Exclusive interview with Greg Kaser, Supply Chain Working Group, World Nuclear Association, UK. During the Generation track of African Utility Week in May he is part of a panel discussion on “Nuclear power in Africa”.
1. Japan’s intention to decommission nuclear power plants and change their energy mix – what is the impact on the international landscape?
New domestic projects are crucial to sustaining the expansion of nuclear power to more countries. When a country takes the decision to build a nuclear power plant for the first time, the government, the safety regulator and the utility want to look at the current experience of the technology vendor and its reactors. There must be a reference plant. Japan is to continue the Shimane 3 and Ohma 1 projects, whose construction was temporarily halted after the Fukushima accident. And other plants will be re-started on a case-by-case basis over the next months, subject to regulatory and local authority approval. Reducing the overall share of nuclear generation is not likely of itself to have an international impact. But abandoning nuclear technology altogether could well reduce export opportunities for those vendors affected.
2. What changes need to be made to renew faith in nuclear energy?
There is no single silver bullet. Public concern has risen and ebbed since the 1960s and major accidents have reinforced a negative perspective on civil nuclear technology. But the biggest hurdle remains investor confidence. Nuclear generated electricity is one of the cheapest forms of power. And it stays that way too. Fossil fuels are more volatile and it is only surplus extraction capacity that pulls their prices down – a temporary advantage that the investment cycle will eliminate eventually. In a deregulated energy market, providing power at a steady competitive tariff helps maintain customer loyalty and reduces the churning associated with regular tariff rises. The long term economics are really robust, especially when the costs of converting to a carbon neutral energy system are taken into account. WNA has publications available to download on these issues.
That said, we are not experiencing a renaissance of nuclear power. But we are nevertheless at an important stage in restoring confidence in the technology. Modern reactor models are under construction in every continent except one, Africa. To be sure, there have been first-of-a-kind engineering and regulatory issues in some cases. The renaissance has only been postponed. When utilities see that these reactors are operating well, major nuclear programmes will surely be initiated. The industry needs to demonstrate its project management capability to get these new plants built and running with the minimum delay. Regulators can help here: not by giving licensees an easy time, but by taking advantage of the lessons learned in country A and applying them to their own circumstances.
3. Where should the focus be in terms of the African nuclear supply chain and localisation?
WNA has done some work on the question of localization. Becoming a qualified supplier to the nuclear industry is no easy task. The industry is subject to stringent oversight by governmental agencies and suppliers must provide exceptional performance in their design, manufacture and construction. Localization of manufacture is a means by which a developing country can capture more of the value in the supply chain and form a highly skilled workforce. But there is a cost to taxpayers and companies in making the necessary investment in manufacturing capacity and training.
On the other hand, cheap and available electricity is the means to enable local production to develop and serve domestic demand. Importing nuclear technology is a means to an end, not necessarily an end in itself. To be sure, an emerging industrial country needs to know what it is buying – and the utility must understand the technology. But the degree of localization has to be looked at in the context of the overall development strategy for the nation. And not every country can, or wants to, have a full-scope aircraft industry or pharmaceutical industry and the same applies to nuclear technology. There will probably be areas where localization makes sense – to meet domestic or regional demand, for example, or for maintenance and servicing of the facility, for waste management, and sometimes as part of the global supply chain of a multinational undertaking. The specifics of which elements of the supply chain are worth localizing will depend on the country’s development strategy, its comparative advantage and its priorities.
4. What are the best funding and financing models to use?
Nuclear power plants are expensive to build and cheap to run. Financing construction is challenging the industry, especially in the global context where the mature developed market economies are in recession or unable to raise growth rates. Even in regulated energy markets, utilities have proved reluctant to embark on major power supply investments that carry a significant project risk. The risks arising from first-of-a-kind engineering, regulatory complexity and policy uncertainty mean that project financing has not materialized while corporate finance faces competing claims from other areas of the operation.
Governments can help with finance through their programs to encourage low carbon energy sources – through loan guarantees and feed-in tariffs – and with export finance. Of course, governments want to see a return on their money and it is up to the nuclear industry to provide convincing evidence in terms of a lower carbon footprint or high skilled employment creation. The economic returns will flow when a series of standardized power plants are ordered, when there is a good degree of regulatory and policy certainty, and appropriate structuring has been put in place to address project management and financing.
5. Does Africa have appropriate sites for nuclear development and what should the environmental impact assessment cover?
Quite rightly, Africa is looking to hydroelectricity as the major source of low-carbon power. Even so, several countries have plans to develop nuclear energy. WNA has surveyed these in a 2011 report on emerging nuclear countries that is available on our website. Siting issues are important but so is the institutional framework for regulation, operation and managing social and environmental impacts. The protests we have witnessed in India over the reactor projects at Kudankulam and Jaitapur could easily be repeated elsewhere in the developing world. Local communities have to be involved in the siting arrangements, so that they understand how safety is addressed and can make an input from their local knowledge. At both the Indian sites fishermen have proved to be a really crucial group, because of their unwarranted fears that they will not be able to sell their catch due to radiation contamination. At a more mundane level, they worry that the coolant needed by the power plant will make the waters too warm for the species they are fishing for. These are very practical issues and we must learn from the negative public reaction that has occurred when undertaking siting assessments. The power plant will be a major local employer and as a good neighbour should consider supporting appropriate community development.
6. You are part of a panel discussion on Nuclear Power in Africa at African Utility Week. What will be your main message to the delegates?
My key message is: nuclear power is not just about reducing your carbon footprint; it should be an integral part of Africa’s development strategy.