A-1). Such a scenario implies a price for oil of 

$260 or more per barrel (in 2011 dollars) in 2040. 

Similarly, a fleet of nuclear-powered LH(X) amphibious 

assault ships would become cost-effective at a real annual 

growth rate for oil prices of 2.5 percent (for a price of 

$173 per barrel in 2040); and a fleet of nuclear-powered 

LSD(X) amphibious dock landing ships would become 

cost-effective if the price of oil grew at a real annual rate 

of 5.2 percent (for a price of $373 per barrel in 2040). 

The comparable findings from CBO’s main analysis are a 

real annual rate of growth in oil prices of 3.4 percent and 

an implied price of $223 per barrel for destroyers, growth 

of 1.7 percent and an implied price of $140 per barrel for 

LH(X) amphibious assault ships, and growth of 4.7 percent and an implied price of $323 per barrel for amphibious dock landing ships.
APPENDIX THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS 19

CBO

Table A-1. 

Estimated Life-Cycle Costs for a Nuclear Versus a Conventionally Powered Fleet, 

Calculated as Present Values Using Treasury Rates for Discounting

(Billions of 2011 dollars)

Source: Congressional Budget Office.

Notes: Total costs for each type of ship consist of the sum of the discounted value of the life-cycle costs for each ship of that type considered 

in CBO’s analysis—that is, for 39 destroyers, 5 amphibious assault ships, and 12 amphibious dock landing ships. (Life-cycle costs are 

costs over a ship’s entire 40-year service life, beginning with its acquisition and progressing through the annual expenditures over 

40 years for its fuel, personnel, and other operations and support and, finally, its disposal.) Details of CBO’s present-value calculations 

and discounting methods are discussed in the text.

A conventionally powered DDG-51 Flight III destroyer (a “flight” is a variant) is expected to have a full-load displacement (weight) of 

10,000 tons; CBO assumed that a nuclear-powered DDG-51 would displace 12,000 tons. CBO also assumed that the replacement class,

the DDG(X), would displace 11,000 tons if conventionally powered and 13,000 tons if nuclear powered; that the LSD(X) amphibious

dock landing ship would displace 18,000 tons if conventionally powered and 20,000 tons if nuclear powered; and that the LH(X) 

amphibious assault ship would displace 45,000 tons in either case (the ship would have adequate capacity to accommodate nuclear

reactors with no increase in displacement).

n.a. = not applicable; * = between zero and $50 million.

a. CBO allocated the total $1 billion cost to develop a new nuclear reactor equally among the 51 destroyers and LSD(X)s under the nuclearfleet alternative. No costs were allocated to the LH(X)s; CBO assumed those ships would be outfitted with one of the A1B reactors that the 

Navy plans to use in the new Gerald R. Ford class (CVN-78) of aircraft carriers.

b. CBO allocated the total $500 million cost to certify an additional nuclear shipyard equally among all 56 ships under the nuclear-fleet 

alternative.

Acquisition

Develop a new nuclear

reactora n.a. 0.8 n.a. 0 n.a. 0.2 n.a. 1.0

Certify an additional

nuclear shipyardb n.a. 0.4 n.a. * n.a. 0.1 n.a. 0.5

Procure ships 44.9 67.2 7.5 9.8 7.4 13.3 59.8 90.4 ____ ____ ___ ___ ___ ____ ____ ____

Subtotal 44.9 68.4 7.5 9.8 7.4 13.6 59.8 91.9

Fuel 10.4 0 2.1 0 1.9 0 14.4 0

Personnel 28.2 34.7 6.2 7.2 6.9 8.8 41.3 50.8

Other Operations and

Support 7.9 7.9 2.4 2.4 2.7 2.7 13.0 13.0

Disposal * 0.8 * 0.1 * 0.3 * 1.2 ____ _____ ____ ____ ____ ____ ______ _____

Total 91.4 111.8 18.2 19.6 18.8 25.4 128.5 156.9

Memorandum:

Number of Ships Built 39 39 5 5 12 12 56 56

Destroyers

DDG-51 and DDG(X)

Nuclear Conventional

Dock Landing Ships All Ships

LSD(X) Amphibious

Assault Ships

LH(X) Amphibious

Conventional Nuclear Conventional Nuclear Conventional Nuclear
20 THE COST-EFFECTIVENESS OF NUCLEAR POWER FOR NAVY SURFACE SHIPS

CBO

Figure A-1.

Break-Even Rates for Oil Prices at Which Life-Cycle Costs, Discounted Using 

Treasury Rates, Are Equal for a Nuclear and a Conventionally Powered Fleet

(Relative discounted cost, nuclear power to conventional power, as a percentage)

Source: Congressional Budget Office.

Notes: The break-even rate is the annual rate at which the price of oil must increase above general inflation, starting in 2011, so that life-cycle 

costs for ships equipped with nuclear propulsion systems equal 100 percent of the life-cycle costs for the same ships with conventional propulsion systems. CBO estimated break-even rates of 5.2 percent for LSD(X) amphibious dock landing ships, 3.9 percent for 

destroyers, and 2.5 percent for LH(X) amphibious assault ships.

Total costs for each type of ship consist of the sum of the discounted value of the life-cycle costs for each ship of that type considered 

in CBO’s analysis—that is, for 12 amphibious dock landing ships, 39 destroyers, and 5 amphibious assault ships. (Life-cycle costs are 

costs over a ship’s entire 40-year service life, beginning with its acquisition and progressing through the annual expenditures over 

40 years for its fuel, personnel, and other operations and support and, finally, its disposal.) Details of CBO’s discounting method and 

selection of rates are discussed in the text.

a. Includes DDG-51 Flight III (a “flight” is a variant) and DDG(X) destroyers.

LH(X) Amphibious

Assault Ships

LSD(X) Amphibious

Dock Landing Ships

Real (Inflation-Adjusted) Annual Rate of Increase in the Price of Oil Beyond 2011 (Percent)

Destroyersa

0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

0

20

40

60

80

100

120

140



= Break-Even Rate

$86 $115 $152 $202 $268 $353 $465

Corresponding Price per Barrel of Oil in 2040 (2011 dollars)