NEA Issue Brief: An analysis of principal nuclear issues
No. 9, June 1993

Broad impacts of nuclear power

Energy choices

Utility decisions regarding which technological option to select when creating additional electricity generating capacity are chiefly based on an evaluation of the comparative costs of the options available. However most of the time these costs do not fully reflect the broader impacts ("externalities") of this energy choice on the economy and society at large. To formulate their future energy and resource development policies governments therefore have to take them into account whether of an economic environmental health or social nature which may support or discourage the adoption of a particular technology.


Externalities to be considered

In the case of nuclear power development the range of impacts to be considered can be split into three broad categories: economic environmental and health and social.



BROAD IMPACTS OF NUCLEAR POWER DEPLOYMENT
Primary Impact
(a) Economic

  • Direct Cost savings
  • Fossil fuel price capping
  • Energy supply security (Avoided lost output)
  • Avoided net fuel imports
  • Enhanced technology exports
  • Electricity price stability
  • Intellectual capital gains

(b) Environmental/Health Increased radiation levels

  • Nuclear accident consequences
  • Avoided greenhouse gas emissions
  • Avoided acid gas emissions
  • Avoided carcinogen emissions
  • Avoided fuel extraction and transport accidents

(c) Social

  • Changed employment levels
  • Changed risk perceptions (weapons accidents health gene pool)
  • Changed social consensus
  • Changed cultural impact
  • Changed ecological impacts


Economic Consequences

  • Enhanced productivity
  • Improved competitivity
  • Improved terms of trade
  • Currency appreciation and enhanced economic growth
  • Changed levels of morbidity and mortality, therefore economic output
  • Changed physical damage and environmental losses affecting resource utilisation
  • Direct effects on resources
  • Changed institutional costs
  • Changed economic efficiency


How are decisions taken?


The framework within which energy decisions are made is illustrated in a simplified version in Figure 1 which indicates the factors of influence and the complexity of their interactions.

Figure 1. Decision framework for electricity

Future energy supply choices are influenced by:

  • the demand (Box F)
  • the supply costs (box G)
  • and the existing policy framework (Box A).

The current position (Box A) is continually influenced by changing decisions whether legal political, or economic, and the new standards (Box E) that are developed. The decision framework to some extent internalises any perceived external costs and effects within the decision making process (Box E). New knowledge about the technologies concerned (Box B) and their effects on the public the environment and the overall national economy (Boxes C and D) influence the governments institutions and the public (Box H) which in turns generates new decisions. The process is dynamic but uncertain and protracted. It is subject to changes of fashion as well as changes in basic knowledge and understanding.

Each of the listed factors in Figure 1 (boxes C, D, E, F and G) can be (and has been) taken into account in the energy policy/investment choices of the past. However, the relative weight accorded to each of them has changed markedly over time and has differed from country to country. Factors have included security of fuel supply employment and balance of payments (all these factors are noted as box D). Social consensus (box H) has also had its proeminence. Environmental concerns have gained in importance everywhere (box C).


What are the tools used to support policy decisions?

All countries and utilities employ quantitative models of one sort or another to help in energy planning and policy evaluation. These models differ considerably in their scope, size and complexity depending on the needs of those developing and using them.

At the micro level, electrical utilities will do their own demand projections, based on their evaluations of future developments in the economy, and the relationship of these to electricity consumption in the markets served. They have their own electricity network optimisation models and their own microeconomic models enabling them to analyze the financial implications of alternative investment strategies. They take into account their expectations concerning the behaviour of other energy sub-sectors and the possible consequences of government fiscal and regulatory policy.

Those governments not wholly and exclusively committed to reliance on market forces to resolve priorities and determine investment choices and timing, will employ macroeconomic models. These link energy use to other sectors of the economy, and can be used to analyse the implications of different energy investment strategies, different fiscal policies, etc., on energy demand and the fuel mix. They also can be used to examine the future growth of energy demand given different assumptions about general economic growth. The implications of different energy strategies on the wider economy in terms of employment, balance of payments, and general economic stimulus can be explored.

At the global level, international agencies, in particular, may examine the implications of population and economic growth for future energy demand, to establish the adequacy of resources possible constraints on future world development, and means of alleviating or overcoming such constraints.


Four principal qualitative models

Four principal types of qualitative models have been applied to the analysis of the consequences of the development and utilisation of nuclear energy (Figure 2). They range from microeconomic investment appraisal to macroeconomic impact analysis using conventional macroeconomic models or input-output analysis. Environmental (or other) impact analysis can also be conducted at the micro-level or macro-level employing similar techniques to those for economic analysis.


Figure 2. Quantitative models for energy impacts analysis


The broader impacts and their significance

Most of the individual impacts are examined from the perspective of their general implications for a national economy. The arguments put forward are not qualitatively affected by the question of whether a single plant or a programme of nuclear plants is considered, although quantitatively there will be differences.

The impacts are examined in two separate groups. The first group includes those that are normally linked through macroeconomic models, such as the ones described above. The second group are those that may have impacts on the wider economy, but which are usually regarded as exogenous and sometimes unquantified factors. Environmental and health effects, a subset of the second group, are treated separately.


What are the quantifiable effects?

Secondary investment effects

The act of investing in a new nuclear facility will stimulate economic activity beyond what is reflected in the conventional resource cost analysis, resulting in total increases in the regional or national income that can exceed the direct investment costs by a significant margin. The magnitude of this multiplier effect depends on the nature of the technology involved and the extent of its reliance on domestic or imported goods.


Employment

The nuclear industry is a significant though not a major employer in OECD countries, employing a few per cent of the workers of the industrial sector (4% in France). One characteristic of the industry is its relatively high proportion of skilled and graduate staff relative to most other major energy and manufacturing industries.

The direct employment provided by the industry in construction operations and fuel services is lower than that involved in equivalent electricity supply using coal and possibly renewable sources. This argument has been used to pursue energy options other than nuclear power in countries with indigenous coal supplies, but it ignores the effects on employment that may result from changes in the country's Gross Domestic Product (GDP).

In many countries where phase-out of nuclear power has been considered, studies indicate large economic consequences, of the order of one per cent drop in GDP with a concommittant drop in employment. This is due mainly to the lower cost of electricity generated by nuclear power. The fact of having a lower electricity price increases competitivity and stimulates growth increasing the GDP, which more than compensates for any other employment effects. A rise in the electricity price may also result in losses of jobs for several tens of thousands of persons. In one country the choice of nuclear over coal is credited for generating in the order of one hundred thousand jobs.


Balance of payments

The effect of policy choices on balance of payments is frequently used as an argument to favour one option over another, on the basis that anything that reduces imports or increases exports is beneficial to the economy.

The nuclear industry can affect trade balances through the import or export of technology and fuels. Its potential for technology export has been advanced as an argument in many countries in support of its development, and its ability to substitute low-cost uranium imports for high cost oil, coal or gas has also been argued in favour of its adoption.


Price stability

The introduction of an additional large-scale energy source, like nuclear power, into the world's energy supply mix helps to provide price stability.

The availability and use of the additional source reduces demand pressures on the fuels it displaces and leads to their future prices being lower than they would otherwise have been. This benefits all fuel users, even though they themselves may not have adopted the new energy source itself. Thus the industrial countries' adoption of nuclear power will have helped to restrain the world market price of oil and coal to the benefit of the developing countries amongst others.

One study has endeavoured to quantify the effect on fossil fuel prices of nuclear power's contribution to world energy supplies. The analysis has examined the cost implications of suspending nuclear power production globally, immediately or over a 10-year period. In both cases, oil and coal prices are Projected to rise to nearly double their 1990 levels by 2005, resulting in a decline, in the case of Japan, of GDP by 1% in real terms The effect of such fuel price changes on other countries' economies would differ depending on their dependence on imported fuels.


Regional impacts

The regional impacts of investment in new generation capacity are similar to those for national economies. The local impacts are larger in relative terms on employment, environmental and infrastructural effects, and secondary for production. However, the benefits (though not the detriments) are likely to draw in labour and products from outside the region so that the local gains may be diluted.


What are the other impacts with economic consequences?

Security of energy supply

One advantage sometimes claimed for indigenous fuels, for fuel- free energy systems or for technologies requiring low volumes of fuel (like nuclear power), is that they enhance the security of energy supplies. They can do this mainly by reducing dependence on external fuel sources whose supply could be disrupted by political or other actions. On the other hand, the supply of nuclear fuel is unlikely to be a problem, since reactors are normally refuelled only once a year, and fuel stockpiles are easy to establish and maintain. A day's supply of uranium fuel implies a small truck compared with several train-loads of coal.


Resource depletion

For both coal and uranium, the world resource base is so large compared with rates of consumption that this is not an important factor. Known uranium resources alone could provide all the world's energy requirements for centuries if fuel breeder technology is used.


Spin-off

All advanced technologies call for new materials, techniques and skills that can find application in other sectors of the economy with consequent economic benefit. Nuclear power has been no exception, and it has contributed to substantial technical progress in many fields. This use of products or skills developed as part of one technical programme in other spheres of economic activity is commonly called spin-off.


Socio-cultural effects

Nuclear power has provided a focus for opposition to advanced technology, to centralisation of decision-making and to other features of modern industrial society. As such, it has contributed to a significant loss of social consensus and a degree of social conflict in many OECD countries. This has imposed extra costs on society as a whole, though without nuclear power another focus for this opposition would probably have been found.


Environment and health

The environmental and health implications of electricity generation and use have become a major focus of attention.

Three important points can be made at the outset. First, the impacts associated with electricity sources are not confined to the generation stage, but extend backward into fuel extraction and processing, and construction of the plant and forward to the reprocessing and final disposal of wastes. Second the benefits and costs associated with individual options have to be measured against those of the alternative options. Third, these alternative options may include non-electricity options such as conservation strategies or direct fuel combustion that have their own environmental and health impacts.


Nuclear power

In the nuclear power cycle, small quantities of radiation are released to the environment during reactor operation and at fuel production and spent fuel management plants. These releases are carefully monitored and controlled to levels that correspond on average to less than 0.1 per cent of the public's exposure to radiation from naturally occurring radioactivity arising from radioactive minerals in the ground, from atmospheric radon and from cosmic rays.

In general the radiological impacts on the public associated with nuclear power are comparable or lower in this regard to those associated with other alternative power generation and equivalent energy conservation measures requiring the use of materials to achieve their effect (e.g. loft insulation, cavity wall insulation).

Concern about nuclear power among the public focuses on risk of a major accident resulting in the release of a significant fraction of the fission products into the environment, and with consequent loss of life and ecological and economic damage.

In practice governments in OECD countries are committed to give international guarantees through international conventions or otherwise concerning compensation for major incidents, and the reactor owners must procure private insurance which covers a substantial portion of the risk.


Fossil-fuelled generation

In general the social costs associated with fossil fuel combustion using modern technology, are small, with the possible exception of the effects of greenhouse gas emissions. This assumes that technologies to remove sulphur and nitrogen oxides from the flue gases are incorporated into the plant design, that regulations and standards adequate for public protection are in place, and that the cost of these measures are internalised. It should, however, be noted that "appropriate" standards for pollution emissions differ more for fossil fuel emissions than for nuclear power plants.

It is not widely appreciated that the combustion of coal releases quantities of radiation to the environment that are (in terms of its potential biological consequences) similar in magnitude to the routine releases from the nuclear industry for comparable electrical output. Natural gas production and use also release radioactive radon to the atmosphere, and its unvented use for domestic cooking adds to the radiation doses in domestic properties. The additions are also comparable to those arising from the civil nuclear power industry. As for nuclear power, the amount of radiation released in both these cases is small compared to background radiation, and the costs attached to these effects are thus negligibly small.

Trace quantities of other organic compounds that are known carcinogens are released from coal-fired plants. These could in theory lead to a small number of delayed premature deaths amongst the general population in much the same way as radiation releases. There is almost no scientific information on this risk, although one estimate has Suggested that it could be similar in magnitude to the effects of radiation releases from coal or nuclear plants.

Acid gases are most significant for coal, oil and emulsion fuels. Natural gas does not contribute other than through small emissions of nitrogen oxides. Most fossil-fuelled plants now being constructed in OECD countries are designed to reduce the emissions of sulphur dioxide and nitrogen oxides to "tolerable" levels. As is true of nuclear plants, the costs of the controls required to meet emission regulations would be incorporated into the investment cost analysis. In cases where the cost of the impact of the emissions is still considered as an "externality" by utilities, they would have to be considered by the appropriate governmental authorities.

Fossil fuel combustion leads to the release of carbon dioxide and nitrous oxides, both of which add to the heat-trapping capabilities of the atmosphere. The principal greenhouse gas (apart from water vapour) is carbon dioxide, which currently accounts for some 50% of the global warming effect of the atmosphere. There is still much uncertainty about the precise size of this global warming, and even greater uncertainty about the regional variations in temperature and rainfall. But some of the adverse effects could well be minimised provided they were slow enough to permit evolutionary social change and migration.


Conclusion

The standard microeconomic cost analyses of nuclear and fossil fuelled electricity generation (as done by most utilities), and the related analysis of the overall costs of operating a power network, are commonly regarded as providing sound economic guidance on power station choice. However, the analyses are usually conducted from the perspective of the electricity utility, and tend to ignore the broader economic impacts that either benefit or impose costs on other sectors of the economy. Some of these occur within the boundaries of the country making the investment, some fall outside these boundaries.

There are, however, further effects arising from the choice of generation technology for investment that are not captured in the conventional analysis. Some are gains, some are costs, and some are avoided costs associated with use of other energy options. Most of these impacts have been cited in aid of arguments for or against investment in nuclear plants at some time or other, and many have been advanced as arguments favouring the specific energy investment policies adopted by governments. Individually, the arguments often sound plausible and convincing because they relate to specific public or policy concerns of the day. Security of supply, employment, balance of trade, and environment are examples.

With regard to the broader impacts not normally encompassed by investment appraisals, the NEA has concluded that there is no reason to suppose that any of them with the exception of carbon dioxide effects, would yield significant costs or benefits to future nuclear investment, over and above those reflected in the resource cost analysis. (Significant here is taken to be one or two percent of the resource cost, which is well within the likely uncertainty surrounding the projected costs of generation.)

In these circumstances it seems likely that the minimisation of total resource costs of electricity generation, taking account of projected real movements of costs over the life of the plants, will remain the most economically beneficial strategy for the long term.

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