Annual Report 1998-99

In view of Australia’s position as a major uranium exporter and holder of the world’s largest uranium reserves, clearly future developments in the nuclear industry are of considerable interest to us. Amongst other issues are the implications of these developments for climate change.

At the end of 1998 there were some 434 power reactors in operation in over 30 countries, with a total generating capacity of 349 Gigawatts electrical (GWe) - details are in Table 7. In 1998 nuclear energy generated approximately 16% of the world’s electricity, or 24% of the electricity produced in OECD countries.

The use of nuclear energy is continuing to grow, albeit slowly. At the end of 1998 there were 36 power reactors under construction, and a further 10 on order, with a total capacity of 32.3 GWe; an increase of 9% over 1998 capacity (although taking into account expected closures of old and inefficient reactors, mainly in the US and the UK, the actual increase is expected to be somewhat less).

In the period to 2010, world electricity demand is projected to grow at an annual average of 2.4 - 3.1%. For the OECD countries, the projected annual growth in demand is 1.7%, while the growth in nuclear energy capacity is only half this, 0.9%. Thus, under current projections nuclear energy’s share of total electricity production is declining.

The next 10-15 years are seen as being critical to the future of the nuclear industry. Although the operating costs of nuclear energy are competitive, nuclear energy has usually been at an economic disadvantage due to high capital costs exacerbated by lengthy regulatory processes. And of course public acceptance has been a major issue in many countries. Today there are two broad policy directions which could be mutually contradictory - deregulation of energy markets, and concern over global warming.

The policy settings influencing energy choices will determine not only whether new nuclear reactors are built, but whether it is economic to extend the lives of existing reactors. The licensing periods of reactors which started in the 1970s will be due for renewal in the next 10-15 years. Although most reactors will be suitable technically to be extended for a further 20 years or so, at this stage it is by no means certain this will be commercially viable in all cases. The first renewal applications by US utilities were made in 1998.

Clearly deregulation of electricity markets will disadvantage the nuclear industry further, unless governments intervene to ensure a level playing field: nuclear suffers from having all associated costs - waste management and decommissioning - internalised, that is, incorporated into electricity tariffs. This compares unfavourably with other energy sources which currently are not required to fully cover externalities, such as the effects of pollution and greenhouse gas emissions. Unless some adjustment is made for these - for example, through taxation measures or mandatory technical remediation - the future prospects for nuclear energy are not encouraging. It is noted that similar considerations apply to the development of renewable energy sources, though for the foreseeable future in most situations only nuclear energy offers a viable alternative to fossil fuels for large-scale base-load electricity generation.

At the same time that market deregulation is proceeding, there is increasing recognition of the role of nuclear energy in limiting carbon dioxide emissions. Total world carbon dioxide emissions from burning fossil fuels are around 20 billion tonnes a year. Some 7.5 billion tonnes come from burning fossil fuels for electricity generation. Nuclear energy saves a further 2.3 billion tonnes, compared with generation of the same electrical output by burning coal. For many countries, particularly if there are binding greenhouse emission limits, nuclear energy will have to remain - or become - a major part of their energy mix.

Under a fully deregulated market it becomes problematic to maintain mechanisms by which governments can achieve desired policy outcomes. It has been the policy of many governments, for a variety of reasons, to ensure a diversified mix of energy supply, with nuclear energy making a significant contribution. Now greenhouse considerations are entering the picture. How to reconcile these issues - to ensure that a deregulated electricity market is able to meet broader policy objectives - will assume increasing importance over the next few years.