The Economic Case for Ditching Nuclear Power in the Middle East

Summary of my intervention on the weak economic case of nuclear energy for countries in the Middle East at the 2017 International Beirut Energy Forum.

“There are many arguments to be made against the use of nuclear power in the Middle East. Just to name a few, you can think of issues related to security, safety and public opinion. My intervention today, however, will specifically examine the economic dimension.

Cost and Ease of Financing

One major global challenge associated with the deployment of nuclear power is financing. In the Middle East, the cost of a single 1 GW reactor unit is expected to range between 4 to 9 billion dollars. Such large-scale investments remain a barrier for nuclear power projects.

High capital costs brings in sensitivity to interest rates, which in countries with weak credit rating such as Jordan, Egypt and Turkey, would substantially increase investment costs.

What makes things even worse is the long-lead time to build a nuclear power plant, let alone the possibility of construction delays, which are a common feature of nuclear projects, even in countries with advanced industrialization such as the United States and France. Prospects of lengthy construction time not only scares investors away due to delayed pay-backs, it exposes them to a variety of risks such as project cancellation, political and regulatory changes.

The average construction time alone of a nuclear power plant is 7.6 years compared to 1 year for natural gas-fired plants, and 2 years for utility-scale renewables.

Because of the scale of investments required, and possible liability issues when the reactors are operating, governments or government-owned companies are the dominant sources for nuclear financing. This, however, contradicts with governments’ intention to move the burden of financing of large infrastructure projects to the private sector.

On the other hand, financing of renewables in the region looks more possible. In fact, international energy companies and banks are steadily penetrating the renewable energy market in the region. The financing of Shams Maan, a 52 megawatt solar PV project in Jordan, is a good example for a project completely financed by commercial bank lenders.

Coupling Between Natural Gas and Renewables

As an alternative to the nuclear option, the coupling between natural gas and renewables is becoming an increasingly appealing option for countries in the region. This is because:

• Costs of renewables, particularly solar PV, are going down. In many places around the world, solar electricity generation has achieved grid parity (i.e. generating electricity with costs equal or less than that generated by fossil fuel based power plants).
• Peak-demand in the region, particularly within the Gulf fits well with the solar insolation profile, so solar power could well cover the peak-demand and part of the base-load during the day, while natural gas can cover the base-load.
• Current natural gas market signals of increased supply and cheaper LNG prices will continue to motivate countries in the region, both importers and exporters, to build more gas-fired power plants.
• Gas-fired power plants are flexible in terms of being switched on and off relatively quickly to follow demand of electricity.

Localization Potential

Several countries in the region, particularly in the Gulf, are stressing the importance of increasing local content as part of their proposed economic and energy diversification plans. It is not surprising to realize that the localization potential of renewables is higher than that of nuclear power. The specific nuclear designs, technologies and materials that are exclusively manufactured and provided by a small number of companies and counties makes it hard, and costly, for countries in the region to accomplish a certain level of localization in nuclear power. Additionally, as was demonstrated in the talks with Iran over its nuclear program, any attempts to build and control parts of nuclear fuel cycle will likely to be met with controversy and political pressure.”