In Age of Austerity, France Stays with Nuclear Power

First, an additional tidbit on our coverage of IEA’s World Energy Outlook 2011, where we learned that the rumors of nuclear energy’s demise are greatly exaggerated. Just consider this chart from page two of the “Key Graphs” part of the report. 

As you can see, the IEA sees nuclear’s future more in line with the measured growth of renewables rather than coal or oil’s steady decline.

In its report, the IEA imagines a world without (or actually, with very little) nuclear power. It’s called the “Low Nuclear Case” scenario. And surprise! It’s not the utopia some would have you believe.

The net result would be to put additional upward pressure on energy prices, raise additional concerns about energy security and make it harder and more expensive to combat climate change.

Of course, it’s a projection, so it has to be taken with a grain of salt. But the data coming in from countries that have scaled back their nuclear energy plans show that the IEA is onto something.

First, there’s Germany. As we’ve covered before, their nuclear moratorium has led to higher cost electricity, lost jobs and more emissions.

There’s some evidence that Japan’s shutdown of most of its reactors may be having a negative effect on Japan’s export-based economy. [Financial Times, subscript req’d. “Japan restarts first nuclear reactor since disaster,” Nov. 1, 2011.]

Concerns about stable supply of electricity are prompting some [Japanese] companies to shift production overseas. A rise in fuel costs for utilities to make up for a lack of nuclear power, leading to bigger electricity bills for consumers, is another factor undermining the economy.

A full nuclear shutdown would have a huge annual bill as Japan turns to more expensive fossil fuels.  

Using gas and oil to make up for the loss of all nuclear power reactors will cost more than 3,000 bn yen ($38bn) a year, based on imported fuel prices and utilisation rates in 2009, the government has estimated.

Another country has considered the pros and cons of nuclear power, but when asked about shutting down its reactors replied with an emphatic “Non, merci!”

The French government's fiscal belt-tightening effort won't touch the country's ambitious nuclear energy program, France's energy minister said Wednesday, as he also dismissed any need for France to reduce its nuclear dependency...French energy and industry minister Eric Besson said Flamanville, the follow-up Penly reactor and other French nuclear investments won't be affected "at all" by the country's austerity package.

"The plan is designed to reduce deficits, yet growth engines aren't touched, budgets for the future haven't been dented," Mr. Besson said two days after the government unveiled a €7 billion austerity package.

In fact, it turns out nuclear energy can be especially helpful in times of austerity. First nuclear energy creates jobs—not only in the industry itself—but in wholly unrelated fields.

Mr. [Henri] Proglio [chief executive of Electricité de France] said that 400,000 jobs, direct and indirect, in the nuclear industry would be threatened [if France shut down its reactors] as well as another 100,000 future jobs dependent on nuclear exports. Another 500,000 jobs in energy-intensive sectors like aluminum production could be outsourced to other countries as a result of higher energy costs, he predicted.

Lower cost electricity (generated thanks to nuclear energy) also leaves ratepayers/consumers with more money in their pockets, too. Money they can spend on other goods and services, spreading the wealth.

The French pay, on average, about 30 percent less for their electricity than their neighbors do, he said, ‘‘thanks to our nuclear establishment and hydropower.’’

Of course there is a way out. Something akin to the IEA’s Low Nuclear Case: build more fossil fuel plants.

Mr. Proglio told the paper that it was his ‘‘conviction’’ that France…would need to invest somewhere in the vicinity of $544 billion to build new fossil fuel power plants to replace lost generating capacity if it shut down its reactors.

That, he said, would have to be financed by a doubling of the price of electricity and would bring a 50 percent increase in France’s greenhouse gas emissions.

A doubling of electricity prices, hundreds of thousands of jobs lost and (lest we forget!) higher emissions. Sounds like the IEA is onto something in its projections of a world without nuclear power. And sounds like France has the right idea to not scale back nuclear energy during tough times. Something to keep in mind as more nations, including our own, face budget cuts.

IEA and the Disaster of “Low Nuclear” Usage

This isn’t bad:

Nuclear energy remains vital to cope with rising energy demand, mainly in emerging economies, fight global warming and avert increased damage to the environment, the IEA warned on Wednesday.

Here’s another bit from the same Agence Presse Francais story:

The IEA also warned that global nuclear generation capacity could fall by 15.0 percent by 2035 if countries such as Germany and Belgium pressed ahead with cutting their nuclear output in the light of the nuclear accident at Fukushima in Japan in April.

This is exactly right. In a Dow Jones story, EIA even calls it a warning:

But the report's "Low Nuclear" scenario is still only a possibility, rather than a certainty, said Fatih Birol, the IEA's chief economist.

"We made the low nuclear scenario to show governments the consequences" of the policies they are considering in the wake of the Fukushima disaster, Birol told Dow Jones Newswires in an interview. It is intended as a warning, he said, without naming any particular governments.

Well, the AFP story calls out Germany and Belgium by name and the report mentions them, too, but perhaps Birol wants to be more subtle. Focusing on this is good for the nuclear energy business, but it probably sells short what the EIA report is and does.

What the EIA does is provide an Annual Energy Outlook report which presents a number of reference scenarios and cases showing what might happen over the next 25 years in the energy market given different variables. One of the variables – which is called the Low Nuclear Case – reduces nuclear energy capacity by half by 2035. And indeed, doing so has exactly the dire outcomes AFP and Dow Jones says it does.

This story from Dow Jones avoids the issue of warnings, allowing the EIA itself to say that later on:

The crisis at Japan's Fukushima atomic facility could result in a 15% fall in nuclear power capacity by 2035 if countries reconsider existing policies, the International Energy Agency said Wednesday.

This would result in increased costs for coal and gas imports for power generation and higher emissions of climate-warming gases, it said.

But it still should be stressed that the IEA also says no such thing will happen – in most of the other scenarios and cases. The New Policy scenario sees nuclear energy capacity increasing 70 percent. In introducing this scenario, the report directly says (no link – IEA would like to sell this report):

In the New Policies Scenario, generation from nuclear power plants worldwide increases by almost 2000 TWh over the Outlook period, more than the nuclear output in North America and OECD Europe combined in 2010. This increase comes predominantly from non-OECD countries, with China alone accounting for over two-fifths of the global increase. In India, nuclear power generation grows almost ten-fold. In Russia, it grows by two-thirds. About 60% of the nuclear capacity added in the OECD replaces ageing nuclear plants that are retired in the Outlook period; in total, capacity increases by only 16%.

And elsewhere in the report, the report mentions that most countries have reaffirmed their commitment to their nuclear energy industries.

That’s the thing about the future – you can say almost anything about it – ands IEA does, sometimes drastically different things, from year to year. And that’s fine: after all, the accident in Japan happened between two reports.

The IEA reports are highly informed, but still, they cannot be anything but provisional. It’s the nature of the work. (The OECD, by the way, is the Organization for Economic Cooperation and Development, a sort of international chamber of commerce.)

Now, having said all that, the point these stories make is more than valid. if nuclear capacity were halved in the next 25 years, IEA cannot project a plausible way to achieve key policy goals – about global warming and carbon emission reduction – and the price of electricity will certainly face upward pressure. Moreover, renewable energy source will take up some of the slack, but coal will take up a lot more.

And IEA says the cost to replace nuclear capacity and meet new demand will be somewhere in the neighborhood of $1.5 trillion. (after a few billion, why just hand out blank pieces of paper?)

While it was certainly pleasing to watch EIA set the table for a lot of press attention, I think it’s fair to say that most policymakers understand what nuclear energy is and does – what policy goals it helps achieve – and how much electricity it can produce. So the somewhat dire tone taken – while justified by the report – reflects what is explicitly a prediction not a reality.

No one wants to alarm anyone, you understand.

Although the report is not available to the general public, you can still get a lot of information here.

Unusual angle on the Doel nuclear facility in Belgium. But not by name.