Powering the continent: nuclear energy

The focus of my posts so far has been to consider the case for renewables in the continent. I think the evidence laid so far is supportive of a strong case for renewable deployment. It is a case; I will continue to make with additional evidence. In this post however, I’ll make a detour to consider the case for nuclear energy.

A resurging interest in nuclear…

There has been an increasing interest in the development of nuclear energy in the continent.  In the East, Kenya established the Kenya Nuclear Electricity Board whose primary mission is to fast track the development of nuclear electricity generation in Kenya.  Further west, in March this year, speaking at the Nuclear Security Summit at The Hague, President Goodluck Jonathan announced Nigeria’s intention to develop nuclear power plants.  The country is planning to commission its first project, a 1,200 MW plant by 2020 and an additional 2,800MW by 2030. The previous government in Senegal announced in 2010, that it was considering building a nuclear electricity plant with French assistance with a timeline for 2020 commissioning.

The status (and brief) history of nuclear energy in Africa…

South Africa is the only country with operational nuclear power plants. It has two plants - Koeberg 1 (930MW) and Koeberg 2 (900MW) for a total of 1,830MW. These plants commenced operation in April 1984 and July 1985 respectively and are due to close in 2024 and 2025 respectively.  In addition to South Africa, 8 countries have research reactors – developed mostly during the cold war period. These are mostly small scale plants and are shown in the chart below.

Sources: International Atomic Energy Agency Research Reactors Database, http://nucleus.iaea.org/RRDB/RR/ReactorSearch.aspx; World Nuclear Association Information Library, http://www.world-nuclear.org/info/Facts-and-Figures/World-Nuclear-Power-Reactors-and-Uranium-Requirements/ http://www.world-nuclear.org/info/Country-Profiles/Countries-O-S/South-Africa/

Why the previous renaissance failed?

Despite the considerable interest in nuclear energy in the 1970s to early 1980s, widespread adoption never materialized (the Nigeria Atomic Energy Commission for instance was constituted during this period in 1976). I suspect even in its heyday in the early 1970s, (despite the generosity of Eastern and Western blocs) and a laxer attitude towards safety relative to now, the economics did not make sense. Most nuclear power plants built during this period were state financed or built with public money which most of the newly independent countries simply did not have.

The economics of /cost competitiveness of nuclear and commentary on its potential

The question then is whether things have changed, that is whether the economics makes this new renaissance enduring compared to the last. From a levelised cost basis (presented below) nuclear appears to be reasonably attractive and cost competitive.  It costs approximately $96/MWh – more expensive than geothermal, hydro or wind, but certainly cheaper than solar. It is also comparable to coal (the subject of a future post). On this basis, the answer to whether we should consider it is a qualified maybe.

Costs of wind, and other power generation technologies in $/MWh 

Source: US Energy Information Administration (EIA), Levelised Cost of New Generation Resources in Annual Energy Outlook 2014, April 2014

The cost metric cited above, however hides a few important aspects of nuclear which makes it unique as an investment case. Nuclear requires a lot of upfront expenditure.  It costs approximately $5,500 per kW. Given that most new plants are likely to be sized at 1,200MW or greater; this simply means that a single plant would require $6.6 billion. And that does not guarantee that it will be on time and on budget. Recent projects in Flamanville, France and Olkiluoto Finland have experienced significant cost and time overruns due in part to new designs, project management or other reasons. EDF’s Flamanville 1,600MW reactor originally had a cost estimate of €3.3 billion (in 2005) which has since been revised to €8.5 billion. If we conservatively assume a 50% cost overrun (less than EDF’s experience), we are still looking at roughly $10 billion in upfront capital expenditure.

(a) Can we afford this?

There are three crude measures of assessing whether nuclear should be an option. The first is financial – do most countries have the budget to finance a nuclear programme or not?
The chart below shows that the cost of a single plant is basically more than the annual revenues collected by all but nine countries. Moreover, if you assume a prudential threshold that the cost of a single project should not be more than 10% of annual revenues, then only a single country meets this threshold – South Africa.

Estimated national budget in $ million - 2011

Source: CIA World Factbook – See https://www.cia.gov/library/publications/the-world-factbook/fields/2056.html

I appreciate that such a project would be financed in part using long term debt, and that the capex would be over a 5 year period of time, so potentially affordable by a few more countries. In addition, there is a case that several countries combining forces could feasibly finance such a project. However, this does not detract from the fact that as an undertaking, outside South Africa, almost every other country would struggle to finance a single plant.

(b) Can the national power systems cope with this?

The second test is whether the electricity system in most countries could cope with this. The simple answer is that most national systems would not cope. Of the 49 countries shown in the chart, in all but 16, a single 1,200MW nuclear plant would provide more than the existing installed capacity. Of the remaining 16, with the exception of South Africa, Egypt and Algeria, a single plant would provide more than 15% of existing installed capacity, posing considerable challenges for grid operation.

Estimated size of the electricity system in MW of installed capacity - 2011

Source: US Energy Information Administration (EIA), International Energy Statistics - Total Electricity Installed Capacity by Country, 2011

Since electricity cannot be stored and is consumed when produced, the system operator normally keeps as reserve, enough capacity to back-up the single largest plant to ensure that in the event the plant fails, demand can still be met. Installing a 1,200MW reactor means that you would need a significant amount of back-up, probably equal to the size of the plant. You are therefore looking at over 2,400 in new capacity to ensure supply.

From the chart above - that is more than most countries currently have and would likely require significant investments to strengthen the grid and provide back-up just to ensure the plant can operate. It is possible that with greater regional grid interconnection this is less of an issue; however it is an important disadvantage of nuclear plants.

Four UK nuclear reactors owned by EDF Energy (2,300MW capacity) were shut down a few weeks ago for safety reasons following a routine inspection and are now likely to be offline until November or December this year – imagine having to suddenly shut down 50 or 60% of national electricity supply for several months to get a sense of the scale of the challenges nuclear would pose.

(c) How about safety?

Public perception of the safety of nuclear energy has been shaped by accidents such as Chernobyl, Three Mile Island and most recently Fukushima. Although there is considerable debate on the risk of nuclear energy, I personally think safety as a concern is overstated and with a robust safety infrastructure and regulatory regime, nuclear can be a safe means for generating electricity.

Having said that, developing such systems takes time and significant resources, which I am not confident any of the countries outside South Africa currently have or are likely to develop over the next decade.  Take Nigeria for example, last year it graduated a total of six nuclear engineers (very limited technical expertise) and in late March, nuclear scientists working for Nigeria's Center for Energy Research and Development, Obafemi Awolowo University, the Center for Energy Research and Training and Ahmadu Bello University threatened to picket the Nigeria Atomic Energy Commission (NAEC), if nothing is done to settle their back unpaid salaries (cannot even pay those available).

Success therefore will require a comprehensive legal framework and developing competences in licensing, monitoring and supervision of compliance with safety standards and security guidelines consistent with international /IAEA standards; investments in emergency preparedness, security measures, and environmental protection and establishing long-term financial arrangements for decommissioning and radioactive waste management as well as the associated liabilities.

Conclusions

I think the case for nuclear energy is fairly weak – most countries cannot afford it, existing grids would be unable to cope with it and the infrastructure and regulatory framework to ensure its safe operation is simply not in existent. Considering nuclear in my opinions is a bit like planning to spend your life savings on a Ferrari, when a Toyota or a Kia would do just fine.

*PS: 140,000 businesses / villages or households, each installing an average of 40kW, and spending c.$80,000 per unit, basically gives you the same amount of output - and far easier to achieve than financing a $10b programme!