Arguments Against Nuclear Power Development in Iran May, 2003

Overview Economics of nuclear vs. fossil fuels Increased oil / gas exports Energy security Environmental issues Infrastructure Conclusions

Iran’s major economic concerns Oil export revenues are important to the government and the overall economy –[x% of GDP and/or x% of tax revenues]

Factors that speak against nuclear capacity development in Iran Average cost of nuclear capacity world wide = $2,000 per kW Only 3-year domestic supply of production uranium to operate Bushehr is available –Will require approximately tons of U per year –After indigenous supply is depleted, Iran would have to purchase either yellowcake or processed fuel in the world market –Cost of raw uranium is prohibitive compared to open market resources ($80 - $130 per kg U vs. $40 per kg U) Capital costs for fuel cycle infrastructure that support one Bushehr reactor are approximately $500 million

Nuclear power will not ‘free up’ oil for export Only 20% of Iran’s electric energy is produced by oil. Natural gas has been the fuel of choice for electricity generation for the past 10 years. Therefore, it can be reasonably assumed that Iran’s oil-fired generating units are some of the oldest plants on the electric system. Standard electric utility practices would dictate that these oil-fired units be phased out of operation and retired at the end of their economic lives – probably within the next 20 years. Therefore, oil presently used for electric power generation would likely be freed-up for export regardless of whether Iran develops nuclear generating capacity.

Nuclear power will not ‘free up’ natural gas for export In 2000, electric power generation consumed only 40% of Iran’s natural gas production. By 2020, natural gas use for electric power generation is projected to increase by approximately 90% - while production is expected to increase by approximately 160%.

Development of nuclear power will not create energy security for Iran Iran has enough Uranium to operate the Bushehr reactor for only 3 years. In contrast, Iran has proven natural gas reserves of over 300 years. Once indigenous Uranium supplies are used up, Iran must seek a supply on the world market. Development of a domestic nuclear fuel cycle infrastructure without adequate indigenous resources will not increase energy security in Iran and would place a high risk on the infrastructure investment. Economies of scale dictate that large capacity, multi-unit nuclear stations be constructed. This will tend to reduce the reliability of the electric system compared to dispersing smaller capacity natural gas-fired generating units around the electrical grid.

Nuclear power does not address environmental concerns in Iran The mining, processing, fabricating, reprocessing and/or storage of nuclear fuel will create enormous environmental impacts with high, long-term costs of mitigation. New, high-efficiency natural gas-fired generating units have very low emissions. Natural gas-fired generating units can utilize dry cooling technology which reduces water use.

Status of Iran’s electricity-generating sector Currently, 75% of all electricity generation is produced from natural gas –Enormous proven natural gas reserves estimated to be at least 812 trillion cubic feet; or, 15% of the world total –Natural gas reserves to production ratio conservatively estimated at 300+ years 20% of electricity generation is produced from oil –Iran’s oil reserves are among the most abundant in the world

Economic factors do not favor the development of nuclear capability over oil/gas Nuclear power is the economic choice only for the most unlikely combination of low nuclear cost, high natural gas prices and a low discount rate World-wide, the average capital cost for nuclear power plants is about $2,000 per kW –At this level nuclear is uneconomic, unless natural gas prices are at the highest levels, and then, only for the lowest discount rate Flaring of 10% of natural gas production does not support assumptions of high gas prices; the cost of re-injection or intra- country transportation is greater than the $$$ value of the gas A 3% discount rate does not include a risk component. Nuclear power is one of the highest risk investments in the electric power sector

Projected generating capacity requirements Currently, Iran’s economy is growing at about 4% annually This translates to an expected 20 gigawatts of new generating capacity needed

Infrastructure challenges for non-nuclear generating development Domestic pipeline construction Technology challenges (well conditions, access, etc.) Imports and refineries Domestic subsidies OPEC - Sanctions - Subsidies Electricity grid enhancements

Conclusions The choice of which new electricity generating venue depends upon the relative costs of each technology Using a standard economic analysis, it is not economical for Iran to develop nuclear power for electricity generation It is also not economical for Iran to develop a nuclear fuel cycle for power generation based on its small uranium resources and the wide availability and low price of nuclear fuel worldwide.