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ANALYSIS

Nuclear power should enable Mena states to diversify
their sources of energy, but the outlook is mixed.

Fiscal restraints to sideline Mena nuclear goals

ABU DHABI, June 8, 2016

Fiscal constraints are one of the major barriers to progress in the Mena nuclear power sector, a report said, adding that it could account for only three per cent of Middle East electricity generating capacity by 2040.

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, according to the Apicorp Energy Research June 2016 from Arab Petroleum Investments Corporation (Apicorp).

While the six GCC 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.

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. 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 5.6GWareunder construction. Only a further 6.4GW are likely to come online by 2030. The International Energy Agency (IEA) estimates that by2040, the region’s nuclear industry will account for only3 per cent of electricity generation, with oil and gas accounting for 70 per cent.

Several factors make the nuclear option attractive. 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 the energy sector.

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 can be cost competitive

Nuclear projects require substantial upfront capital but exhibit lower operational and fuel costs over their lifetime- typically 50 years. Upfront capital costs range from $3 billion-$6 billion/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 can be competitive against other sources of base load 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 per cent, nuclear is more competitive than coal and gas. At 7 per cent, nuclear remains competitive. Only at 10 per cent does nuclear become less attractive.

While nuclear is often seen as a source of long-term power supply, this is contingent on the ability of project owners to secure large stocks of uranium. Currently, only four countries in Mena have proven uranium reserves. But, at an average price of $69/kg this year, production in the region remains uneconomical. Therefore, countries considering nuclear will have to rely on uranium supplied largely from outside the region.

UAE leads GCC diversification drive

The UAE nuclear programme has been dubbed a model for nuclear newcomers. Cooperation with international bodies like the International Atomic Energy Agency (IAEA) was extensive while the country built up its programme. The UAE established a Nuclear Energy Program Implementation Organization, which set up the Emirates Nuclear Energy Corporation (ENEC).

Abu Dhabi even agreed to forgo domestic enrichment, obtaining its nuclear fuel from reliable and responsible international suppliers and returning radioactive waste.

The UAE is the only GCC state with nuclear plants under construction. At the heart of the country’s nuclear strategy is the construction of the Barakah nuclear power plant. Korea Electric Power Corporation is building four 1.4GWpower plants at a cost of $20 billion, with another $20 billion allocated for the operation of the plants during their 60-year lifetime. The construction of the first and second reactors is complete and the third is under way. The first of the four plants is scheduled to begin operations in July 2017, with an additional reactor coming online each year until 2020.

ENEC expects the four nuclear reactors when on-line will meet up to a quarter of the UAE’s power demand. Over the coming decades, the UAE hopes to add a further 14.4GWof nuclear capacity, but no firm plans have yet been announced.

Saudi Arabia planned big

Economic growth, a rising population and sustained periods of low energy prices have driven high power-demand growth in Saudi Arabia. Despite recent increases in energy prices and efforts to improve energy efficiency, the country still needs an additional 34GWof generationcapacityby2020 (123GW).

The recent announcement of the Saudi 2030 Vision revised down these plans. The new plan is to install 3GWof nuclear by2030, 1.5GW in the eastern region and 1.5GW in the western region. These plans have not been officially announced and much obscurity surrounds the body that will implement the programme, with indications that KACARE will be dissolved and a new entity will take over the country’s new renewable and nuclear programme. – TradeArabia News Service




Tags: UAE | Vision 2030 |

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