Atomic revival gathers momentum

By Rebecca Bream
Published: November 3 2008 02:00

The revival of interest in nuclear energy has been in full swing for several years, and the list of countries considering building new reactors is lengthening all the time. Concerns about energy security and climate change are gaining political momentum around the world, and are winning over many former opponents to nuclear power.
As well as established nuclear powers such as the US, the UK and China planning to boost nuclear investment, countries that have never hosted atomic reactors are talking about getting involved in the industry.
For example, Poland, which gets more than 90 per cent of its electricity from coal-fired power stations, has asked South Korea for help in building its first nuclear reactor and hopes to start construction by 2012.
The United Arab Emirates, also a newcomer to nuclear power, has awarded a contract to US engineering and construction company CH2M Hill to manage its atomic investment programme. Although the UAE has large amounts of oil and gas, it wants to move into nuclear energy in order to satisfy a rising demand for electricity. CH2M Hill will be responsible for planning the UAE's nuclear investment programme in accordance with United Nations standards.
As more countries decide to enter the nuclear world, questions are being asked about how governments can most effectively encourage investment in reactors and avoid mistakes of the past.
Safety considerations are paramount; another accident on the scale of those at Three Mile Island in 1979 or Chernobyl in 1986 would destroy public confidence in the nuclear industry and would kill off much of the political and commercial interest in nuclear expansion. Countries that have either never built a nuclear reactor before or those, like Italy and the UK, that have had a hiatus of several decades since their last plant was constructed, need to prove that their nuclear safety regulatory regimes are robust and that risks will be minimised.
Another issue is cost. In the early days of nuclear power, proponents said that electricity would be generated so cheaply it could almost be given away for free. But in the decades that followed, many reactor projects missed deadlines and ran over budget. In the UK, a tendency to change the reactor technology each time a new power station was built meant that there was only a very shallow pool of expertise and spare parts to draw on when the plants broke down, leading to lengthy outages.
This time around, standardisation is the nuclear industry's buzzword. Reactor manufacturers such as Westinghouse, Areva and GE stress that the best way to keep costs down and limit outages is to build large fleets of standardised reactors. This would provide economies of scale, and mean that each country could draw on an established global supply chain and source of skills and technical information.
In the past, nuclear power has been more expensive than power generated from gas-, oil- or coal-fired plants, when measured over the life of the plant. But as fossil fuel costs have risen in recent years, nuclear energy has started to look more commercially-viable.
There are fierce debates about the real cost of nuclear energy, once the expense of dealing with spent fuel and radioactive waste has been included. As yet there is little impartial data available, but experts argue that nuclear power offers countries advantages that outweigh the costs.
Tony Ward, a partner in the power and utilities team at Ernst & Young, says that governments' desire to diversify sources of power and cut emissions of CO 2 will continue to drive investment in nuclear power, no matter how much coal, oil and gas prices fluctuate. "Nuclear is at the moment the only truly scaleable provider of base-load power that is also low carbon," he says, adding that falling steel and construction costs should help projects keep to budgets.
Governments differ in how they expect nuclear investment to be paid for. In China and France, plants are being built by government-owned companies and it is not yet clear how much of the cost will be passed on to customers through bills and how much will be subsidised by the governments. In the US and the UK, investment is coming from the private sector, with the full cost being recovered from customers over time.
But to kick-start nuclear investment, all governments are offering some sort of incentive. "The US has chosen to provide financial incentives for the first tranche of reactors built and the UK is seeking to refine its energy policies," says Mr Ward at Ernst & Young.
It remains to be seen whether there will be enough skilled engineers and specialised components to support the revival. Mr Ward says projects could be delayed by shortages.
"Despite major investments around the world in the manufacturing plant, equipment and nuclear certifications on which the industry depends, demand is expected to outrun supply for at least the next two decades," he says.
Copyright The Financial Times Limited 2008