China / Energy / Environment / Foreign Policy / National Security

Potential Benefits and Costs of US Backed Nuclear Power Plants Abroad


Last month the U.S. International Development Finance Corporation (DFC) announced its reversal of a legacy policy that banned the financing of nuclear power projects abroad[1]. The decision, currently in the public notice and comment period, was lauded as a victory by the energy, environmental, and national security spheres[2][3] but raises several concerns around carbon emissions, capital and time costs, and nuclear proliferation. So, what are the potential benefits and costs for and against nuclear power plants? First, let’s begin with a little background.

What is the DFC and the Policy?

The DFC was created in 2018 when President Trump signed the BUILDS Act (Better Utilization of Investments Leading to Development) into law.[4] Its purpose is to consolidate and modernize the Overseas Private Investment Corporation (OPIC) and United States International Development Finance Corporation (USDFC) to catalyze “market-based, private-sector development and economic growth in less-developed countries and advance the foreign policy interests of the United States”.[5] The BUILDS Act was in direct response to the China’s growing influence in the global economy, especially China’ Belt and Road Initiative.[6] With the DFC’s creation and consolidation with OPIC and USDFC, restrictions on financing nuclear power projects were grandfathered in.[7] The proposed change would promote economic growth, secure zero-emission and reliable power source, increase US nuclear exports, and safeguard national security and US interests abroad through the financing of nuclear plants overseas.[8]

Benefits

Among the various benefits, the most pertinent are the energy and climate change impact nuclear plants can have in securing a reliable power source and reducing carbon emissions (as it produces no greenhouse gas emissions during operation). Nuclear power has the highest capacity factor out of all energy sources with a rate of 93%.[9] This means that nuclear power plants are generating their maximum amount of energy 93% of the time, almost 2 times more than natural gas and coal and 3.5 times more reliable than solar. For areas that struggle to deliver reliable power due to capacity failures (880 million people do not have access to electricity[10] with large numbers owing to capacity issues and not power grid access[11]) nuclear power can be the solution, spurring economic growth and better health outcomes in these countries.

Alongside what nuclear power plants can do for nations abroad, they serve important foreign policy and security goals. Until the 1970s, the US supplied 90% of reactors but since has had no nuclear power projects under construction overseas.[12] Today, Russia accounts for more than 60% of reactor sales worldwide, while China has positioned itself (via policies that support financing and exporting nuclear tech and embracing their own domestic market) to compete against Russian dominance within the next decade.[13] Concerns arise over project standards and safety due to using technology deemed only “good enough”, and accelerated approval of such projects due to low interest rates, long repayment periods, and large (total real money) financing provided by Russia and China.[14] Russia in particular views nuclear energy exports as a key “vehicle for expanding and enhancing its influence” and has repeatedly leveraged other countries reliance on Russian imports to exert influence (e.g. Ukraine)[15]. Meanwhile, China’s regulators have been given high marks by the International Atomic Energy Agency but lack means and are overwhelmed to regulate effectively.[16] Allowing foreign governments to build and operate energy infrastructure, especially in strategically important locations such as Turkey, risks US security allowing for investing nations to send in troops to ‘protect their investment’.[17] The change in policy modernizes US strategy and allows the US to curb growing Russian and Chinese influence and offer stronger nuclear safeguards.

Costs

Nuclear power, with its plentiful benefits, doesn’t come without severe drawbacks. Some surprising one’s center around carbon emissions. Although nuclear power plants produce no emissions once it begins production of energy, the ‘carbon debt’ it creates has experts unsure of its carbon reduction claims [see Sovacool 2008 and Weisser 2007]. To assess the total output of carbon, a life cycle assessment (LCA) must be conducted. A LCA is “the compilation and evaluation of the inputs, outputs and the potential environmental impacts of a product system throughout its life cycle”.[18] Filtering out less scientifically rigorous studies, Sovacool found that the carbon emissions of nuclear plants to range from 1.4 gCO2e/kWh to 288 gCO2e/kWh (carbon dioxide emissions per kilowatt-hour), with a mean value of 66 gCO2e/kWh.[19] Weisser’s meta-analysis found a range of 5 gCO2e/kWh to 25 gCO2e/kWh, with a mean value of 12.[20] To put the LCA emissions in perspective, wind energy clocks in at 34 gCO2e/kWh and solar at 49.9 gCO2e/kWh[21] (though with solar technology rapidly evolving, this number is likely to fall drastically over the next few years). According to the UK’s Committee on Climate Change, all electricity generated should produce 50 or less grams of carbon dioxide emissions per kilowatt-hour by 2030 to mitigate the impending climate change crisis.[22] As shown by Sovacool and Weisser, there is no consensus to the carbon footprint of current nuclear reactors, but it is clear that nuclear power isn’t carbon free.

One hurdle nuclear power plants have faced since their creation has been the extremely high capital costs. Current estimates put the cost of construction at $6-9 billion dollars per 1,100 MWe plant.[23] The failed Virgil Summer-2 plant in South Carolina cost the state $9 billion[24], Watts Bar in Tennessee cost $12 billion[25], and Georgia’s Vogtle-3 and 4 plant is expected to cost more than $27.5 billion[26] (all 4 plants have a net capacity of 1117 MWe). Even with Russia’s low-interest, long-term financing, Turkey’s first nuclear power plant is estimated to cost over $22 billion dollars.[27] The costs to build India’s 2,050 MWe Pavagoda Solar Park  was around $2.1 billion[28] (~$1 billion per 1,100 MWe), while California’s 1,550 MWe Alta Wind Energy Center cost $2.9 billion[29] (~$2.58 billion per 1,100 MWe), both of which are significantly cheaper than a nuclear power plant. The estimates include costs incurred purchasing land, as Pavagoda requires 13,000 acres (~7,000 acres per 1,100 MWe), Watt Bar Nuclear 1,700 (~1,700 per 1,100 MWe), and Alta Wind Center 3,200 acres (~2,300 acres per 1,100 MWe), yet renewables still remain cheaper.[30]

Counteracting climate change is a function of 3 variables: carbon, cost, and time. Time is often left out of conversations when speaking about energy. There are studies that conclude that solar and wind are already faster to build and more scale-able than nuclear (9 months for solar vs. 69 months for nuclear, though with the recent delays to numerous nuclear plants finds that estimate to be generous).[31] Each decision has an opportunity cost: money is finite so each purchase forgoes the others. The capital costs and time investment nuclear power require raises the question on whether renewables would yield a higher ROI in the classical sense and for carbon reduction.

Finally, financing nuclear plants abroad may secure important foreign policy goals but can harm national security. The obvious danger to most is a nuclear plant meltdown, something that came to the forefront with the 2011 Fukushima Daiichi disaster in Japan which displaced 500,000 residents. [32]But DFC’s policy change would only affect nuclear power plants overseas, so how could it affect national security? Nuclear proliferation and the creation of rogue nuclear states. Although countries with nuclear energy programs are not more likely to pursue or acquire nuclear weapons[33] as the diffusion of nuclear knowledge and know-how continues, controlling and monitoring other nations becomes extremely challenging as they could subvert its use to develop weapons. One need not look further than the UK, which primarily created nuclear power plants to provide fissile material for nuclear weapons.[34]Spent nuclear fuel can be recycled and used again at a nuclear plant but can also be used to extract weapons grade plutonium[35]. Even low enriched uranium, the fuel that would be used in the newest generation of reactors, can be further enriched to make nuclear weapons easily (though not cheaply) if that nation already has the technical capability to make/operate a nuclear plant.[36] Dr. Graham Allison goes so far as to say, using cumulative probability, that there is a 100% chance of a nuclear attack by 2048 without drastic changes in nuclear policy (using the probability of a 10% attack over 50 years as estimated by the Future of Humanity Institute).[37]

Conclusion

Nuclear energy is divisive for good reason. Do the benefits of clean energy, safeguarding nuclear standards, and combating growing Russian and Chinese influence outweigh the real dollar costs, time investment, and nuclear proliferation risks? The DFC will decide within the next few months as they enter the final rule stage. The agency will examine public comments and choose whether to withdraw the proposal, amend or modify it, or proceed as is.


[1] https://www.dfc.gov/media/press-releases/dfc-begins-public-comment-period-proposed-change-nuclear-energy-policy

[2]https://www.realclearenergy.org/articles/2020/07/08/lifting_the_dfc_nuclear_finance_ban_supports_us_national_security_interests_498455.html

[3] https://www.csis.org/analysis/united-states-inches-toward-development-financing-nuclear-projects

[4] https://www.whitehouse.gov/briefings-statements/statement-press-secretary-h-r-5105-s-2463-better-utilization-investments-leading-development-build-act-2018/           

[5] IBID

[6] https://www.csis.org/analysis/build-act-has-passed-whats-next

[7] https://www.csis.org/analysis/united-states-inches-toward-development-financing-nuclear-projects

[8] IBID

[9] https://www.energy.gov/ne/articles/nuclear-power-most-reliable-energy-source-and-its-not-even-close

[10] https://www.iea.org/commentaries/population-without-access-to-electricity-falls-below-1-billion

[11] https://qz.com/africa/1431213/africas-electricity-shortages-have-health-and-economic-costs/

[12] https://www.csis.org/analysis/united-states-inches-toward-development-financing-nuclear-projects

[13] https://www.atlanticcouncil.org/blogs/energysource/the-trade-war-we-want-china-to-win-chinas-nuclear-exports-can-challenge-russian-dominance/

[14] https://www.csis.org/analysis/united-states-inches-toward-development-financing-nuclear-projects

[15] https://www.atlanticcouncil.org/blogs/energysource/the-trade-war-we-want-china-to-win-chinas-nuclear-exports-can-challenge-russian-dominance/

[16] https://www.atlanticcouncil.org/blogs/energysource/the-trade-war-we-want-china-to-win-chinas-nuclear-exports-can-challenge-russian-dominance/

[17] IBID

[18] http://large.stanford.edu/courses/2011/ph241/ali1/

[19] https://www.nirs.org/wp-content/uploads/climate/background/sovacool_nuclear_ghg.pdf

[20] https://doi.org/10.1016/j.energy.2007.01.008

[21] https://www.sciencedirect.com/science/article/abs/pii/S0301421513010719?via%3Dihub

[22] https://theecologist.org/2015/feb/05/false-solution-nuclear-power-not-low-carbon

[23] https://www.synapse-energy.com/sites/default/files/SynapsePaper.2008-07.0.Nuclear-Plant-Construction-Costs.A0022_0.pdf

[24] https://theintercept.com/2019/02/06/south-caroline-green-new-deal-south-carolina-nuclear-energy/

[25] http://large.stanford.edu/courses/2019/ph241/rogers2/

[26] https://www.powermag.com/georgia-psc-backs-additional-costs-for-vogtle-nuclear-project/

[27] https://www.world-nuclear.org/information-library/country-profiles/countries-t-z/turkey.aspx

[28] https://spectrum.ieee.org/energy/renewables/the-pros-and-cons-of-the-worlds-biggest-solar-park

[29] https://www.power-technology.com/projects/alta-wind-energy-center-awec-california/

[30] IBID

[31] https://www.lazard.com/media/450773/lazards-levelized-cost-of-energy-version-120-vfinal.pdf

[32] https://www.bbc.com/news/world-asia-47879768

[33]https://www.belfercenter.org/sites/default/files/files/publication/ispb%20nuclear%20energy%20nonpro%20-%20draft%202_FINAL.pdf

[34] https://cnduk.org/resources/links-nuclear-power-nuclear-weapons

[35] https://fas.org/sgp/crs/nuke/RS22542.pdf

[36] https://www.amacad.org/publication/nuclear-power-without-nuclear-proliferation

[37] https://cco.ndu.edu/News/Article/1507316/nuclear-terrorism-did-we-beat-the-odds-or-change-them/

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