IEEJ： April 2014

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Special Bulletin
A Japanese Perspective on the International Energy Landscape (166)

April 2, 2014

IEA Workshop on the Future of Nuclear PowerKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn March 31, the International Energy Agency sponsored a workshop titled “the Future ofNuclear Power” in Paris. The IEA designed the workshop to prepare for taking up nuclear power
generation as one of the major topics in its annual flagship publication “World Energy Outlook
2014” that will be released in November to forecast global energy supply and demand through 2040.
Some 100 government and industry representatives and experts participated in the workshop. The
workshop featured vigorous debate in five sessions on the outlook for nuclear power in selectedmarkets, the economic realities of nuclear power, challenges to financing new nuclear power plants,
the impact of public acceptance, safety and regulation on the future of the nuclear industry, and asummary, conclusions and next steps. In the following, I would like to discuss impressive points ofthe debate.
First, the workshop reaffirmed that nuclear power generation in the world is highly likely
to continue expanding. Following the Fukushima nuclear plant accident, discussions have continued
on where nuclear power generation should be positioned in Japan. Germany has specified a policy ofphasing out nuclear plants. Some other countries have grown more cautious about nuclear power
generation. At present, however, more than 70 nuclear reactors are under construction in the world.
While some new nuclear reactors are planned for construction in Western industrial countries, thefuture nuclear generation expansion will concentrate in Asian emerging countries and the Middle
East where power demand is expected to grow substantially. Particularly interesting arguments
emerged at the workshop on China’s renewed moves to accelerate nuclear plant development. Just
after the Fukushima accident, the Chinese government toughened safety regulations on nucleargeneration, slowing down nuclear plant development by freezing inland nuclear plant construction
projects. Recently, however, there have been moves to promote the construction of sophisticatednuclear reactors including the AP1000 pressurized water reactor. Factors behind such moves havebeen power demand growth, problematic heavy dependence on coal and the promotion ofenvironmental conservation. Workshop speakers said that as nuclear plant development is based on
China's comprehensive strategy, it is important to understand the overall trend of nucleardevelopment.
The Middle East is also making progress in nuclear plant development. Why is it that
nuclear plant development is making progress in the Middle East including many countries rich withoil and gas resources? Behind the progress is a rapid increase in power demand. As a result, oil andgas consumption for power generation has rapidly expanded, affecting Middle Eastern oil producing
countries' oil and gas export potential. For Middle Eastern oil producing countries, nuclear power
generation can secure oil and gas supply for exports, can offer better economic efficiency than theplanned gas and LNG imports and can become a target for strategic investment of currently
abundant funds. Therefore, many of these countries are seriously considering nuclear plant
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development. At the workshop, discussion was made with regard to a prospect that nuclear power
generation capacity in the Middle East could expand to 75 gigawatts by 2030 depending on
substantial progress in nuclear reactor construction projects in Saudi Arabia, Jordan and Turkey inaddition to an ongoing project in the United Arab Emirates. Given nuclear policy and infrastructuredevelopment, how to secure human resources with nuclear technology, knowledge and experiences,grid constraints and other challenges to nuclear plant development in the Middle East, however, it isuncertain whether the prospect could be realized. But nuclear power is likely to attract great attention
in the Middle East. In the workshop, there was an interesting discussion that whether the forerunning
UAE project would be successful would be the key to nuclear plant development in the Middle East.
Second, it is important that workshop participants actively debated various key challenges
for nuclear power generation expected to expand in the whole of the world. The Fukushima nuclear
plant accident has affected the public acceptance of nuclear power and prompted governments totoughen nuclear regulations to enhance safety. The accident has been the most serious, grave event
involving nuclear power not only for Japan but also for the rest of the world. Safety enhancement isa key challenge for nuclear policy and affects the economic efficiency of nuclear power, as noted at
the workshop. Particularly, we must consider the economic efficiency of nuclear power generation
while taking into account global progress in the promotion of electricity market liberalization, as
well as the U.S. case where gas-fueled power generation has grown more competitive thanks tonatural gas price drops under the promotion of the shale revolution. While conventional wisdom isthat existing nuclear power plants are more economically efficient than other power sources, someU.S. nuclear plant operators have recently decided to shut down existing nuclear reactors in view of
their problem about economic efficiency, as noted in the workshop. Safety enhancement measures
work to increase costs and plant life assessment for existing nuclear plants affects overall costs. In
this regard, nuclear power generation’s economic efficiency in the particularly competitiveelectricity market is of great significance.
As new nuclear plant construction is important for expanding nuclear power generation in
the future, the economic efficiency is expected to attract more attention than in the past. In thisrespect, workshop participants pointed out that nuclear plant construction costs have tended to rise
and that costs for safety enhancement measures will be added. They also noted that the nuclear
industry should tackle cost reduction measures including modularizing nuclear plant construction
and standardizing plant designs and others.
Interestingly, many participants at the workshop pointed to the importance of policy forsecuring economic efficiency and financing for nuclear power plant development. In comparison
with other power generations options, nuclear generation features (1) far bigger initial investment,(2) a far longer lead time between planning and completion/operation, (3) the absence of income
during the long lead time, and (4) great potential damage from accidents. These features make it
difficult for nuclear plant operators to decide on investment or secure financing, despite nuclear
energy’s advantages including contributions to energy security and global warming prevention, costcompetitiveness in normal operation and stable electricity supply for base load. In this sense, nuclear
policy and system stability are decisively important. Interestingly, workshop participants reiterated
that policy and government play a decisively important role in supporting new nuclear power plant
construction as it is difficult to expect effective signals for the support from the market alone, by
citing an interesting example of introduction of British feed-in-tariff with contract-for-difference
system.
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As pointed out at the workshop, risks accompany any technology. In this sense, a key
viewpoint is how we should interpret the relationship between risks and social benefits regarding thefuture of nuclear energy. As confidence or trust is required to counter risks, the key challenge is how
policy, regulations, government and relevant industries can establish social confidence in nuclear
power. Appropriate, transparent information must be developed, diffused and shared to establish
confidence. Objective, neutral, scientific and quantitative analyses are required in this regard. I
would like to expect the IEA’s future analysis to play a role to this end.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

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