Future of Nuclear Energy in Emerging Markets: Kingdom of Saudi Arabia


Forum on Energy’’s Emerging Market Series takes a country-by-country look at the future of nuclear power in emerging markets. While many are rolling back their use of nuclear energy in the wake of Fukushima, there still seems to be a clear effort by emerging nations to make nuclear energy a major part of their future. Vietnam, the United Arab Emirates, Jordan, China, Turkey, India and Finland are just a few of the nations Forum On Energy will highlight in its Emerging Market Series.

The Kingdom of Saudi Arabia (KSA), a nation usually associated with oil exploration, is undertaking one of the world’s most ambitious nuclear power expansions. Over the next 16 years the KSA plans to construct 16 nuclear power reactors at a cost of more than $100 billion. The new plants are expected to contribute 22 GWh of electric power producing capacity, or roughly 20 percent of the total projected generating capacity in 2030. Initial construction is expected to begin in 2016 and reactors are projected to come on line two each year from 2022 to 2030.

KSACrudeConsumptionTraditionally, the KSA has relied on domestic oil and gas reserves to fulfill its electricity needs. Fuel oil supplies roughly 50 to 60 percent of electric power feed stock, while natural gas supplies meet the remaining need. Given the KSA is one of the world’s largest oil and gas producers and holds one-fifth of all global oil and gas reserves, the need to diversify its domestic energy supplies is a somewhat recent development. Over the last 30 years, as the KSA has industrialized and urbanized, demands placed on the power grid have skyrocketed. In 2001, peak demand reached 24 GWh. In 2011, it had spiked to 45 GWh. In 2030, it expected to reach nearly 135 GWh. 

Soaring electricity demand has already led to a significant increase in the proportion of oil and gas production reserved for domestic electricity, limiting exports, decreasing excess capacity and hampering development the new petrochemicals industry. In the summertime, upward of 25 to 30 percent of production is reserved for domestic use. Electricity demand increases are further exacerbated by fast growing demand for fresh water, one-hundred percent of which is acquired through the energy-intensive process of desalination.

KSAprojectedconsumptionIn order to increase electricity production while ensuring sufficient oil and gas supplies are available for export to provide financial support for the country’s generous public subsidies, the KSA examined all possible courses of action and decided to focus its efforts on efficiency improvements and increasing production from nuclear power and renewables. The plan is to increase electric power production from the current capacity of 55 GWh to 120 GWh by 2020 with additional increases by 2032. The planned 2020 capacity totals include 55 GWh of renewables capacity (none are currently online), of which 41 GWh will be solar. Planned generation increases by 2032 include 18 GWh of nuclear capacity and efficiency improvements designed to eliminate the need for an additional 37 GWh. The KSA is also investing heavily in co-generation and has implemented new rules that allow companies, such as Saudi Aramco, to sell co-generated power to electric utilities and eventually individuals.


Saudi Arabia Nuclear History

Increasing electricity demand first witnessed in the 1990s and early 2000s came to a head in the summer of 2006, when the KSA could not meet its electricity demands and was forced to cut output during peak times. This and other developments spurred initial conversations on nuclear energy when, in 2006, the Gulf Cooperation Council (of which the KSA is the largest member) commissioned a study on the peaceful use of nuclear energy.

KSA_KACAREInitial efforts toward some sort of joint nuclear power development by the Gulf Cooperation Council failed to mature, and in 2009 the KSA announced it was considering developing its own nuclear power program. In April of 2010, King Abdullah decreed “development of atomic energy is essential to meet the Kingdom’s growing requirements for energy to generate electricity, produce desalinated water and reduce reliance on depleting hydrocarbon resources.” In order to fulfill the decree, the KSA established the King Abdullah City for Nuclear and Renewable Energy (KA-CARE) in Riyadh. KA-CARE was designated as the lead agency for the coordination of nuclear power in the KSA.

Over the next year, KA-CARE, in coordination with the consulting firm Poyry, undertook a strategic full-spectrum analysis to define a “high-level strategy in the area of nuclear and renewable energy applications.” This process produced the outline for today’s KSA energy policy and the current development of nuclear power in the Kingdom.

In November of 2011, KA-CARE hired WorleyParsons to conduct site surveys to determine the best possible sites for development of the nuclear power generating stations. The process is ongoing, but in September of 2013 three sites were identified as the primary options, given their proximity to coolant water sources, their position on the KSA’s electrical grid and their location near electricity-intensive consumers, such as desalination plants. The identified locations are Jubail on the Gulf Coast and Rabuk and Jizan on the Red Sea.

Currently, KA-CARE is in the process of establishing the Saudi Arabian Atomic Regulatory Authority (SARRA). SARRA is expected to become operational in early 2014. As of January 2014, KA-CARE has not yet selected any particular company or national partner to build or operate any of its nuclear power reactors. However, it has been active in signing international agreements to facilitate the bidding and construction process. KA-CARE also plans to set up a nuclear holding company in 2014 which could sign joint-venture agreements with foreign partners to operate nuclear sites. The KSA has stated its interest in diversifying the technologies used in its nuclear reactors and is considering only Generation 3 and 3+ advanced reactors. The KSA is expected to seek preliminary bids for its first two nuclear reactors in 2014.

Potential Partners

GE Hitachi – GE Hitachi is expected to be one of the leading bidders to provide nuclear power technology to the KSA. To that end, it has signed a memorandum of understanding with Exelon Nuclear Partners, the U.S.-based nuclear power plant operator, to jointly bid on the forthcoming opportunities. GE Hitachi has proposed using its Generation III+ Economic Simplified Boiling Water Reactor (ESBWR) and Generation III Advanced Boiling Water Reactor (ABWR) models. KA-CARE is said to be examining the proposed technology.

Toshiba/Westinghouse – Toshiba/Westinghouse is aggressively pursuing business in the KSA and has also signed a memorandum of understanding with Exelon Nuclear Partners, the U.S.-based nuclear power plant operator, to jointly bid on the forthcoming opportunities. Toshiba/Westinghouse has proposed using Westinghouse’s AP1000 (a Generation 3+ design) and Toshiba’s ABWR in the KSA.

Areva and Electricite de France (EDF) – Areva and EDF are actively pursuing nuclear business in the KSA, having signed agreements with numerous companies and institutions to support their expected bid. In July of 2013, Areva and EDF signed an agreement with the Saudi Arabian National Institute of Technology “with the aim of contributing to the development of technical nuclear skills in Saudi Arabia.” In December 2013, Areva and EDF also signed MOUs with five Saudi industrial partners (Zamil Steel, Bahra Cables, Riyadh Cables, Saudi Pumps, and Descon Olayan) to build a network of Saudi suppliers for future nuclear projects. Simultaneously, Areva and EDF signed a second series of agreements with four Saudi universities (King Saud University in Riyadh, Dar Al-Hekma College and Effat University in Jeddah, and Prince Mohammed bin Fahd University in Al-Khobar) to contribute to the development of nuclear expertise in the KSA.

Others – Other groups that have stated interest in bidding for the contracts include a South Korean consortium led by the Korea Electric Power Corporation, a Japanese consortium led by the International Nuclear Energy Development of Japan Company, and Russia’s Rosatom.

International Cooperation

United States – In 2008, the KSA and the United States signed a memorandum of understanding that created the framework to allow the U.S. government to assist the KSA in developing civilian nuclear energy technology. This agreement began the process of establishing a comprehensive U.S.-KSA framework for cooperation in the development of environmentally sustainable, safe and secure civil nuclear energy technology. The KSA also joined the United States-sponsored Proliferation Security Initiative and stated its intent to rely on the international markets for nuclear fuel and to not pursue a full nuclear fuel cycle.

The United States and the KSA have not completed negotiations on a 123 Agreement. Failure to complete these negotiations and acquire ratification by the U.S. Senate would preclude U.S. nuclear companies (and others) from undertaking certain types nuclear power activities in the KSA.

International Atomic Energy Agency (IAEA) – The KSA has been a non-nuclear member of the IAEA since 1962 and is party to numerous multilateral agreements on civilian nuclear power. Most recently, in 2009, the KSA signed a Safeguard Agreement with the IAEA. The Safeguard Agreement begins the process of international collaboration to help the KSA build a civilian nuclear program. However, the KSA has not yet signed or become party to the IAEA’s Additional Protocol.

France – In February of 2011, France and the KSA signed a Nuclear Cooperation Agreement allowing the two countries to cooperate in the fields of production, use and transfer of knowledge of peaceful uses of nuclear energy. The agreement opened the way for the French nuclear industry to bid on billions of dollars’ worth of nuclear construction and operations projects.

Argentina – In June of 2011, the KSA and Argentina signed a nuclear energy agreement focused on the development of small scale nuclear reactors to power desalination plants on the Saudi coastline. The efforts paved the way for Argentina’s Atomic Energy Commission and its private sector partner INVAP to begin the construction of a research reactor in the KSA. INVAP has previously build research reactors in Algeria and Egypt.

South Korea – In November 2011, the KSA and South Korea signed a bilateral cooperation agreement on the development of nuclear energy. The agreement calls for cooperation in research, development, and construction of nuclear reactors and research reactors. In June 2013, the Korea Electric Power Corporation offered support for localization of nuclear technology and joint research and development if KA-CARE selects South Korean reactors.

China – In January of 2013, Saudi Arabia and China signed a bilateral agreement to pave the way for Chinese nuclear reactor development and maintenance, research reactors, and the provision of fabricated nuclear fuel.

Agreements Under Negotiation – The KSA is currently negotiating agreements with the Russian Federation, the Czech Republic, the United Kingdom and the United States.

Concerns

The lack of a 123 Agreement with the United States fuels significant concerns about the KSA’s nuclear power program. Without a 123 Agreement the KSA’s ability to import nuclear technologies would be severely hampered. France, Japan and United States — three leading bidders — will not transfer enrichment and reprocessing technologies without a signed 123 Agreement, limiting the KSA’s procurement options.

Even if the U.S. government and the KSA are able to sign a 123 Agreement, it is far from a sure thing that the U.S. Senate would approve the measure. While the KSA has committed to purchasing already enriched fuel on the international market (thus eliminating the necessity of mastering the nuclear fuel cycle) some in the U.S. Congress worry about Saudi intentions vis-à-vis Iranian enrichment; King Abdullah has repeatedly said the KSA will seek to build its own nuclear weapon if Iran is successful in its efforts to do so. Some in Congress also worry about the stability of the Saudi regime and are concerned what would happen to nuclear components should the regime fall.