WNA report – what is the future of fuel?

The World Nuclear Association (formerly The Uranium Institute) has published reports on nuclear fuel supply and demand at roughly two yearly intervals since its foundation in 1975. The new report, “The Global Nuclear Fuel Market – Supply and Demand 2009-2030” (published 10 September 2009, GBP500 to non-members) is the fourteenth in the series and builds on the previous report issued in September 2007. It maintains the forecasting period up to 2030, fitting in with the time periods also considered by leading energy bodies such as the International Energy Agency (IEA). It includes scenarios covering a range of possibilities, reflecting possible outcomes for nuclear power. Forecasts of the period beyond 2030 are beyond the scope of the report and would require rather different approaches, but the key issues examined are likely to have continued relevance during that extended period.

In common with its predecessors, the report concentrates on the front end of the nuclear fuel cycle i.e. from uranium mining to electricity generation, without detailed consideration of the back end. Used fuel management and plant decommissioning are important issues within the nuclear industry but only the impact of recycling used nuclear fuel is closely examined. There is, as yet, no identifiable market in used nuclear fuel, as national management strategies are pursued in most countries. This area of the fuel cycle must wait rather longer for internationalization, but options for this are now under active discussion.

One of the report’s key strengths is that it has always followed the practice of making extensive use of information from the WNA’s members in its compilation. These represent all aspects of the nuclear fuel cycle on a worldwide basis. Over its 14 editions, the report therefore has become something of a bible for those interested in its subject area, not just those within the industry but also journalists, financial analysts and business planners.

The report is drafted by a group of members with the assistance of the WNA secretariat in London, assisted by various sub-groups covering key aspects of the market. Questionnaires to both WNA member and non-member organizations active in the fuel cycle are used to extend the knowledge base and to help produce the forecasts included in the report. The questionnaires are supplemented, where necessary, by judgments applied by the drafting group, based on published material and other information deemed accurate. Sources of information include regular reports produced by industry participants, conference papers, and the publications of public bodies such as the Energy Information Administration (EIA) in the United States and the Euratom Supply Agency (ESA) in the European Union (EU). The forecasts of fuel requirements are developing utilizing a MS Excel-based computer model developed at the WNA over many years, which incorporates the key operating characteristics of reactors throughout the world.

An interesting time

This year’s report comes at a very interesting time for nuclear power and more particularly for the world nuclear fuel market. Nuclear is now very much back on the agenda with over 50 new countries reportedly having contacted the International Atomic Energy Agency for its assistance with their planned nuclear programmes. Yet there remains a worry that the so-called nuclear renaissance, much discussed both within and outside the industry in recent years, is threatened by a huge variety of possible adverse issues, ranging from non-proliferation concerns and possible public acceptance difficulties to costs of new plants and alleged financing difficulties. This makes this period a little different to the previous age of optimism that sparked the foundation of the old Uranium Institute in 1975. Although some difficulties were anticipated for the expansive vision for nuclear power at that time, the experiences of the lean years for the industry from the 1980s onwards increase the uncertainties that the report has to address. What it has in common with the 1970s is the expectation that the supply of uranium and the fuel cycle services conversion, enrichment and fuel fabrication must now expand rapidly to meet expected additional demands. The report’s main aim is to highlight the possible magnitude of these requirements and then to explain how they may be met.

Demand

The demand side of the report firstly considers the prospects for nuclear generating capacity by country then applies reactor operating factors to these to produce scenarios for fuel requirements. For existing reactors, the scenarios involve a projection of the reactor lifetimes, based on consideration of technical, licensing and policy issues. New reactor additions for each individual country and area are considered on the basis of existing plans and policies and can be considered in three categories: namely those under construction, those in the planning and licensing process and those which are proposed but on which no firm commitments have been made. The process of constructing a new reactor typically takes four to seven years and in addition, this period is generally preceded by several years of planning and licensing activities. This means that a reactor for which planning and licensing are already well underway at the time of preparing the report (but where construction has not yet commenced) could begin operating by around 2014 or 2015. However, a reactor that is not at least in the early stages of planning and licensing by now is unlikely to begin operation before 2017 or 2018 at the earliest. Reactors that could begin operation up to 2020 are likely to have been at least proposed or discussed by governments or utilities as part of their overall energy plan or policy.

This limits the number of new nuclear countries which could have reactors by 2020. To reflect the range of uncertainties which surround any forecast, three scenarios are introduced, namely lower, reference and upper, aiming to cover the full range of possible outcomes for the future in a comprehensive, logical and internally consistent way. In the reference scenario, there are only five by 2020 (Belarus, Indonesia, Iran, Italy and the United Arab Emirates) with an additional nine in the upper case. By 2030, however, nuclear power can spread to a much wider range of countries and 31 succeed in starting nuclear programmes by then in the upper scenario.

The WNA demand scenarios have shown a great deal of consistency over past reports, but have become gradually more optimistic on nuclear prospects. Indeed the upper scenario now shows world nuclear generating capacity more than doubling by 2030 to over 800GWe, compared with 373GWe today. The main change from the 2007 edition of the report is not surprisingly a more optimistic outlook for nuclear prospects in both China and India, where good progress has been made towards their expansive plans. The reference scenario shows a slower rate of growth, but still reaches nearly 600GWe by 2030, over 200GWe above today’s level.

The report considers the reactor operating factors which are crucial in determining fuel demand. Both reactor capacity factors and fuel enrichment levels are still rising, tending to push up fuel requirements for any given level of nuclear capacity, but it is the tails assay at world enrichment plants which is particularly important in determining the balance between uranium and enrichment requirements. This essentially economic decision based on relative prices for each allows the buyer to minimise costs by varying the inputs to produce enriched uranium. The upsurge in world uranium prices to 2007 caused the optimum tails assay to drop sharply towards 0.20% U-235, pushing up demand for enrichment at the expense of uranium, but recent times have seen a return to 0.25% and this is the assumption throughout the report (at least for Western enrichment plants – Russian plants are assumed to operate at a lower 0.15%).

Supply

Representing a change from previous WNA reports, following an introduction to the crucial secondary supplies, each of the individual supply elements has its own chapter analysing both supply and demand to 2030. The main focus of the uranium chapter is how primary production will be expanded rapidly to cope with the expectation of much increased demand. Uranium reserves and resources in the ground are clearly more than adequate to fuel any conceivable expansion of nuclear power, but developing new uranium mines faces many of the issues which surround new reactor projects. Gaining regulatory approval and financing can take extended periods and there remain many uncertainties about mines which are at the planning and proposed stages of development. The report develops uranium supply scenarios to match those developed for uranium requirements and demonstrates that production can certainly rise sharply to meet demand. Kazakhstan and some African countries are set to take the lead over the next five years but with Australia and Canada eventually responding to the key market signals as well. An important conclusion of the report, however, is that secondary supplies will remain very important in the market all the way to the 2030s – reports of their death have been much exaggerated.

In the uranium conversion sector, there is need for capacity up-rates at some existing facilities while major investment is taking place to completely replace the Areva facility in France . In enrichment, the old gas diffusion plants are gradually being replaced by centrifuges, which are far more economic. Capacity is also modular in character and can relatively easily be increased to meet market demand, subject to regulatory approvals. The enrichment situation in the United States is particularly interesting, where both Urenco and Areva will have centrifuge plants, while Usec is experiencing problems with developing its American Centrifuge programme. GE is also trying to commercialize the SILEX laser enrichment technology. The Russians, with their strong enrichment capacity, will also have improved direct access to the US market once the down-blended highly enriched uranium (HEU) deal ends in 2013 .

The fuel fabrication sector is a little different to uranium, conversion and enrichment in that it is not providing a bulk commodity item, rather a more individualized high technology service. World capacity is currently more than adequate to meet likely demands, which will increasingly include first cores for new reactors. Most sectors of the market are highly competitive, with even the Russians beginning to face competition for the fuelling of VVER reactors from Western companies.

In conclusion, the report demonstrate the various means by which the increased demand for nuclear fuel will be met, but stresses that this is not an automatic process and faces considerable challenges. Both new and existing reactors will certainly get their fuel but the business will involve a fascinating international supply chain, subject to possible interference by regulators and possible trade restrictions. Consideration of prices is beyond the scope of the report, but recent experience suggests that they lie at levels which encourages companies to invest in the necessary capacity to meet demand. Within the uranium sector at least, prices have not returned to the lows of the 1980s and 1990s and the business remains full of junior companies seeking to get their projects underway. Some will likely succeed, possibly opening up production in some new countries, all of which will help supply diversity and reassure reactor operators that their rising requirements will fully be met.

Steve Kidd is Director of Strategy & Research at the World Nuclear Association, where he has worked since 1995 (when it was the Uranium Institute). Any views expressed are not necessarily those of the World Nuclear Association and/or its members.

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