NS4960 Spring Term 2018 Nuclear Rebound? Oxford Analytica, “Nuclear Industry Will Rebound,” November 13, 2013

Overview Nuclear power seems to be making a comeback Announcement by UK of a major new nuclear power station – online 2022 at earliest Announcements other countries Japan restarting some nuclear plants Expansion of nuclear plants in China Russia and India

Trends I Fukushima likely to lead to greater and more expensive certification requirements for new plants Older plants (pre 1981) will likely be retried more quickly due to Fukushima Global electricity demand increased 3-4% per year during 2000-10 and is expected to continue growing at around 2.5% until 2030 – in line with expected Global GDP growth, population increases and Industrialization As demand grows fuel mix for power generation continues to diversify Coal and gas still dominate but Coal’s share declining and the renewables share (including) hydro is increasing

Trends II Fukushima – changed landscape Impact on Japan Nuclear had fairly good prospects for global power generation prior to March 2011 disaster in Japan While absolute capacity is still expected to rise, the share of nuclear power in global fuel mix now expected to decline Impact on Japan Prior to Fukushjima disaster nuclear power provided around 30% of Japan’s electricity Share had been predicted to grow to 40% by 2017 Now hard to estimate as first reactor restarted in September 2015

Trends III Gap in electricity production Japan filled by increased production from fossil-fueled thermal plants Reduced electricity demand Increased oil imports New coal-fired plants have also been constructed Impact beyond Japan Fukushjima disaster prompted many countries to re-examine their nuclear power programs German government decided to shut down seven of its pre-1981 reactors and halt all nuclear generation after 2023 Belgium, Switzerland and Taiwan indicated that extending lifetime of older plants now less likely China imposed a freeze on nuclear plant construction following the disaster though this was lifted after two years

Trends IV Long term decline Even before Fukushima production had been in absolute and relative decline for some years Nuclear energy accounted for 17% of global electricity generation in 1993 – peak year but By 2006 this had fallen to 15% and in 2012 its share just 11% Total nuclear output in 2012 was 7% lower than in 2011 and 12% below recent peak in 2002 As of July 2013 there were 17 fewer reactors operating compared to peak in 2002

Challenges I Ongoing challenges Safety Competition Costs increased requirements have greatly added to costs Competition Facing increased competition from renewables where operating costs are low and capital costs are falling Costs Nuclear construction costs have increased from $1,000 to $7,000 per kilowatt of generating capacity over past ten years Shortages of skilled and experienced engineers also a problem Poor profitability, coupled with higher debt levels, reduced credit ratings and falling share prices mean energy firms poorly placed to develop new projects Building such high-cost plants very difficult in an open market electricity system – some form of long-term contract underwritten by government inevitable

Prospects I Nuclear Renaissance? Despite drawbacks nuclear provides secure long term zero emissions power Thus a number of countries continue to pursue new nuclear plants as part of their generating mix Most new construction is concentrated in emerging markets such as China, India and Russia

Prospects II UK Successive UK governments have promoted construction of new nuclear plants French Company EDF will do the construction First at Hinkley Point in Sommerset Six additional reactors at three additional sites UK Government agreed to “contract for difference” that guarantees the generator an electricity price regardless of market conditions Deal criticized because the agreed price is much higher than present market price Construction risk remains largely with the taxpayer and consumer Deal may violate EU rules on state aid

Prospects III While costs of UK deal are well above conventional thermal power (ignoring carbon charge) competitive to some renewable sources Nuclear does not suffer problems of intermittency that plague other renewables. Assessment Relative hiatus on new nuclear plant construction and continuing retirement of older plants mean nuclear output will continue to fall for a number of years Nuclear will likely come back once memories of Fukushima fade Can expect a limited nuclear renaissance during next decade