Reassessing Power

By CHARLES K. EBINGER& JOHN P. BANKS

Reassessing Power

By CHARLES K. EBINGER& JOHN P. BANKS

Fukushima accident increases global concern over nuclear safety

The accident at the Fukushima Daiichi Nuclear Power Plant in Japan has had an immediate impact on resurgent interest in nuclear power worldwide.

Numerous governments have announced plans to re

examine nuclear energy policy and review the safety of their reactors and the adequacy of their regulatory frameworks.

On March 16, EU Energy Commissioner Gunther Oettinger called for safety and stress tests on all 143 reactors in member countries.In the United States, President Barack Obama called on the Nuclear Regulatory Commission to conduct “a comprehensive safety review…of all our existing nuclear energy facilities.”Germany has temporarily closed seven old plants and suspended a previous decision on life extensions for all its 17 nuclear generators.China, with the world’s largest nuclear reactor construction program, suspended approval of new plants while conducting safety reviews at existing plants.

In the wake of the accident, all aspects of nuclear power plant construction and operation are facing increased scrutiny, with particular attention focused on the ability of reactors to withstand catastrophic events and seismic activity; emergency preparedness and the adequacy of backup power systems;the siting of multiple units in one location;the re-licensing of older facilities; the handling and storage of spent fuel; and liability in the event of an accident. The examination of these issues and assessment of the events at Fukushima in detail will almost certainly result in new policy and regulatory revisions,which in turn will likely cause delays to global nuclear expansion plans in the short term.

Impact

The negative impact of the Fukushima disaster will be less pronounced in most of the industrialized world where the much-heralded nuclear “renaissance” was already facing fi nancial, regulatory and logistical challenges. Prior to the events in Japan, high up-front capital costs had been the principal obstacle in deploying expanded nuclear capacity.

Charles K.Ebinger

John P. Banks

John Rowe, Chairman and CEO of Exelon Corp.,the largest U.S. nuclear generator, said just days before Fukushima that nuclear energy would not be economical in the next decade largely because of cheap natural gas. In Western Europe, the only two nuclear plants under construction are both behind schedule and over budget. Fukushima has brought safety concerns to the forefront and will exacerbate the risk premium in the cost of nuclear power.

The situation is different in emerging markets for three reasons. First, these countries are confronted with more daunting longterm energy and development challenges. The International Energy Agency estimates that 80 percent of total global electricity consumption growth, and nearly all of the increase in global carbon dioxide emissions will occur in developing countries in the period between 2008 and 2035. Meeting rising electricity demand to support economic modernization, population growth, urbanization and a growing middle class, while lowering carbon dioxide emissions,leaves these countries with no alternative but to consider nuclear energy as a viable component of their broader economic development and energy security strategies.

Second, many developing countries are further along in their commitment to nuclear power development than those in the industrialized world. Most current reactor construction and planned expansion in the next decades are in emerging markets, especially in Asia.Seventy- fi ve percent of reactors under construction are located in China, Russia, South Korea and India, with China alone accounting for 42 percent of global construction. Furthermore,some nuclear plans are very ambitious, with China targeting 90 gigawatts of nuclear capacity by 2020, up from 10.8 gigawatts today. South Korea intends to export 80 nuclear power plants over the next two decades, while Russia wants to increase reactor sales from $17 billion to $50 billion in the next 20 years. Other countries are looking to build their first nuclear reactors in the next several decades, including Egypt,Indonesia, Jordan, Kazakhstan, Saudi Arabia,Turkey, the United Arab Emirates and Viet Nam.

Finally, the expansion of nuclear power in emerging markets is predominantly stateled: Governments are directly planning and implementing civilian nuclear energy programs,supporting their state-owned nuclear companies including their emergence as international vendors, and partnering with international companies, many also state-owned. Rosatom in Russia, China’s National Nuclear Power Corp.and the Nuclear Power Corp. of India Ltd. are examples of these. State backing can lower transaction and capital costs, and government commitment—if not outright mandate—facilitates and streamlines project implementation.For example, recent estimates indicate it costs twice as much to build a nuclear plant in the United States and Europe as in China. The French EPR reactor, for example, costs 2.5 times more than South Korea’s APR1400. With such an increasingly active and prominent role for governments, political considerations and not purely commercial factors will play a major role in the future of nuclear power.

Emerging market countries will face some increased challenges to a continued policy of civil nuclear expansion in the wake of Fukushima. Whether expanding existing nuclear capacity or building reactors for the fi rst time, countries will be under closer international scrutiny to ensure that infrastructure,financial resources, human capacity, and legal and regulatory frameworks are in place.These considerations apply equally to plant safety and to proliferation prevention.

Nuclear capacity in emerging markets will expand at a slower rate in the short term as they conduct safety reviews of existing plants, reexamine plans,or delay licensing,siting and other decisions. Many have also re-affirmed their longer-term commitment to nuclear power

They will also face louder public opposition to nuclear power. As the events of the “Arab Spring” populist uprisings in the Middle East and North Africa demonstrate,even countries that have hitherto been used to centralized decision-making ignore public opinion at their peril. Nongovernmental groups in India, Turkey, Jordan, Indonesia,and other countries have already started to question their governments’ nuclear plans.

Although the end result of these issues and trends is difficult to know, we believe nuclear capacity in emerging markets will expand at a slower rate in the short term as they conduct safety reviews of existing plants, reexamine plans, or delay licensing, siting and other decisions. Many have also re-af fi rmed their longerterm commitment to nuclear power, including South Korea, Turkey, Indonesia, Brazil, India,Russia, China and Viet Nam.

Alternatives

Fukushima will have a dramatic effect on efforts to reduce global carbon dioxide emissions. The European fi nancial services company Société Générale recently estimated if developed nations do not build any more nuclear power facilities, and existing plants are retired as scheduled, an additional 860 million tons of carbon dioxide will be emitted per year between 2010 and 2030. This would constitute a 6-percent increase over projected emissions during a period when industrialized countries’ emissions are supposed to be stabilizing.

If the nuclear accident at Fukushima prompts the shutdown of existing plants or a deferral or scaling back in building new ones,other sources will have to fi ll the gap, namely natural gas, coal, renewables and ef fi ciency.

Fukushima has occurred in the midst of a major global trend to increase the use of natural gas in power generation. Moreover, growing supplies of unconventional shale gas, led by a vast resource base in North America, are keeping gas prices low and are likely to do so for years to come. In short, Fukushima will bolster the move toward gas in power generation, and booming supplies will continue to put downward pressure on gas prices, detracting from the competitiveness of nuclear energy.

Many countries, such as China, India,Indonesia, South Africa, Pakistan, Poland and Germany, may have to turn to domestic coal resources in the short term if development of nuclear power slows. Clean coal options are a possibility but cost and timely commercial deployment are major obstacles. More ef fi cient coal combustion processes, such as ultra-super critical pulverized coal and integrated gasi fi cation combined cycle, along with carbon capture and storage (CCS), could dramatically reduce carbon dioxide emissions from coal plants. But none of these technological approaches are much beyond the pilot or demonstration stage.Most analysts estimate CCS cannot be widely scaled up until after 2020.

Renewable sources of electricity generation, primarily wind and solar, are viable options, and indeed many countries are promoting them. In the United States, wind has accounted for more than 35 percent of total capacity added in the past four years, while China, India and many countries in Europe have aggressive targets for renewable capacity additions. But renewables face challenges in cost, intermittency and transmission.These are not insurmountable obstacles, but ones that do need to be addressed.

Energy ef fi ciency is also a feasible alternative. For example, energy ef fi ciency programs in the U.S. electricity sector saved 92.6 billion kilowatt-hours in 2009, enough to power 8 million homes and avoiding 66 million tons of carbon dioxide emissions. Efficiency is also cheap at an average cost of 3.8 U.S. cents per kilowatt-hour to implement.

In summary, we expect the Fukushima accident will drive greater deployment of natural gas and renewable energy capacity,especially wind. Also, a far more concerted effort is required to promote energy efficiency and commercialize clean coal technologies. Governments need to provide greater support for zero- and low-carbon alternatives with both market “pull” policies such as mechanisms to put a price on carbon,as well as market “push” policies, especially greatly expanded support for research and development for CCS for both coal and natural gas generation, grid-level storage, solar energy as well as efficient, next-generation vehicle battery chemistries.

(Viewpoints in this article do not necessarily represent those of Beijing Review)

Charles K. Ebinger is director of the Energy Security Initiative at the Washington, D.C.-based Brookings Institution. John P. Banks is a nonresident fellow with the Energy Security Initiative and adjunct professor with the School of Advanced International Studies at Johns Hopkins University