Nuclear Power Will Grow as Cost of Fuel, Kyoto Rises, IAEA Says

Nuclear power's use will grow as higher fuel prices and the cost of carbon-emissions trading motivate companies and governments to invest in reactors, the United Nations nuclear watchdog predicted.

The International Atomic Energy Agency has raised its forecast for nuclear power for a fourth year, chief economist Alan McDonald said in an interview Tuesday. The equivalent of 127 1,000- megawatt plants will be built by 2020, the IAEA said. Capacity will rise to 427 gigawatts from 367 gigawatts today.

``Nuclear is often the better option for countries that put high value on energy security,'' McDonald said. ``It's a long- term, stable system.''

Atomic energy is becoming economically more attractive as the price of oil and natural gas rise. The Kyoto Protocol is leading countries that signed the treaty to consider nuclear energy, to reduce the emissions produced by gas- and coal-fired plants. Public concern about safety may be easing, polls show.

``The predictability of the industry's operations is better today than it ever has been,'' Ken Brockman, the IAEA's director of nuclear installation safety, said in an interview on Monday.

Asia will drive demand, McDonald said. China now relies on coal and oil for 90 percent of its fuel. It plans to get 40 gigawatts of electricity from nuclear power by 2020, up from 6.5 gigawatts today. India is building nine reactors and will increase capacity to 20 gigawatts from 2.7 gigawatts by 2012.

Western Reluctance

The only new reactor under construction in the United States and western Europe was ordered by Finland's utility, Teollisuuden Voima Oy. Siemens AG and France's Areva SA won a $3.7 billion contract to build the 1.6-gigawatt reactor in December 2003.

Westerners are more reluctant to invest in nuclear projects because of high costs, McDonald said, although reactors can run as long as 60 years and cost less money to operate, he said.

``George W. Bush says nuclear power is a good thing, but in a liberalized energy market, it's up to industry to decide,'' McDonald said. ``With a five-year planning horizon, gas and coal still look cheaper.''

Nuclear power costs up to 5.5 cents per kilowatt-hour, compared with 3.2 cents for coal and 3.5 cents for natural gas, according to a University of Chicago study last year. It can be brought down to 3.2 cents per kilowatt-hour, according to the report, cited by the IAEA.

Safety Concerns

Safety concerns also hinder reactor construction in the West, after the Three Mile Island accident in the U.S. in 1979 and the Chernobyl explosion in Ukraine in 1986. No nuclear plants have been ordered in the U.S. since 1978, according to the IAEA. Germany agreed in 2000 to permanently close its 19 nuclear plants over the next two decades.

``Chernobyl is still a haunting issue,'' Linda Keen, the president of Canada's nuclear safety commission, said in an interview on Monday. Tighter regulation and industry peer reviews have helped to make nuclear power safer, she said.

New technologies are also addressing safety. Areva produces a reactor that uses 15 percent less uranium. Westinghouse makes a reactor that needs no human intervention.

``India and China don't have George Bush's problem because they're not investing in a liberalized market,'' McDonald said. ``If you're a government doing the investing, you can think long- term and consider non-monetary considerations.''

Incentive Missing

In the U.S., the government's rejection of Kyoto removed an incentive to invest in nuclear plants, the IAEA said. The treaty in effect requires companies to pay to emit carbon dioxide.

``Kyoto is the first step, because until now there's been no value attached to carbon dioxide emissions on the bottom line,'' McDonald said. ``It's a lot less clear about how carbon avoidance is going to be accounted for in the United States.''

U.S. companies are trying to renew licenses for old atomic reactors instead of building new ones. Three-quarters of the 104 nuclear power plants are seeking 20-year operating extensions, according to the agency.

``The industry is now looking at partly used nuclear plants as a good investment,'' said Brockman, 55, who worked at Detroit Edison Co. and Westinghouse Electric before joining the IAEA.

The Department of Energy gave $13 million last November to a group of companies including Chicago-based Exelon Corp., New Orleans-based Entergy Corp., and Charlotte, North Carolina-based Duke Energy Corp. to investigate nuclear investment.

The Vienna-based IAEA produces its nuclear energy forecast once a year by inviting regulators from around the world to discuss new projects in their markets and model power demand.