Jordan’s plans to build a nuclear power station raise serious issues on the technologies chosen, the economics of the nuclear plants, providing finance and bringing foreign partners to own and operate the plant.
History of the nuclear programme
The attempt to build nuclear power plants goes back to 2008 when governmental agreements were signed between Jordan and France to build nuclear capacity in Jordan and exploit Jordan’s uranium resources. A list of four potential supplier countries, Korea, Russia, France and Canada was successively whittled down to France with the Atmea1 design supplied by an Areva/Mitsubishi joint venture, Atmea and the AES-92 design supplied by Atomstroyexport of Russia. The site was initially near Aqaba but was moved to a site nearer Amman, Al Majdal. Over the four years following the initial agreement, the expected date of first power slipped from 2015 to 2020. In May 2012, the Jordanian Parliament voted to suspend the reactor programme and the uranium exploitation effort pending completion of economic feasibility and environmental impact assessments. This vote appears to have had little impact. However, in September 2012, Areva followed RTZ in abandoning their interest in exploiting Jordanian uranium reserves.
The Fukushima disaster led to a clear commitment from the Jordanian Atomic Energy Commission that any reactor built would meet current developed country standards of safety and would have undergone a full safety assessment by an experienced and credible independent safety regulatory body.
Technology
The decision to opt for latest Western safety standards means that inevitably Jordan will have to choose a reactor that is not proven. No reactor designed after the Chernobyl disaster has entered service yet and only two, the Areva EPR and the Westinghouse AP1000, of the several designs being offered have any construction experience. Neither of these designs is under consideration in Jordan. In the West, the only experience is with the EPR with a reactor under construction in both of Finland (Olkiluoto) and France (Flamanville). Experience with both projects has been extremely bad with both 4-5 years late being completed and about 100 per cent over budget.
The Atmea1 design is the less developed of the two and work has not yet started on detailed design and until this is complete, a safety assessment cannot be carried out. Recent experience in the UK and USA with safety assessments suggests this might take up to 6 years. With no other customers, it is not clear whether Areva will be prepared to undertake the detailed design work nor is it clear which regulatory body would carry out the safety assessment.
The AES-92 is being built in India and two reactors, which are near completion, have been under construction for more than 10 years. The design has not been ordered elsewhere, not in the Russian home market. It is not clear what upgrades would be needed to bring the design up to current Western standards, but as with the Atmea1 design, it has not undergone a safety review by a Western regulatory body and it is hard to see why such a body would carry out a review.
There are other design issues regardless of the design chosen. The site identified does not have access to cooling water and it is proposed that treated waste water from the Khirbet Al Samra plant would be used. Waste water has only been used as coolant at one nuclear power plant in the world, the Palo Verde plant in the USA and it is not clear how proven the method is and how applicable this experience is.
There is also the issue of the grid size and maximum demand in Jordan is about 2600MW. IAEA guidelines suggest that the capacity of a reactor should be no more than 10 per cent of system minimum demand. Even if demand grows significantly by the time a reactor is on-line, it will clearly be several times larger than this recommended value. The consequence of building such a large reactor will be additional costs in ‘spinning reserve’ to ensure supply continuity when the reactor breaks down and potentially grid instability.
Jordanian Capability
Jordan will clearly have to strengthen its nuclear capabilities particularly in its safety regulatory body and its capabilities in operations and maintenance (O&M). It is clearly essential that Jordan has in place a competent and credible safety regulatory body to ensure that the design chosen meets the required standard, that construction work meets the quality standards needed and that operations and maintenance are carried out to the highest standards. It cannot rely on the suppliers and the owner/operators to ensure this is the case.
For O&M, Jordan will not be in a position to do this independently and it is looking for foreign utility partners to provide this expertise as well as some of the equity. There must be significant doubts as to whether any foreign utility will want to take on what must be seen as an economically risky venture.
Economics
Given that a nuclear power plant would account for a very large proportion of Jordan’s electricity requirements, it is essential that it provide power at a competitive price if the requirement that electricity should be affordable is to be met. The main determinants of the cost of a kWh of nuclear electricity are the fixed costs associated with construction and these are set by the cost of construction, the cost of capital and the reliability of the plant. Theses fixed costs must be paid regardless of the level of output of the plant so reliability is essential if they are to be spread as thinly as possible.
Construction cost is difficult to estimate accurately because few reactors of modern design have been completed in the past 20 years and even fewer are in countries where that can be confidence that any published costs are accurate. When the newest generation of plants was publicised more than a decade ago, the promise for them was they would be safer, but because the designs would be simpler than their predecessors, costs would be lower, construction less complex and therefore the risk of delays in construction reduced. The promise was that such plants could be built for no more than $1000/kW so that a 1000MW reactor would cost $1bn. Latest estimates from countries such as UK and USA are of the order $7000/kW. The implications of the Fukushima disaster have yet to be taken into account in these designs and costs and they can only increase costs. This dramatic increase in estimated costs – historically estimated costs have always been lower than actual out-turn costs – continues the upward cost curve for nuclear power that has applied throughout its 50 year commercial history. The expectation with normal technologies is that factors such as ‘scale economies’, ‘learning’ and technical progress would mean real costs would come down as the technology matured. There are no clear explanations as to why this expected pattern has never applied to nuclear power, nor any expectation that the cost curve will start to turn downwards.
Financing nuclear power stations in the West has historically not been a problem because the expectation was that whatever went wrong with a nuclear power station, consumers would pick up the bill so for a utility to build a nuclear power plant incurred little financial risk for them or for the banks lending them money. This meant that lending money for a nuclear power plant was seen as low-risk and the cost of capital commensurately low.
If nuclear investment is seen as risky for financiers, the cost of borrowing and hence the fixed costs arising from construction will be much higher. The introduction of competitive electricity markets under which generators that are not competitive will go out of business and of more proactive regulators who are unwilling to pass on excess costs to consumers has meant that finance is a major barrier to nuclear power investment in the West if there is no guarantee of cost pass-through to consumers. If this guarantee is not available, the alternatives are sovereign loan guarantees and fixed price contracts. Under loan guarantees, taxpayers of the country supplying the plant guarantee the loan so that if the venture fails, the bank will be repaid by taxpayers. In today’s economic climate, governments are unwilling to take on such risks, which are counted as part of the country’s debts, certainly not for the high proportion of the costs that would be needed to convince banks. Fixed price contracts (so-called ‘turnkey’) are rare for nuclear power plants because no one organisation has sufficient control over costs to be able to offer a realistic guarantee. The Finnish Olkiluoto plant was sold under a fixed price contract, but, as costs have escalated, Areva have refused to honour the contract and the responsibility for meeting the cost over-runs is subject to an acrimonious legal dispute. Regardless of the rights and wrongs of this case, banks will see this as evidence that turnkey contracts may not be worth the paper they are written on.
For developing countries, finance has always been a potential problem because electricity prices are often politically determined and might not reflect costs and because the credit rating of the countries might be poor. For Jordan, which would be highly unlikely to be able to finance a nuclear power plant by itself, this reinforces the need for foreign partners to take an equity stake and bring with them finance and financial guarantees. It is far from clear that any foreign government will be willing to offer a package of equipment supply, finance, training, reactor O&M etc. that Jordan will need.
Opportunity costs
The likelihood is that the range of issues raised above will mean that Jordan’s attempt to build a nuclear power plant will fail. This will mean that a significant amount of Jordanian public money will have been wasted on a fruitless venture. However, the much more important cost may be the ‘opportunity costs’ of not pursuing other options that could have met Jordan’s needs and the opportunity costs of the talented scientists, engineers and technicians who have not been available for other more productive applications. Jordan has already spent four years pursuing an option, nuclear power, which is unlikely to be feasible. This money is lost and cannot be recovered but the priority is to abandon the nuclear ambitions now so that resources can be directed to options that will meet Jordan’s need for reliable, affordable and sustainable electricity supplies.
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