World survey

A much better outlook

16 July 2004

In the USA, there will be 101GWe of installed nuclear capacity in 2010, according to the latest EIA projections. Yet, not that long go, the EIA said that the USA would have under 88GWe in 2010. Why have the figures been revised to such an extent and how much confidence should we place in the current projections?

It has been often remarked upon in NEI that there can be considerable discrepancies between different organizations’ forecasts of future generating capacity, for example when the World Nuclear Association’s (WNA’s) uranium market report was discussed (see NEI January 2004, p21). In this instance, it was noted that future uranium demand is clearly dependent on future nuclear generating capacity. So, if we cannot have confidence in generation projections, then the figures for future uranium demand are of not much use. The article pointed out some significant differences in WNA nuclear generating capacity projections and those of the US Department of Energy’s Energy Information Administration (EIA).

Recently, the EIA released its International Energy Outlook 2004 (IEO 2004). Although it looks forward over 20 years into the future, the differences from the projections in IEO reports of just a few years ago are significant. For example, the 2002 report predicted that worldwide installed nuclear capacity for 2020 would be 359GWe – which itself was already some16GWe higher than the IEO 2001 projection. Last year, in IEO 2003, nuclear capacity in 2020 had ‘increased’ to just below 382GWe, and the figure in IEO 2004 has again risen – to 401GWe. In other words, it’s taken a little over two years to add 50GWe of nuclear generation to the year 2020!

If the projections for a particular future year change so much from year to year, one could question whether such outlooks serve any useful purpose. In the case of uranium supply projections, it is often argued that these reflect what would happen should the current state of affairs continue. Such projections are therefore not really ‘projections’ in the sense that they are stating what is actually going to happen, but rather what would happen if the industry maintains the present situation. It might be more accurate to think of them as providing warning signals to the industry, often giving an idea of what changes ought to be made in order to avoid the ‘projected’ scenario. If, for example, a uranium supply shortage is predicted, then uranium mining companies might start opening new mines, or carry out more exploration – and such activity might lead to the shortage not materialising. So, in this case, even though the predicted uranium shortage didn’t happen, it would have done had the industry not reacted to the projections. It is interesting, and surprising, to note that many people in the industry treat such reports as if, no matter what, these future scenarios are unavoidable.

Moving on to the series of IEO reports, the EIA’s projections of, say, future nuclear generation seem to depend on what the EIA currently thinks of the industry. As the EIA’s confidence in the nuclear industry increases, its projections of future nuclear capacity become more optimistic. IEO 2004 states: “The nuclear power forecast is higher than in IEO 2003, because the prospects for nuclear power have been reassessed in light of higher load factors reported for many existing nuclear facilities and the expectation that fewer retirements of existing plants will occur than previously projected. Extensions of operating licences (or the equivalent) for nuclear power plants are expected to be granted among the countries of the industrialised world, slowing the decline in nuclear generation. In the USA, natural gas prices are projected to be higher than in previous forecasts, and as a result no US nuclear power units are expected to be retired in the IEO 2004 reference case.”

Therefore, as it’s been a fairly good year for the nuclear industry, the EIA has upwardly revised its reckoning of the amount of installed capacity in over 15 years’ time. Of course, if the nuclear industry were to now sit back safe in the knowledge that there will be the equivalent of another 50 units online in about 15 years from now – because that’s what it says in IEO 2004 – then there definitely won’t be anything like the 401GWe of capacity that is predicted.

Turning to the bigger picture of future energy demand, the EIA does not appear to make major changes to its projections. For example, IEO 2004 predicts that world marketed energy consumption would grow from 404 quadrillion British thermal units (‘quads’) in 2001 to 471 quads in 2010. Almost a decade ago, IEO 1995 projected energy consumption in 2010 to be 472 quads.

Future energy demand is much easier to predict as it is broadly linked to economic growth; so it is not too surprising that the EIA is much more consistent from year to year with these projections. But it is almost impossible to predict the future energy mix with any certainty. So, this means that we can be fairly certain about what the level of energy consumption is likely to be in a particular year, but it’s more or less anyone’s guess how that energy will be generated. Each form of generation will compete with other forms of generation to supply as much of the electricity demand as possible.

Having said all that, it is important to take note of changes in the EIA’s views on a particular source of energy, since this gives a very good indication of the US government’s views (although the EIA is independent, it is the statistical and analytical agency within the Department of Energy). While the actual numbers projected are to be taken lightly, what is important is how these numbers change from year to year, and whether any trend can be observed. In the following brief look at the nuclear projections to 2025, which are taken from IEO 2004, it is advisable to refer to the Figure below, which illustrates how projections for the years 2010 and 2020 have changed in successive reports from IEO 1998 through to IEO 2004. This Figure should both highlight the transient nature of the numbers themselves, and help determine to what extent the EIA is revising its opinion of nuclear generation.

Changes in world nuclear capacity projections


Perhaps the most worrying aspect of IEO 2004 is that ‘nuclear’ no longer gets its own heading! There is a section for gas, coal and oil markets, but is it the case that nuclear energy is no longer important enough to justify its own section?

At least the nuclear industry can take comfort in better projections (compared to recent IEO reports) for nuclear, as noted earlier. Worldwide, electricity generation from nuclear power is projected to increase from 2521TWh in 2001 to 3032TWh in 2020, before declining slightly to 2906TWh in 2025. As a percentage of the world’s total electricity supply, the nuclear share would fall from 16% in 2001 to 12% in 2025.

In absolute terms, the world’s total nuclear power capacity is projected to increase from 353GWe in 2001 to 385GWe in 2025 in the reference case (see Table). During this period, the largest additions of nuclear capacity are expected in Asia (China, India, Japan and South Korea) and in Russia. In particular, developing Asia is expected to see the greatest increase in worldwide nuclear generating capacity (with 44GWe of additional installed nuclear generating capacity), accounting for 96% of the total projected increment in nuclear capacity in the developing world. China is projected to add nearly 19GWe of nuclear capacity in the IEO 2004 reference case, South Korea 15GWe, Japan 11GWe, India 6GWe and Russia 6GWe. Japan and Russia are also expected to retire 5GWe and 7GWe of existing nuclear capacity, respectively, between 2001 and 2025.

However, the IEO 2004 reference case assumes that the currently prevailing trend away from nuclear power in the industrialised countries will not be reversed, and that retirements of existing plants as they reach the end of their designed operating lifetimes will not be balanced by the construction of new nuclear power capacity in those countries. Life extensions, higher capacity factors (load factors), and capacity uprates are expected to offset some of the capacity lost through plant retirements. For example, life extensions and higher capacity factors are expected to play a major role in sustaining the US nuclear industry. Thus, despite a declining share of global electricity production, nuclear power is projected to continue in its role as an important source of electric power.

For the most part, and under most economic assumptions, nuclear power is a relatively expensive option for electricity generation when compared with natural gas or coal, particularly for nations with access to inexpensive sources of fossil fuels, and without world compliance with carbon emission reduction policies, such as the Kyoto Protocol. In addition, there is strong public sentiment against nuclear power in many parts of the world, based on concerns about plant safety, radioactive waste disposal, and the proliferation of nuclear weapons. The economics of nuclear power may be more favourable in countries where other energy fuels (mostly imported) are relatively expensive.

Worldwide energy consumption

Worldwide, total energy use is projected to grow from 404 quads in 2001 to 623 quads in 2025. The IEO 2004 reference case outlook shows strongest growth in energy consumption among the developing nations of the world, as it has in past IEO reports. The fastest growth is projected for the nations of developing Asia, including China and India, where robust economic growth accompanies the increase in energy consumption over the forecast period. Gross domestic product (GDP) in developing Asia is expected to expand at an average annual rate of 5.1%, compared with 3.0% per year for the world as a whole. With such strong growth in GDP, demand for energy in developing Asia doubles over the forecast, accounting for 40% of the total projected increment in world energy consumption and 70% of the increment for the developing world alone.
In contrast to the developing world, slower growth in energy demand is projected for the industrialised world, averaging 1.2% per year over the forecast period. Generally, the nations of the industrialised world can be characterised as mature energy consumers with comparatively slow population growth. Gains in energy efficiency and movement away from energy-intensive manufacturing to service industries result in the lower growth in energy consumption. In the transitional economies of Eastern Europe and the former Soviet Union (EE/FSU) energy demand is projected to grow by 1.5% per year in the IEO 2004 reference case. Slow or declining population growth in this region, combined with strong projected gains in energy efficiency as old, inefficient equipment is replaced, leads to the projection of more modest growth in energy use than in the developing world.
Electricity consumption
Over the projection period, worldwide net electricity consumption is projected to nearly double between 2001 and 2025, from 13,290TWh to 23,072TWh. Strong growth in electricity use is expected in the countries of the developing world, where electricity demand increases by an average of 3.5% per year in the IEO 2004 reference case, compared with a projected average increase of 2.3% per year worldwide. Robust economic growth in many of the developing nations is expected to boost demand for electricity to run newly purchased home appliances for air conditioning, cooking, space and water heating, and refrigeration. For the industrialised world and the transitional economies of the EE/FSU, where electricity markets are more mature, slower average growth rates of 1.6% per year and 2.0% per year, respectively, are projected.


World installed nuclear capacity (in GWe) by region, 2001-2025

Worldwide energy consumption Worldwide energy consumption

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