As Iran’s nuclear program inches closer to international acceptance, a number of countries– Saudi Arabia, Turkey, Jordan, Algeria and Egypt–are in various stages of planning the construction of nuclear power reactors. The most ambitious among these is Saudi Arabia, from which many in the nuclear industry are hopeful of profiting. Despite this strong push, nuclear power makes little economic sense for these countries, and they would be much better off investing in solar power, because it is rapidly become cheaper and it is especially appropriate for regional electricity demand patterns.
The stated arguments for nuclear construction are familiar. An April 2010 Saudi royal decree stated, “The development of atomic energy is essential to meet the kingdom’s growing requirements for energy to generate electricity, produce desalinated water, and reduce reliance on depleting hydrocarbon resources.” Another argument that is sometimes offered is economic competitiveness with fossil fuels. A comparison of electricity generation costs from nuclear reactors, natural gas-based power plants, solar energy from photovoltaic cells, and concentrated solar power stations reveals, however, that unless natural gas prices rise dramatically, gas will remain the cheapest source of energy.
Nuclear electricity would be more than twice as expensive as gas for the simple reason that constructing a nuclear reactor is extremely costly, both in absolute terms and on a per unit cost basis. Electricity from gas would continue to be cheaper even if a relatively high carbon cost– even above $150/ton CO2 in some scenarios–were imposed. This large cost difference also negates the argument about the foregone opportunity cost from Middle Eastern countries consuming natural gas resources instead of exporting them. In reality, when the costs of liquefying and shipping these resources are taken into account, a country like Saudi Arabia would have to be assured that natural gas prices will rise to and stay well above the current and historical global average for decades, before it becomes a sound economical choice for it (and other natural gas-producing countries) to replace a natural gas plant with a nuclear reactor. The downward pressure caused by U.S. shale gas expansion makes it unlikely that natural gas prices will reach the high levels needed to make nuclear power economical anytime soon.
The argument about lost opportunities does hold for oil. It makes good economic sense to shut down oil-based power plants and replace them with nuclear reactors or natural gas. Saudi policymakers may have already realized this, as nearly 100% of installed capacity in recent years is based on natural gas.
Surprisingly, solar technologies are economically competitive with nuclear reactors. The key points are that it would take at least a decade or more for a country like Saudi Arabia to generate its first unit of nuclear electricity, and solar photovoltaic and concentrated solar technologies have both undergone dramatic declines in prices. Based on current trends, the cost of electricity from solar plants will become cheaper than that from nuclear plants around the end of this decade in areas with ample sunshine, like the Middle East.
In contrast, nuclear reactors are not becoming cheaper. Some studies have found evidence of “negative learning,” wherein nuclear costs rise as more reactors are constructed. For reactor construction projects, significant escalation in cost should be understood as inevitable given the nuclear industry’s tendency to underestimate construction times as well as costs. The best recent example comes from Olkiluoto, in Finland, where losses exceed 5 billion euros and the commissioning of the reactor has been delayed by nearly a decade.
The average period it takes to construct a nuclear reactor is about eight years, which does not include the time spent before construction on infrastructure, regulatory activities, and so on. In general, one can assume that it would take a decade or even two, from planning to commissioning. Meanwhile, solar power has shown itself quite appropriate for the Middle East. There is substantial overlap between electricity demand and solar insolation patterns, and there would be little or no need for constructing expensive storage facilities to deal with the sun not shining at night.
So far in the region, only the United Arab Emirates has begun nuclear construction. This is an exceptional arrangement, because the South Korean government appears to have subsidized the project substantially. As a result, the deal was criticized in South Korea as commercially weak. South Korea’s primary aim seems to have been to enter the nuclear export market. Hence, this case offers no conclusions about the relative economics of nuclear power.
In sum, the economic case for countries in the Middle East to build nuclear reactors is nonexistent unless natural gas prices shoot up or a climate agreement introduces very high carbon costs. To the extent that countries desire to move away from fossil fuels, switching to solar power makes much more financial sense, and one that seems naturally suited to local conditions.
By M. V. Ramana, Al-Monitor
