MANAMA: Sustained increases in electricity demand in tandem with continuing demographic growth have prompted a number of MENA states to consider alternative sources of power generation, including nuclear, according to APICORP Energy Research June 2016.
In the face of rising electricity demand, nuclear power should enable MENA states to diversify their sources of energy and reduce their carbon footprint. But the outlook is mixed: while six countries have nuclear projects under way, planned or proposed, raising power generation capacity by 39GW, Oman, Qatar and Kuwait have cancelled proposed nuclear projects in the wake of the Fukushima disaster. Fiscal constraints are one of the major barriers to progress, and the expectation is that nuclear power will account for only 3% of Middle East electricity generating capacity by 2040.
For countries in the GCC, nuclear power would free up more oil and gas for export, while net energy-importing countries like Egypt and Jordan would be able to secure long-term energy and reduce their import bills.
Yet at present, nuclear power facilities with capacity of just 5.6GW are under construction. Only a further 6.4GW are likely to come online by 2030. The International Energy Agency (IEA) estimates that by 2040, the region’s nuclear industry will account for only 3% of electricity generation, with oil and gas accounting for 70%.
But development of the nuclear sector to a level at which it competes with oil and natural gas will be both complex and expensive. Countries with ambitions to build nuclear power plants will need to find funding, attract human capital and put in place clear and stable regulatory frameworks. Governments will need to prove to the global community that their nuclear programmes are peaceful and ensure public acceptance of their programmes. Public acceptance in the region is generally higher than that in Europe, and in the UAE, this helped support the implementation of its programme.
The political ramifications of a nuclear industry in the region also need to be addressed. Following the lifting of Iranian sanctions, there were concerns on how countries in the region would pursue their individual programmes and proposals were made to use the next decade to agree on region-wide restraints. These include banning the separation of plutonium from spent fuel, limiting the level of uranium enrichment, and placing enrichment plants under multinational control.
Nuclear projects require substantial upfront capital but exhibit lower operational and fuel costs over their lifetime – typically 50 years. Upfront capital costs range from $3bn-6bn/GW of installed capacity, more than double the cost of equivalent coal- or gas-fired plants. Investment decisions are therefore heavily dependent on the availability of finance and government support.
Nuclear plants emit considerably less greenhouse gases compared with fossil fuel-fired capacity and help countries reduce their carbon footprint. Cost competitiveness has improved in recent decades, allowing nuclear technology to become a serious component of energy diversification strategies. Nuclear also advances human capital and promotes employment in a new energy sector.
Nuclear can be competitive against other sources of baseload power. The levelised cost of electricity (LCOE) for nuclear increases at higher discount rates, given nuclear is capital intensive. At a discount rate of 3%, nuclear is more competitive than coal and gas. At 7%, nuclear remains competitive. Only at 10% does nuclear become less attractive.
MENA countries are increasingly favouring renewables and coal as a means of diversifying their power generation mix. Renewable energy is viewed as an attractive option by a public sceptical about nuclear. However, renewables technologies cannot offer the scale, productive capacity or reliability given their dependence on intermittent sun and wind. The case for nuclear in MENA is made more difficult at a time when more developed countries such as Germany are implementing strict timelines to phase out nuclear, with similar approaches taken in Italy and Spain. Between 2000 and 201 3, the share of nuclear in global power generation dropped by 6% from its peak in the late
1 990s.
Rising domestic demand in the MENA region and the pressure to reduce its carbon footprint could boost nuclear development. Nevertheless, the likelihood is that financial, technical and political problems will cause delays.
Governments considering the nuclear option must budget for high initial investment costs. At a time when governments are rationalising spending, nuclear will trail behind conventional sources of power development in the near future. Reduced credit ratings make it difficult for governments to access cheap finance. In the case of the UAE, the main reason behind its success was the government’s ability to finance the entire programme without relying on local or external debt or equity.
Nuclear plants are typically larger than existing non-nuclear plants and need sophisticated grid systems to integrate the power generated, meaning that investments in grid infrastructure can be substantial. Although this might not be a particular problem for the UAE and Saudi Arabia, it will prove challenging for Egypt and Jordan, which are struggling with inadequate grid infrastructure
MENA states contemplating nuclear development will need to assure their citizens that sufficient safeguards are in place to avoid accidents like that experienced by Japan at Fukushima in 201 1 . They will need to establish the appropriate infrastructure, such as nuclear law, regulatory bodies, and safety measures. Establishments such as ENEC in the UAE and Jordan’s JAEC are a step in the right direction but there is still a long way to go.
Nuclear power is putting down roots in the MENA region, but its full potential is unlikely to emerge before the middle of the century, and even then it will continue to face fierce competition from other energy sources. The smooth progress so far of the UAE’s nuclear programme is no guarantee that other states, particularly those without the benefit of substantial revenue from hydrocarbon exports, will find the going so easy.
