Survey of Energy Resources 2007
Nuclear - Rising Expectations
Fossil Fuel Prices.
Higher world market prices for fossil fuels have put nuclear power on the agenda of many countries currently without nuclear power and have revived interest in countries with stagnating nuclear power programmes. Because they are driven largely by demand, current high prices for fossil fuels are likely to be more permanent than were those of the 1970s. Energy demand growth, driven by continuing economic development, is expected to persist - hence the pressure on prices is likely to last. High world market prices for fossil fuels have the greatest impact on countries that are highly dependent on energy imports, particularly developing countries with relatively scarce financial resources. A doubling of international prices translates into generation cost increases of about 35-45% for coal-fired electricity and 70-80% for natural gas. In contrast, a doubling of uranium prices (which have also increased recently - see below) increases nuclear generating costs by only about 5%.
Rising fossil fuel and uranium prices not only affect the relative competitiveness of electricity
generating options but can also affect supply security. Concerns about energy supply security were important in the nuclear expansion programmes of France and Japan at the time of the 1970s oil shocks. They are one of the arguments advanced in Europe today for expanding nuclear power, and they may prove an important motivation for some countries currently without nuclear power to strongly consider the possibility.
Developing countries with sizable domestic fuel resources have recently begun looking at the feasibility of introducing nuclear power in the 2015-2020 time frame. These include OPEC members Indonesia and Nigeria as well as six member countries of the Gulf Cooperation Council. For them the immediate impact of increased oil prices is not the same as that for oil importers, but the logic may lead in the same direction. Nuclear power can be a vehicle to increase export revenues by substituting domestic demand for natural gas (and to a lesser extent oil) by nuclear power. The additional export earnings may well finance the construction of part or all of a country's first nuclear power plants. Also some oil and gas exporters, for example Indonesia, may be interested in nuclear power as a way to reduce currently high rates of oil and gas resource depletion.
Nuclear power plants have a 'front-loaded' cost structure, i.e. they are relatively expensive to build but relatively inexpensive to operate. The low share of uranium costs in total generating costs protects plant operators against resource price volatility. Thus existing well-run operating nuclear power plants continue to be a generally competitive and profitable source of electricity, but for new construction the economic competitiveness of nuclear power depends on several factors. Firstly, it depends on the alternatives available: some countries are rich in alternative energy resources, others less so. Secondly, it depends on the overall electricity demand in a country and how fast it is growing. Thirdly, it depends on the market structure and the investment environment. Other things being equal, nuclear power's 'front-loaded' cost structure is less attractive to a private investor in a liberalised market that values rapid returns, than to a government that can look longer-term, particularly in a regulated market that assures attractive returns. Private investments in liberalised markets will also depend on the extent to which energy-related external costs and benefits (e.g. pollution, greenhouse gas (GHG) emissions, waste and energy supply security) have been internalised. In contrast, government investors can incorporate such externalities directly into their decisions. Also important are regulatory risks. Political support for nuclear power varies across countries, and, within a given country, it can change over time. An investor must weigh the risk of political shifts that might require cancellation of the project midstream or introduce delays and costs that would vitiate an originally attractive investment. Different countries also have different approval processes. Some are less predictable than others and create greater risks, from the investor's perspective, of expensive interventions or delays.
In Japan and the Republic of Korea, the relatively high cost of alternatives benefits nuclear power's competitiveness. In India and China, rapidly growing energy needs encourage the development of all energy options. In Europe, high electricity prices, high natural gas prices and limitation of GHG emissions under the European Union Emission Trading Scheme (EU ETS) have all improved the business case for new nuclear power plants. In the USA, the 2005 Energy Act significantly strengthened the business case for new construction. Previously new nuclear power plants had not been an attractive investment, given plentiful low-cost coal and natural gas, no GHG emission limits, and investment risks arising from the lack of recent experience in licensing new nuclear power construction. The provisions of the Energy Act, including loan guarantees, government coverage of costs associated with certain potential licensing delays and a production tax credit for up to 6 000 MWe of advanced nuclear power capacity, have improved the business case enough to prompt announcements by nuclear firms and consortia of possible Combined Operating License (COL) applications covering approximately 25 possible new reactors in the USA.
Fig. 6-10 summarises estimates from seven recent studies of electricity costs for new power plants with different fuels. Except for oil-fired electricity generation (estimated in only one study) the high end of each cost range is at least 100% higher than the low end. This is due partly to different techno-economic assumptions across the studies, but also to the factors listed above. Moreover, the ranges in Fig. 6-10 incorporate only internalised costs. If high enough priority is given to improving national energy self-sufficiency, for example, the preferred choice in a specific situation might not be the least expensive.
The best way to strengthen a country's energy supply security is by increasing the number and resiliency of energy supply options, and for many developing countries, expanding nuclear power would increase the diversity of energy and electricity supplies. Moreover, nuclear power has two features that generally further increase resiliency. The first was noted above: that nuclear electricity generating costs are much less sensitive to changes in resource prices than are fossil-fired electricity generating costs. Secondly, the basic fuel, uranium, is available from diverse producer countries, and small volumes are required, making it easier to establish strategic inventories. In practice, the trend over the years has been away from strategic stocks towards supply security based on a diverse well-functioning market for uranium and fuel supply services. But the option of relatively low-cost strategic inventories remains available for countries that find it important.
Environmental considerations may weigh increasingly in favour of nuclear power. Nuclear power at the point of electricity generation does not produce any emissions that damage local air quality, cause regional acidification or contribute to climate change. There are some emissions associated with plant construction and the nuclear fuel cycle (i.e. mining, enrichment, transportation, etc.). But on a per kWh basis over the lifetime of the plant these are far below emissions from fossil-fired power plants and at least comparable to those of wind power and biomass conversion (Fig. 6-11 ).
The Kyoto Protocol, which entered into force in February 2005, requires most developed countries to limit their GHG emissions in the 'first commitment period', 2008-2012. Before the Protocol's entry into force, nuclear power's advantage of very low GHG emissions was largely invisible to investors, as the lack of restrictions or taxes on such emissions meant there was no economic value to their avoidance. Different countries have adopted different policies to meet their Kyoto Protocol limits. Not all benefit nuclear power despite its low GHG emissions, but in the longer run, the limits on GHG emissions should make nuclear power increasingly attractive. For example, a charge on carbon dioxide emissions of € 20 per tonne of carbon dioxide (tCO2), would improve a nuclear plant's generating costs relative to those of a modern coal-fired plant by 10-20%. During 2006, CO2 traded in Europe between € 6 and € 29 per tCO2.
With respect to emission reductions after the first commitment period, the 11th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP11) in 2005 decided to start discussions in an ad-hoc working group, which has now met twice, in May and November 2006. Discussions are still in an early phase, and have not yet begun to address specific issues such as the current exclusion of nuclear power projects from the clean development mechanism and joint implementation.
Political and Public Acceptance.
Rising expectations for nuclear power are also founded on positive government statements about, and newly-expressed interest in, the technology. In March 2005 high-level representatives of 74 governments, including 25 representatives at the ministerial level, gathered in Paris at a conference organised by the IAEA to consider the future role of nuclear power. The vast majority of participants affirmed that nuclear power can make a major contribution to meeting energy needs and sustaining the world's development in the 21st century, for a large number of both developed and developing countries. A meeting organised by the IAEA in December 2006 to examine Issues for the Introduction of Nuclear Power was attended by 28 countries that currently do not operate nuclear power plants.
Factors contributing to the rise in expectations are nuclear power's good and lengthening track record, the persistent growth in global energy needs, new environmental constraints, concerns in some countries about energy supply security and specific nuclear power expansion plans in countries such as India, China, Japan, the Republic of Korea and the Russian Federation. Nuclear power's good and lengthening track record is reflected in the more than 12 400 reactor-years of experience to date, improved capacity factors, lower generating costs and an excellent safety record.
There has been one accident with major off-site consequences - at Chernobyl in 1986. That accident cost lives and caused widespread misery. But it also brought about major changes including the founding of a 'safety culture' of constant improvement, thorough analysis of experience and sharing of best practices. This safety culture has been demonstrating its effectiveness for nearly two decades, and the resulting safety record provides the basis for countries considering constructing nuclear power plants.
Public policies and public opinion towards nuclear power development remain divided - especially in Europe. While some countries vigorously support nuclear development, others have either placed a total ban on atomic energy (Austria, Denmark, Ireland) or have legislated nuclear phase-out policies (Sweden, Belgium, Germany). A recent global public opinion survey commissioned by the IAEA shows a continuing diversity of views. The survey polled 18 000 people in 18 countries. There was substantial diversity across countries. Aggregated results are shown in Fig. 6-12 . A majority of 62% wished to keep current plants running at the same time as a majority of 59% did not want new plants built. A follow-up question was also asked that included brief information about nuclear power's very low greenhouse-gas emissions, following which the percentage in favour of expanding nuclear power rose from 28% to 38%, and the percentage opposing expansion dropped from 59% to 47%.
Public policies with regard to nuclear power plants often reflect the views of the public, but this is not always the case. Recently the mood has been changing, and more positive attitudes towards nuclear power are emerging in some countries. For example, in the United Kingdom a positive public attitude towards nuclear power is becoming evident, and the UK Government has indicated its belief that nuclear has a rôle to play. In its 2007 Energy White Paper it presented its 'preliminary view' that the private sector should be allowed to construct and operate new nuclear stations. According to a Mori opinion poll of 1 500 people conducted in early 2006, 54% said they would accept new nuclear power stations if they would help fight climate change. And 48% agreed that the nation needs nuclear power because renewables alone are not able to meet its electricity needs. Polls also found that pitting nuclear power against renewables hurt support for nuclear power while a combination of both often appeared quite acceptable.
In Poland, where nuclear development was halted by a Parliamentary decision in 1990, the Council of Ministers approved a draft energy policy in early 2005 that explicitly includes nuclear power.
Reflecting these recent positive political developments in Europe, a cross-party group of 25 EU members of parliament endorsed the vital contribution of nuclear energy in countering climate change and called for more investment in all low- or zero-carbon power generation technologies. They said nuclear power should remain central to the EU's energy and environmental policy planning, and called for a global strategy to address climate change.
In the United States, public support for the continued use of nuclear energy now stands at a record high of 70% and shows a continued upward trend, according to a new opinion poll conducted for the US Nuclear Energy Institute (NEI).