NEA head highlights challenges facing nuclear power

11 May 2016

William D. Magwood, IV, director general of the OECD Nuclear Energy Agency (NEA), highlighted some of the issues hindering the prospects of nuclear power at a two-day conference that started today at the organisation's headquarters in Paris. These issues include the impact of deregulated electricity markets, the place of natural gas in the context of efforts to curb global emissions of CO2, and the myths surrounding the costs of building a nuclear power plant.    

Magwood has led the NEA since September 2014. He was appointed a Commissioner at the US NRC in 2010 after previous roles including director of nuclear energy at the Department of Energy. He is recognised as a strong advocate of international technology cooperation, having served as chairman of both the Generation-IV International Forum and the OECD's steering committee on Nuclear Energy.

"My life will not rise or fall on whether there's a lot of new nuclear power plants being built or a few. What I think is important is that the choice is there. But I see issues preventing this," Magwood told delegates at the conference titled Nuclear Energy's Role in the 21st Century: Addressing the Challenge of Financing. The event was jointly organised by the NEA and the International Framework for Nuclear Energy Cooperation (IFNEC).

The IFNEC is a forum of states and organisations that share the common vision of the safe and secure development of nuclear energy for peaceful purposes worldwide.

The conference has convened leading stakeholders from energy planning authorities, regulators and export credit agencies, as well as vendors, utilities, bankers, rating agencies and insurers, to identify key barriers and develop approaches to address the financing of nuclear projects.

Magwood told them: "I am ready to stand here today and declare that the markets are broken; they don't work and don't do what they are supposed to do. The time has come to recognise that we have a situation where large utilities are losing money and are almost on the verge of bankruptcy. When you have a situation in many markets where the only things that can be built are things that are subsidised, then we have a serious problem.

"Building a nuclear power plant takes a lot of decisions which cannot be made in the context of markets that don't make sense. Before you think about putting patches on the situation or thinking what kind of subsidies we can give to baseload plants, what kind of support we give to nuclear, you need to think about the markets in your countries and whether they do what they are supposed to do."

Dealing with climate change needs to be done "in a logical fashion", he said.

"It can't be a matter simply of putting a price on carbon because governments creating policies to pick winners and losers, to try and tailor the markets to do what they want them to do, invariably has unintended consequences. And we've seen it. In many parts of the world, efforts to deal with climate change have focused on pushing more and more renewables, but in some parts of the world CO2 emissions have actually gone up."

The question, how much does it cost to build a nuclear power plant, "is in a way a silly question", he said, "because there are different types, sizes and vendors of nuclear power plants. And you can have a nuclear power plant on an existing plant site with transmission access and then you might have a plant on a greenfield site and of a different design."

The "big numbers" given for the cost of nuclear power plant projects often incorporate more than just the cost of building the reactor, he said, and might also include infrastructure costs and transmission assets.

The "rising cost" of nuclear from work to enhance the safety features of reactors in the wake of the Fukushima Daiichi accident in Japan in March 2011, has been exaggerated, he said. "The reality is that for most countries post-Fukushima measures have been just tiny amounts in the overall cost of a nuclear power plant. When I was at the US Nuclear Regulatory Commission, we concluded from the AP1000 design that there really wasn't much that needed to happen. It really didn't need many modifications because the design itself captured most of what we were concerned with."

There is no need therefore, he said, "to make a choice" between the economics of nuclear power plants and nuclear safety. "I think it's a false choice. Nuclear power is well positioned technically from a safety standpoint to be competitive in markets that work," he added.

"That said, these days we don't just have market issues, we also have the advent of very low priced natural gas and that's not going away any time soon. Without pricing carbon, nuclear will have to survive in that world and that means in some markets it can't, so you have to make the choice: do you want to deal with climate change or not? If you do, you will have to price carbon not at a few dollars or euros per tonne, but very, very significantly," he told delegates.

"So, how much does a nuclear power plant cost? It costs a lot, but not when you look at it as a 60-year asset which can produce electricity for a long period of time. And you should not judge all nuclear power plants the same." Cost and budget overruns at Olkiluoto 3 in Finland cannot be described as typical. "There are projects taking place today that are exactly on schedule and pretty much on price," he said. "But there's a lot of mythology surrounding this issue."

A challenge with small modular reactors will be the need to sell "dozens, scores if not hundreds to make it work", he said. "And if you're selling them to more than one country, are you going to have to go through the entire regulatory process every time you go to a country. If you do that, you may end up making them uneconomic just by the fact that you have to spend huge amounts of money to get the licence." This would run counter to the motivation of regulators to encourage advanced technologies, he said.

Changing environment

Since the time that most of today's commercial nuclear power plants were built and placed into operation, the way projects are implemented, the supply chain, and particularly the financing environment, have all changed radically, Magwood said in a foreward to the conference program.

"Old models of financing large power plant projects have begun to fade in the face of deregulation in many countries. At the same time electricity supplies themselves have also changed, with low-priced and low-cost sources of electricity rushing into the market. In many markets, it is difficult if not impossible to justify the construction of any generation that is not receiving a subsidy or other government support," he said.

"Meanwhile, the lists of who is supplying and who is building nuclear plants have changed significantly over the last decade. New vendors are offering a roster of advanced designs and are marketing very aggressively. Further, with interest growing in small modular reactors and some Generation IV technologies, it appears likely that the nuclear technologies the world uses to make electricity will also change.

"Add to all this, the agreement by 195 countries last year to reduce carbon emissions consistent with the 2 degrees Celsius goal advocated by many scientists, and the result is a global nuclear technology market that is in the middle of a period of change, the likes of which have not been seen since nuclear plants were first deployed 50 years ago."

Such change brings with it both "great opportunity but also great uncertainty", he said. "In the flux of great change, it can be difficult to finance even modest projects. Nuclear power plants are not modest projects; with total costs ranging from about €6 billion to €12 billion and total project implantation times reaching up to a decade, building a nuclear power plant is one of the most complex of all industrial sector undertakings. Therefore, as one might expect, financing nuclear power plants can often present significant challenges."

Researched and written
by World Nuclear News