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The effects of Fukushima on the construction of new nuclear power plants

January 6th, 2012 by Paul Joskow, Massachusetts Institute of Technology

The U.S. Energy Information Administration’s forecasts can be used as a pre-fukushima baseline scenario. They use the year 2035 as their terminal year. This is unfortunate and potentially misleading. Many existing nuclear plants (essentially all existing U.S. plants) will retire within a few years after 2035, even if they are able to secure 20-year license extensions. This means that sustaining nuclear’s share of total electricity generation, would require substantial construction of new nuclear plants well before midcentury both to meet growing electricity demand and to replace retiring units.

Turning first to the OECD countries with existing nuclear power programs, several countries where there was the possibility that they would build nuclear power plants to replace those that are retiring have now reversed course. These include Germany, Switzerland, Italy, Spain, and Belgium (probably). The situation in Japan necessarily remains in flux, but as the country with the third largest nuclear program a decision to move away from nuclear power, together with Germany’s decision would have a material effect on future trends. However, in the rest of the OECD countries with existing nuclear power programs we believe that construction of new nuclear capacity would have been slow absent Fukushima. Any tightening of safety requirements resulting from the Fukushima accident will only make the economic status of nuclear power less attractive.

A potential exception is the UK, where a large fraction of the existing fleet of nuclear plants is likely to retire for economic and technical reasons. Thus, there is a replacement market in the UK that does not yet exist in the U.S., France, etc. In 2008, the UK government decided to support building new nuclear plants, and that decision has, so far, not changed as a result of Fukushima, though the UK is participating in the larger EU review and this will delay pursuing new construction pending the outcome of “lessons learned” from Fukushima. Three consortia have been pursuing construction of several new nuclear units (EDF-Centrica, RWE-E.On, GDF-Iberdrola) using modern light water reactor technologies. However, the prospective new builds in the UK face challenges. The UK has a very large and heavily subsidized renewable energy program, and while natural gas prices are still high compared to the U.S., additional supplies of LNG, and pipeline supplies from Norway, Russia and Central Asia are coming on line, and shale gas deposits have been identified in England and other parts of Europe. In addition, England and Wales has the most liberalized wholesale spot electricity market in the world, with no capacity payments or long term contracts. This market does not appear to be conducive to investments in nuclear generation. In order to attract nuclear power investment the government is pursuing floor prices for carbon allowances and additional electricity market reforms are planned, including long term contracts and a capacity payment mechanism. Nevertheless, in September 2011, Scottish and Southern reported that it was withdrawing from the GDF/Iberdrola consortium and would pursue renewable energy opportunities instead, though the other members of the consortium indicated that they would continue.It has also been reported that RWE is re-evaluating investing in new nuclear plants in the UK. At least in the case of RWE this decision is indirectly related to Fukushima, as the German government’s decision to close its older nuclear plants immediately has had significant adverse effects on the finances of German utilities. It does appear that the UK government is going to great lengths to support nuclear power as part of its GHG mitigation strategy.

Of course, the economic situation confronting investment in nuclear power could change. Experience with the few new plants that are still expected to be built in the U.S. and Europe may demonstrate that current construction cost estimates are too high (so far France and Finland’s experience has been just the opposite) and that optimistic break-in periods allowing these plants to achieve high capacity factors quickly are realistic despite the more pessimistic history—see Du and Parsons (2010). Natural gas prices could increase again. Countries could back off of lavish subsidies and goals for renewable energy and energy efficiency programs. This experience will probably take a decade to accumulate. Thus, we do not expect a dramatic increase in investment in new nuclear plants in the OECD countries with existing programs in this decade, even absent Fukushima.

In the non-OECD countries the major action is in China, first and foremost, as well as in Russia and the former FSU countries in Eastern Europe, and the rest of Asia. The post-Fukushima assessments have had little direct effect so far on plans to construct new nuclear units in the countries where significant nuclear programs were being planned prior to Fukushima. China did reduce its plan for new plants by 2020 by 10 GWe, but many considered the original 100 GWe goal for 2020 unrealistic and the reduction may have reflected considerations other than safety. Russia, India, South Korea and most other non-OECD countries are continuing as planned, pending additional information from reactor safety audits and more information from Fukushima. After reviewing the post-Fukushima situation some countries have now decided that they will not enter or reenter the nuclear expansion business (e.g. Taiwan, Chile, Israel, Venezuela), but the impact on the aggregate global nuclear supply would have been small anyway. On the other hand, non-nuclear Turkey, Saudi Arabia, Vietnam, and Abu Dhabi have recommitted to start building nuclear power plants.

We do believe that the countries that are entering the nuclear power business and those that are considering dramatic increases in nuclear capacity may be underestimating the challenges associated with these plans. China currently has 15 operating reactors with a capacity of 11 GWe. It has 27 units under construction and plans to increase it nuclear capacity by a factor of seven or eight by 2020. It is relying on two foreign and two Chinese companies to lead this expansion. If there is one thing that we learned from the large expansion of nuclear capacity in the U.S. in the 1970s and 1980s it is that many unexpected construction and operating problems can emerge if the program is rushed, operates subject to constraints on the supply of skilled workers (like high-skilled welders, engineers, and construction managers) and does not build in time to respond to unexpected problems and to learn from experience. Successful nuclear power programs must meet economic, stringent safety and reliability criteria. We think that there is a serious risk that China’s program is too ambitious to achieve these criteria. Given the expected rapid growth in electricity demand, the small share of production contributed by nuclear power today (2%) and under the plan (6%), its dependence on imports of fossil fuels, and its goal of reducing dependence on dirty domestic coal supplies, China may be willing to sacrifice on the economics in order to meet energy security and environmental goals. However, China cannot fail to meet high safety standards and this may prove to be a constraint on how quickly its nuclear program can actually proceed.

Countries like Vietnam, Saudi Arabia, Turkey, and Abu Dhabi face additional challenges. They do not have the regulatory infrastructure, internal technical expertise, waste handling, non-proliferation, or industrial structures necessary to rapidly launch a nuclear power program. Indeed, one of the reasons they are interested in starting such a program is to gain and internalize technical expertise and some industrial infrastructure to help to advance their economies. Abu Dhabi has taken an approach that “outsources” most of what is needed to start a nuclear power program in all of these dimensions. It would be would be wise for other countries in this group to learn from its experience.

Paul L. Joskow and John E. Parsons, MIT-CEEPR

P.S. This post is an excerpt from The future of Nuclear Power After Fukushima

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3 Responses to “The effects of Fukushima on the construction of new nuclear power plants”

  1. Flora Marques Says:

    As it is partially mentioned in the article, a partition in the way countries conduct their nuclear energy development is appearing between developed countries and emerging countries. Indeed developed countries had the opportunity, for most of them, to experience the nuclear production of electricity and were able to build national nuclear industries. Most of them are now taking a step backwards trying globally to denuclearize their electricity production in order to develop renewable energies. Germany chose a radical change in its energy policy by closing immediately the oldest nuclear power plants; other countries plan to extend the life cycle of existing power plants but do not plan to build new nuclear capacities or to do so in a much slower pace. In opposition, emerging countries are always more interested in acquiring a strong civil nuclear industry. For instance, as mentioned in the paper, China plans to build a high nuclear production capacity in the next 50 years. This form of energy appears to them as a real asset.
    We can explain this difference between North and South in many ways. First, nuclear production represents a real step forward in development. Indeed, it is generally accepted that a developed country has to master the nuclear energy production. If Northern counties already have that capability and are now trying to go further by developing their renewable energies field, emerging countries still need to prove themselves and build a strong nuclear capacity.
    Also the political regime in the country may have a big impact on how government can pursue their nuclear policy. As public opinion takes usually strong positions on nuclear energy, it is very different whether this opinion is taken into account or not. For instance in France, no one could imagine building a nuclear plant in a new place because the social opposition would be too strong, whereas in China the government doesn’t really listen to the population’s opinion and can then go on building new nuclear power plants.
    Then, after highlighting these structural differences in nuclear policies between developed and emerging countries, we may think about the consequences of Fukushima on these nuclear programs. As explained in the paper, the Japanese disaster has had actually little effect, if it is not making the economic status of nuclear power less attractive. And governments should be careful in not reacting too fast to the Fukushima disaster. Indeed this terrible event needs first to be precisely analyzed in order to understand what really happened and why exactly. If you do so, you realize that Fukushima was a foreseeable disaster. Indeed, the Fukushima nuclear power plant was built in order to resist to waves and earthquakes smaller than those which conducted to the disaster, even though Japan had already experienced in the past such strong natural forces. That proves that a nuclear plant built with higher standards would have resisted, which means that this event shouldn’t put into question the nuclear field itself but more the control of the nuclear power plants safety all around the world.
    Another paradoxical point is that all nuclear actors have been impacted by the Fukushima disaster regardless to their link to this plant or to their similarities and differences. For instance in France, both EDF and AREVA have been touched by the disaster, even though the event happened in another part of the world with a very different technology. That point proves that the nuclear energy sector is not clearly defined for most people and may appear as a “global dangerous block”. To make a parallel with the oil sector, after the accident of the BP oilrig, if BP has been naturally impacted, the competitors haven’t been much impacted and even less the other actors of the oil sector.
    This paradox illustrates how important it is for all actors of the nuclear field to make the nuclear production clearer to the consumers. They have to make great efforts in being as pedagogical as possible to explain how it works, why it is safe etc. For instance it should be known that nuclear energy production is not much more dangerous than other forms of energy production. Also if you take into account the CO2 emissions, who is able to say today what is the most dangerous between a nuclear disaster that has a very low probability of occurrence or the large quantities of carbon liberated in the atmosphere for sure, with other forms of energy production such as coal for instance? This point should be deeply studied in order to react properly to Fukushima in the nuclear sector.
    Another point that should be considered by developed countries before withdrawing their nuclear capacities is their moral obligation to keep their nuclear expertise to be part of nuclear programs in other countries (that will happen anyway) and ensure a high enough level of security. Emerging countries, as it is mentioned in the article, are hurry to possess strong nuclear capacities and may neglect some safety aspects in order to meet this goal as fast as possible. Strong and high-quality nuclear industries, mainly those from Northern countries, have a major role to play in the emerging countries running after nuclear energy. But to legitimate their action and to be part of these nuclear developments, they have to pursue their own nuclear programs in their country.
    If Fukushima has been interpreted in different ways all around the world and has generated opposite reactions, this disaster still needs to be analyze more carefully. Immediate reactions based on the public opinion may not have been the smartest ones and a real rethinking of the nuclear field, considering all aspects of this energy production form, in developed countries should be a priority.

  2. Florent Saint-Cast Says:

    How could we measure if the investment of nuclear plant in China is profitable? Quality of conception and realization is very important, but the social evolution in the country must be also taken into account.
    Economically, a country would choose to invest in nuclear plant if the necessary cost to obtain an acceptable risk is more interesting than an alternative plant of the same power and life expectancy. Nevertheless, the risk is generally defined as a factor of frequency and seriousness. We can admit that the frequency of accident is a parameter which can be controlled by technology. But seriousness is more difficult to predict. It depends on the interpretation of the population. We define the same way for what is acceptable. For example, the only difference in Germany before and after Fukushima is that the country decided that every nuclear accident is unacceptable. Thus, every alternative energy plants are preferable.
    Actually, the acceptability depends essentially on the level of development and on the degree of democratization of the country. Firstly, we can easily assert that in a period of important growth, the risk is more acceptable. Nevertheless, when the people get into a higher standard of life, as in the countries of OECD, every risk need to be analyzed carefully. As concern the second point, in Lanzhou, China, the pollution reaches a dangerous concentration because of the industrial plants. But, the population doesn’t have the democratic tools (newspaper, opinion power…) to tackle efficiently this threat. Events as Fukushima are not enough for the people to question the investment in nuclear plants. The weight of public opinion is too light to influence the decision-maker.
    But this situation will not last in Chinaas concern standard of living and also democracy. The decision to invest in nuclear could be quickly challenged by the Chinese. Consequently, more we increase the standard of security, more expensive the energy will be. Even if France and Germany took different attitudes to the nuclear policy, Fukushima imposed an evolution of acceptability by public debates. The cost evaluated in a report of the European commission is between 10 and 25 billion of Euros. In China, this cost seems reduced, but it’s just for the moment.

  3. Florent Saint-Cast Says:

    To know if the investment in nuclear plant in China could be profitable, quality of conception and realization are very important but the social evolution in the country most be taken into account.
    Economically, a country would choose to invest in nuclear plant if the necessary cost to obtain an acceptable risk is more interesting than an alternative plant of the same power and life expectancy. Nevertheless, the risk is generally defined as the factor of frequency and seriousness. We could admit that the frequency of an accident is a parameter which can be brought under control by technology. Seriousness is harder to predict and it depend on the interpretation of the population. The same does apply to the definition of what is acceptable. For example, the only difference for Germany between before and after Fukushima is that the country decided that every nuclear accident is unacceptable, thus, every alternative energy plants are preferable.
    Actually, the acceptability depends essentially on the level of development and on the degree of democratization of the country. Firstly, we can easily assert that in a period of important growth, the risk is more acceptable. When the population gets to a higher standard of living, as in the countries of OECD, every risk is analyzed. As concern the second point, in Lanzhou, China, the pollution reaches a dangerous concentration because of the industrial plants. But, the population doesn’t have the democratic tools (newspaper, opinion power…) to tackle efficiently this threat. Events as Fukushima are not able to question the investment in nuclear plants for the moment. The weight of acceptability of the population is lighter for the decision-maker.
    But this situation is not stable in China, as concern standard of living and also democracy. The choice of the government to invest in nuclear could be quickly challenge by the Chinese. Consequently, the cost would increase with the standard of security should increase. Even if France and Germany took different ways in term of nuclear policy, Fukushima imposed an evolution of acceptability by public debates. The cost has been evaluated in a report of the European commission between 10 and 25 billion of Euros. In China, this cost seems reduced, for the moment.

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