US Nuclear-Power and the Chinese and Russian Challenge

Excerpts and adaptations from the original essay.

(Atlantic Council) – Despite the ascendancy of natural gas and renewable energy, nuclear power still plays an important role in the global energy transition, providing about 10 percent of the world’s carbon-free electricity. While the United States has the largest number of nuclear plants in the world, efforts to build new reactors face public opposition while aging plants have been retired or closed. The situation is not unique to the United States; major US allies are closing (Germany), scaling back (France and South Korea), or debating the reopening (Japan) of their nuclear-power plants. In contrast, China and Russia are developing their nuclear industries and aggressively pursuing global markets, especially in critical regions such as the Middle East and South Asia.

This Issue Brief examines the challenges facing the United States nuclear industry, the geopolitical implications presented by domestic and international nuclear developments in China and Russia, and policy considerations that could strengthen and protect nuclear power.

STATUS AND PROSPECTS FOR NUCLEAR POWER IN THE UNITED STATES

Nuclear power is an important component of a diverse energy mix. In the United States, there are ninety-nine operational reactors at sixty sites generating 805,694 megawatt hours (MWh) of electricity – or about 20 percent of US carbon-free electricity. These nuclear reactors provide reliable baseload power generation at a reasonable cost. In 2016, average reliability was 92.5 percent, and average generation cost was $33 per MWh. Although US nuclear plants are aging, with 40 percent of the plants more than forty years old, the US Nuclear Regulatory Commission (NRC) has extended licenses from forty to sixty years for more than 85 percent of operating US reactors. Moreover, the nuclear industry has invested heavily in equipment and safety system upgrades – especially after the 2011 Fukushima accident – and have improved operational efficiencies, which means that in all likelihood many of these plants have many more years of useful life remaining

However, faced with competition from gas and renewables generators, the prospects for a stable nuclear industry are dimming:  six reactors with 4,666 MW of generating capacity have recently been closed, eight more reactors (7,167 MW of capacity) are scheduled to close, and another seven have been kept open with temporary local support. The future of US nuclear power is also clouded by huge cost overruns at the newly constructed power plants in Georgia and South Carolina, saved only by the Department of Energy’s willingness to provide an additional $3.7 billion in loan guarantees for the Vogtle completions.

These challenges are substantial, and the consequences of a dramatic reduction of nuclear power in the United States could be dramatic.  Some of the lost capacity would likely be covered from a supply standpoint (surplus electricity-generation in many regions; minimal growth of electricity demand, etc.), but it would still cost tens of billions of dollars to replace the lost electricity, and in all likelihood, the new power would be generated by carbon-based sources.  Officials at the state level, notably in New York, Illinois, Ohio, Pennsylvania, New Jersey, and Connecticut, are worried and are considering a variety of ways to prevent nuclear-plant closures in their own states.  For instance, New York and Illinois have approved zero-emissions credit (ZEC) schemes to support nuclear power, and the courts have thus far upheld these state-level responses. Moreover, the ninety-nine US reactors support 475,000 jobs, provide $60 billion in benefits to the US economy, and account for $12 billion in federal and state tax revenues. Nuclear supply and services companies also play significant roles in support to the US military and defense industry. Indeed, the Energy Futures Initiative (EFI), chaired by former US Secretary of Energy Ernest Moniz, has identified more than seven hundred companies in forty-four states that provide products or services in direct support of the US nuclear-energy industry, with Pennsylvania, California, Texas, Illinois, and Ohio leading the way.

It is possible that the US nuclear industry could be saved by new innovations.  For instance, last year the US Department of Energy provided $500 million to support nuclear RD&D, and some private venture capital sources are investing in “Generation IV” large reactors as well as small modular reactors (SMR). Of these, the most promising in the innovation pipeline is probably a new SMR designed by NuScale, or the new TerraPower SMR, which has the financial support of Bill Gates. Moreover, initial support of the NRC for these new SMR designs suggest that a quick licensing process is likely.

CHINESE AND RUSSIAN NUCLEAR-POWER EXPANSION

In sharp contrast to developments in the United States, China and Russia are pushing to expand their nuclear industries, develop complete fuel cycles, and build and commercialize new reactors for both domestic and international markets. The results of these efforts are striking—nearly two-thirds of the new reactors under construction worldwide are using designs from China and Russia.

Driven by domestic environmental and energy-supply concerns, and a desire to boost its global commercial and climate leadership, China under President Xi Jinping has charted a path to diversify its energy economy away from coal and reduce its carbon intensity by relying on, in large part, nuclear power. China is currently the third-largest generator of nuclear power in the world – behind the United States and France – with thirty-seven operating reactors and a capacity of 32 gigawatts (GW). China has the largest nuclear construction program in the world by far, with twenty (20.5 GW) of the fifty-three total reactors under construction worldwide. However, nuclear power still accounts for only 4 percent of total generation in China. The Thirteenth Five-Year Plan (2016-2020) calls for 58 GW of nuclear capacity online by 2020-2021, and an additional 30 GW under construction at that time— although this target is viewed as ambitious, given delays in construction and fewer new starts, with just two in 2016 and none in the first half of 2017. Given the size and projected growth of the Chinese electricity system, currently (1,645 GW) nuclear power will remain well below 10 percent of electricity generation in 2020, despite the additions. For comparison, China added 52 GW of solar and wind capacity in 2016; solar additions alone were forecasted to jump from 34 GW to 54 GW in 2017.

To speed up the development of nuclear power, China has established joint ventures with Western companies (Toshiba/Westinghouse, Frametome, Lavalin, Energoatom,…) to build and evaluate different technologies, and to incorporate what they learn into their own indigenous designs. In part because of these joint ventures, China has been able to build reactors quicker and at lower cost than Europe, the United States, and even South Korea. A 2015 report from the Organization for Economic Co-operation and Development (OECD) and the Nuclear Energy Agency (NEA) estimate that the average overnight costs for nuclear power in China is about $3,500/kilowatt (kW). This is about 25% less than the $5,500/kW cost in the European Union and about 15% lower than in South Korea. However, the nuclear industry in China is also struggling – the six most recently imported nuclear plants (four from Toshiba/Westinghouse and two from AREVA) experienced construction delays due to a national safety reassessment after the Fukushima accident halted construction. Nevertheless, China’s diversification strategy will continue to stress the large increases in nuclear capacity will indicate something about how it views the relative economics of the sector. But, as in many other countries, nuclear-power decisions in China are heavily driven by political considerations and international implications.

While China’s relationship with nuclear power is relatively new—with its first nuclear plant completed in 1991—Russia’s long history with nuclear power dates to 1954, when the first reactor was commissioned in Obninsk, followed by the construction of larger-scale commercial reactors in 1963–1964. The industry has since grown to thirty-five reactors, totaling 26.9-GW capacity. Nuclear generation reached a record of 196.366 terawatt hours (TWh) in 2016, accounting for 17 percent of domestic electricity generation, and further increased to 202.868 TWh and 19.9 percent in 2017.

Russia has seven reactors under construction, and envisions about 30 GW of new installations by 2030, although reports indicate that Rosatom may delay some plants due to low electricity demand and surplus power capacity. Financial difficulties have also caused delays, such as with the two new-generation VVER-1200- 491s under construction in Saint Petersburg, and reduced oil and gas revenues have led to a drop in the state budget for nuclear—from $2.4 billion in 2013 to $1 billion in 2017, and to $898 million in the proposed September 2017 budget—resulting in construction delays.

Russia is also actively developing new nuclear technology, including a third-generation reactor and a fastbreeder reactor with a closed fuel cycle. However, these projects have experienced considerable problems, delays, and budget issues. In the context of President Vladimir Putin’s aggressive military buildup in the Arctic, it is important to note that Russia is also developing small modular reactors, including floating reactors and barge- or ship-based units, for naval bases, icebreakers, and submarines.

THE GLOBAL NUCLEAR MARKET

While nuclear development is largely stalled in the United States Germany, France and Japan, there is still robust interest in nuclear power around the world, driven, in part, by Russia and China. While new nuclear-plant declined globally for the fourth year in a row in 2016, thirty-one countries operated nuclear reactors as of mid-2017. The International Energy Agency’s World Energy Outlook for 2017 projects that nuclear power will continue to maintain at least a 10-percent share of electricity through 2040, with an additional 273 GW in new nuclear capacity, even as 170 GW is forecast to be retired. China, Russia, and India are expected to account for the largest share of additions. Interestingly, the Middle East is emerging as a possible growth market for nuclear power. The first South Korean nuclear units are nearing completion in the United Arab Emirates, Jordan continues to negotiate on financing for two Russian nuclear reactors, Egypt recently finalized a deal with Russia, and Saudi Arabia announced its intention to proceed with two reactors after years of delay. It should be noted that Russia’s particular interest in building nuclear power plants in the Middle East is informed by a desire to strengthen their geopolitical influence in the region. In addition to its long-standing cooperation with Iran in building the Bushehr 1 nuclear plant and beginning a second unit, Russia is working to finalize a preliminary 2015 agreement with Egypt to build four nuclear units at Dabaa, on the Mediterranean. Just days after President Trump’s controversial December 6, 2017 announcement recognizing Jerusalem as Israel’s capital, Putin visited Egypt and signed the final agreement for the $25 billion, 4800-MW nuclear-power project.

Projected Installed Nuclear Generation Gapacity (GW) in Selected Countries and EY, 2016-2040

The Chinese and Russian use of nuclear-power financing and technology as a means of expanding their geopolitical presence and their foreign-policy influence has important implications for the United States. On one hand, US companies are collaborating with China on building, developing, and demonstrating new reactors; GE has won tenders for the supply of turbine generators for new Russian-supplied units in Hungary and Turkey. On the other hand, Russia and China are vying for expanded influence in countries critical to US diplomacy, namely Iran, Saudi Arabia, Turkey, Jordan, Egypt, and Pakistan. Although it is often difficult to know where President Trump stands on China and Russia, the recent NSS2017 is quite specific:

“China and Russia challenge American power, influence and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.”

POLICY ISSUES FOR CONSIDERATION

Given the strategic importance of the nuclear industry and the challenges at stake, key policy issues should be considered, including:

  1. What actions, if any, should the government take to avoid the premature closure of US nuclear-power plants, reform electricity markets to better value nuclear attributes, and protect the domestic nuclear-industry supply chain?
  2. What government budgetary resources and public-private partnerships are needed to accelerate research, development, and demonstration of advanced reactor designs? And, what international collaborative efforts are necessary to realize a new generation of commercially viable reactors?
  3. Should new US government funding sources be developed to promote US technology exports and bolster US industry competition with Chinese and Russian companies? And, what should be the role of the Export-Import Bank?
  4. Should the United States strengthen or modify its involvement in key international bodies dealing with nuclear-power exports, nuclear safety, physical security, and protection of nuclear materials?
  5. Should the United States expand its efforts to help new nuclear-generating countries with the development of professional nuclear-regulatory agencies and frameworks?
  6. Should the United States reduce its reliance on foreign uranium supplies and fuel-enrichment services for its nuclear-power plants?

A constructive dialogue bringing together industry leaders, policymakers, researchers, and other key stakeholders is urgently needed to address these, and other, issues.

***

Dr. Robert F. Ichord, Jr. is a senior fellow at the Atlantic Council Global Energy Center, where he focuses on policy issues in the transformation of electric power sectors, especially in developing countries. Dr. Ichord has had a distinguished career in the US government, working on international energy security, development, and climate change issues. From 2011 to 2015 he served as deputy assistance secretary for energy transformation in the State Department’s Energy Resources Bureau. Previously, he managed energy programs in the Asia, Near East and Europe and Eurasia regions at the US Agency for International Development, including programs related to nuclear safety in Eastern Europe and Eurasia and was involved in the G-7 process to close the Chernobyl nuclear units.

This article was originally published here on Atlantic Council. (pdf)

Pin It on Pinterest