Arguments Against Nuclear Power Development in Iran

1. Arguments Against Nuclear Power Development in Iran May, 2003

2. Overview • Economics of nuclear vs. fossil fuels • Increased oil / gas exports • Energy security • Environmental issues • Infrastructure • Conclusions

3. 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]

4. 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

5. 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.

6. 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%.

7. 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.

8. 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.

9. 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

10. Economic factors do not favor the development of nuclear capability over oil/gas • Nuclear power is the economicchoiceonlyfor 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 intra-country 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

11. 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

12. Infrastructure challenges for non-nuclear generating development • Domestic pipeline construction • Technology challenges (well conditions, access, etc.) • Imports and refineries • Domestic subsidies • OPEC - Sanctions - Subsidies • Electricity grid enhancements

13. 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.