Transcript Economics of Electricity Generation in Iran

Arguments Against Nuclear Power
Development in Iran
May, 2003
Overview
•Economics of nuclear vs. fossil fuels
•Increased oil / gas exports
•Energy security
•Environmental issues
•Infrastructure
•Conclusions
Iran’s major economic concerns
• Oil export revenues are important to the government and
the overall economy
– [x% of GDP and/or x% of tax revenues]
Factors that speak against nuclear capacity
development in Iran
• Average cost of nuclear capacity world wide = $2,000 per kW
• Only 3-year domestic supply of production uranium to operate
Bushehr is available
– Will require approximately 150 - 190 tons of U per year
– After indigenous supply is depleted, Iran would have to purchase either
yellowcake or processed fuel in the world market
– Cost of raw uranium is prohibitive compared to open market resources ($80 $130 per kg U vs. $40 per kg U)
• Capital costs for fuel cycle infrastructure that support one Bushehr
reactor are approximately $500 million
Nuclear power will not ‘free up’ oil for export
• Only 20% of Iran’s electric energy is produced by oil.
• Natural gas has been the fuel of choice for electricity generation for
the past 10 years. Therefore, it can be reasonably assumed that
Iran’s oil-fired generating units are some of the oldest plants on the
electric system.
• Standard electric utility practices would dictate that these oil-fired
units be phased out of operation and retired at the end of their
economic lives – probably within the next 20 years.
• Therefore, oil presently used for electric power generation would
likely be freed-up for export regardless of whether Iran develops
nuclear generating capacity.
Nuclear power will not ‘free up’ natural gas for
export
• In 2000, electric power generation consumed only 40% of Iran’s
natural gas production.
• By 2020, natural gas use for electric power generation is projected
to increase by approximately 90% - while production is expected to
increase by approximately 160%.
Development of nuclear power will not create
energy security for Iran
• Iran has enough Uranium to operate the Bushehr reactor for only 3
years.
• In contrast, Iran has proven natural gas reserves of over 300 years.
• Once indigenous Uranium supplies are used up, Iran must seek a
supply on the world market.
• Development of a domestic nuclear fuel cycle infrastructure without
adequate indigenous resources will not increase energy security in
Iran and would place a high risk on the infrastructure investment.
• Economies of scale dictate that large capacity, multi-unit nuclear
stations be constructed. This will tend to reduce the reliability of the
electric system compared to dispersing smaller capacity natural
gas-fired generating units around the electrical grid.
Nuclear power does not address
environmental concerns in Iran
• The mining, processing, fabricating, reprocessing and/or storage of
nuclear fuel will create enormous environmental impacts with high,
long-term costs of mitigation.
• New, high-efficiency natural gas-fired generating units have very
low emissions.
• Natural gas-fired generating units can utilize dry cooling technology
which reduces water use.
Status of Iran’s electricity-generating sector
• Currently, 75% of all electricity generation is produced
from natural gas
– Enormous proven natural gas reserves estimated to be at least
812 trillion cubic feet; or, 15% of the world total
– Natural gas reserves to production ratio conservatively
estimated at 300+ years
• 20% of electricity generation is produced from oil
– Iran’s oil reserves are among the most abundant in the world
Economic factors do not favor the
development of nuclear capability over oil/gas
• Nuclear power is the economic choice only for the most unlikely
combination of low nuclear cost, high natural gas prices and a low
discount rate
• World-wide, the average capital cost for nuclear power plants is
about $2,000 per kW
– At this level nuclear is uneconomic, unless natural gas prices are at the
highest levels, and then, only for the lowest discount rate
• Flaring of 10% of natural gas production does not support
assumptions of high gas prices; the cost of re-injection or intracountry transportation is greater than the $$$ value of the gas
• A 3% discount rate does not include a risk component. Nuclear
power is one of the highest risk investments in the electric power
sector
Projected generating capacity requirements
• Currently, Iran’s economy is growing at about 4% annually
• This translates to an expected 20 gigawatts of new
generating capacity needed
Infrastructure challenges for non-nuclear
generating development
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Domestic pipeline construction
Technology challenges (well conditions, access, etc.)
Imports and refineries
Domestic subsidies
OPEC - Sanctions - Subsidies
Electricity grid enhancements
Conclusions
• The choice of which new electricity generating venue
depends upon the relative costs of each technology
• Using a standard economic analysis, it is not economical
for Iran to develop nuclear power for electricity generation
• It is also not economical for Iran to develop a nuclear fuel
cycle for power generation based on its small uranium
resources and the wide availability and low price of
nuclear fuel worldwide.