The effects of the coronavirus pandemic on the energy sector will, of course, depend on how the pandemic unfolds over the coming months and years, and the effects will vary from country to country. In the short term, the International Energy Agency (IEA) estimates that global electricity demand in 2020 will be 5% below 2019 demand, and broader energy demand down 6%.1
Economic stagnation and mass unemployment will persist beyond the lockdowns. The pandemic will lead to a severe global economic recession, worse than the Global Financial Crisis (GFC).2 That means reduced energy demand in some countries and reduced demand growth in others.
Coal demand fell 8% in the first quarter of 2020 compared to the first quarter of 2019 (with part of the fall due to the pandemic), oil demand was down 5% and gas demand was down 2%.1 Global greenhouse gas emissions are expected to decline by 8% in 2020 compared to 2019 emissions, but the IEA warns that the rebound in emissions could be larger than the decline, as has happened after previous crises.
Fossil fuel industries have friends in high places ‒ they have received and will continue to receive strong support from conservative governments in the US3, Australia4 and in numerous other countries. Ted Nace, director of Global Energy Monitor, is more optimistic: "Coal is definitely on the downturn and this pandemic is going to accelerate that. Demand should come back to some degree next year. But there is a very strong argument that it is not going to just bounce back."5
Renewables have been more resilient to covid‑19 lockdown measures than other energy sources, the IEA notes.1 Renewable electricity generation increased by almost 3% in the first quarter of 2020 compared to the first quarter of 2019, amounting to 28% of total global electricity generation. Renewable electricity generation in 2020 is expected to exceed the 2019 figure by 5%, reaching nearly 30% of generation from all sources.
Nuclear power
How is the covid-19 pandemic effecting the nuclear power industry? For the most part, it's business as usual. With the emphasis on business: nuclear facilities are continuing to operate, and construction projects are proceeding, even in circumstances when prudence would suggest a suspension of activities until the pandemic is under control.6 Examples include 200+ workers testing positive for covid-19 at both the Vogtle7 and Fermi8-9 nuclear power plants in the US.
Nuclear electricity generation fell by about 3% in the first quarter of 2020 compared to the first quarter of 2019, according to the IEA, due to permanent reactor closures (unrelated to the pandemic) and temporary closures (and extended planned outages) due to reduced demand.1 Nuclear generation in 2020 is expected to be 2.5‒3% below the 2019 figure. Reactor construction projects will likely be delayed in Finland (where a delay has already been announced), the UK, the US and perhaps elsewhere.
World Nuclear Association Director General Agneta Rising argues that "governments need to take urgent action to invest in nuclear energy as a major part of a global low-carbon energy mix."10 But there's no joy for nuclear in the IEA's post-pandemic prescriptions. IEA executive director Fatih Birol has discussed how the response to the pandemic can learn from the post-GFC experience.11 He notes key differences between the current situation and the GFC: the current economic crisis is far more severe, the decarbonisation challenge is even more urgent, and some vital components for building a clean energy future are more mature and ready to scale up.
Birol notes that governments around the world are considering massive stimulus packages to try reboot their economies.11 He urges governments to favor energy technologies that are "ready for the big time" such as wind and solar (which "can be pillars of post-pandemic stimulus efforts"), offshore wind ("now ready for massive investment"), lithium-ion batteries and hydrogen electrolysers ("important emerging technologies" with "the potential to be the coming decade's breakout technologies").
Birol urges governments to be wary of large, highly complex projects.11 He doesn't say so directly, but he surely has nuclear in mind when noting problems with previous investments in Europe and the US in "very large, complex engineering projects, often with difficult licensing and social acceptance dimensions." Birol encourages government support for projects that are relatively simple to implement but where access to financing is constrained, such as energy efficiency projects in the residential and municipal sectors.
UN Secretary-General Antonio Guterres has spoken strongly about the importance of a "clean, green and just transition" in the aftermath of the pandemic, ending fossil fuel subsidies and not "bailing out outdated, polluting, carbon-intensive industries".12
Guterres is championing South Korea's "very ambitious green deal" plan for its recovery from the pandemic and encourages other countries to follow suit.13 The South Korean government's plan envisages halving the number of the country's 60 coal-powered plants by 2034; reducing the number of nuclear reactors from a peak of 26 in 2024 to 17 in 2034 (while also investing massively in nuclear decommissioning research centers14); and increasing renewables' share of electricity generation to 20% by 2030 and 30‒35% by 2040.15
Nuclear power already in trouble
Lower energy demand and demand growth as a result of the pandemic will mean fewer new electricity-generating plants. Nuclear will find it even harder to stake a claim for new power generation given the high capital costs and the high risks of massive cost blowouts and delays. S&P Global Ratings summarized nuclear's sick and sorry state late last year:16
"Concerns about the safety of nuclear plants and nuclear waste storage solutions, an aging global nuclear fleet, and massively escalating costs for many new projects have added to the industry's woes. ... In developed markets, we see little economic rationale for new nuclear build. Renewables are significantly cheaper and offer quicker payback on scalable investments at a time when power demand is stagnating. New nuclear construction requires massive upfront investments in complex projects with long lead times and risk of major cost overruns."
Writing in Nuclear Engineering International, independent communications consultant Jeremy Gordon is skeptical about the nuclear industry's ability to benefit from covid-19 fiscal stimulus packages:17
"The nuclear industry is orders of magnitude too small to have any influence on the new global direction and is caught flat footed and weak. Its current range of products and projects will be lucky to scoop up any of the coming stimulus cash, most of which will go to developments with short lead times, more visibility and more integration with the wider economy."
Yes, the situation varies from country to country and some nuclear projects will likely benefit from fiscal stimulus programs. But the broader context is that governments will have greater demands placed upon them in the looming economic recession, and less revenue to meet those demands. And private-sector funding will be even more constrained.
Even before the pandemic, funding for small modular reactors (SMRs), from both national governments and the private sector, was typically 1‒2 orders of magnitude too low to establish a viable SMR industry.18 The endless, tiresome SMR rhetoric will likely fade away, albeit slowly. The main exception is that China, Russia and perhaps other countries will pursue small reactors (including floating reactors) and nuclear-powered icebreakers insofar as they intersect with military and geopolitical objectives, and insofar as they are seen to be useful to pursue fossil-fuel mining ventures in places such as the Arctic, the Bohai Sea and the South China Sea.19
Nuclear power on the edge of a cliff
The recent disruptions could hardly come at a worse time for the nuclear industry. The disruptions won't just slow the trajectory of nuclear power ‒ or hasten its downward trajectory. Nuclear power is on the edge of the cliff and the latest problems could push it right over. The GFC helped to put the brakes on the momentum developed by the nuclear industry in the mid-2000s and the post-pandemic recession is likely to be worse than the GFC. The nuclear power industry had some momentum going into the GFC but it has no momentum to weather the coming storm. And the reactor fleet is considerably older than it was during the GFC.
As the catastrophic failure of reactor projects in the US demonstrates, the industry has largely lost the capacity to build reactors. Rebuilding that capacity was shaping up to be a herculean task and may now be impossible. A related problem is the shortage of skilled nuclear workers. The 2019 Global Energy Talent Index reported "an acute need for talent" in the nuclear sector, which has a workforce older than in other energy sectors with nearly one-third of nuclear professionals aged 55 or above.20 That loss of experience and expertise is affecting and will continue to affect operating reactors, construction projects, the 'advanced' nuclear and SMR sectors, and other stages of the fuel cycle from uranium mining and processing to waste management and decommissioning.
Of course, the patterns vary from country to country. But even in those countries that nuclear advocates once had the most hope for, progress is underwhelming.
A Chinese nuclear official said the pandemic will have no effect on the progress of nuclear power plant construction.21 Only time will tell if that proves to be true. The number of reactor construction starts in China has slowed to a trickle ‒ about one per year ‒ and the number of reactors under construction has fallen from 29 in 201422 to 12 currently.23
Russia is one of a number of countries that routinely projects massive nuclear power growth but fails to deliver. Now, the Russian government is no longer projecting massive growth. The Ministry for Economic Development recently published a draft strategy which would see nuclear grow by 28% from 2017 to 205024, a compound annual growth rate of just 0.67%. And Russia is reaching the limits of its ability to fund soft-power diplomacy with generous financial packages for nuclear power plants abroad. The Russian government has already committed about US$90 billion in financial support for overseas nuclear projects (including some funding taken from the beleaguered pension system).25 A senior Rosatom official said in 2017 that the world market for the construction of new nuclear power plants is shrinking, and the possibilities for building new large nuclear power plants abroad are almost exhausted.26 Nuclear advocate and commentator Dan Yurman notes that falling oil prices will further constrain Russia's ability to fund nuclear projects abroad (and the ability of Saudi Arabia to pay for reactors).27
South Korea was once a leading light for the nuclear industry. But the Democratic Party won a landslide election victory in April 2020 and, as mentioned, plans to reduce the number of reactors to 17 by 2034. South Korea's nuclear industry will outlast the anti-nuclear government of President Moon Jae-in (whose term ends in 2022) but it has lost a great deal of momentum.
References:
1. International Energy Agency, April 2020, 'Global Energy Review 2020', https://www.iea.org/reports/global-energy-review-2020
2. Nouriel Roubini, 29 April 2020, 'Ten reasons why a 'Greater Depression' for the 2020s is inevitable', https://www.theguardian.com/business/2020/apr/29/ten-reasons-why-greater...
3. Fiona Harvey, 12 May 2020, 'US fossil fuel giants set for a coronavirus bailout bonanza', https://www.theguardian.com/environment/2020/may/12/us-fossil-fuel-compa...
4. https://350.org.au/press-release/350-orgs-fossil-fuel-watch-project/
5. Jonathan Watts and Jillian Ambrose, 17 May 2020, 'Crisis has proved renewable energy is now a safer investment, and accelerated the shift', https://www.theguardian.com/environment/2020/may/17/coal-industry-will-n... activists in front of the coal-fired
6. International Nuclear Risk Assessment Group, 24 April 2020, 'Nuclear Safety and Security during a Pandemic', www.inrag.org/nuclear-safety-and-security-during-a-pandemic-2
Direct download: http://www.inrag.org/wp-content/uploads/2020/04/V01_-20200424-INRAG_Covi...
7. WRDW, 19 May 2020, 'Vogtle has seen 230 coronavirus cases; 198 of those workers have recovered', https://www.wrdw.com/content/news/Vogtle-has-seen-230-coronavirus-cases-...
8. Nuclear Intelligence Weekly, 15 May 2020, 'Massive Covid-19 Outbreak at Fermi-2', http://www.energyintel.com/pages/login.aspx?fid=art&DocId=1072760
9. Beyond Nuclear, 14 May 2020, 'Fermi 2 struggles with large COVID-19 outbreak among workers', http://www.beyondnuclear.org/home/2020/5/14/fermi-2-struggles-with-large...
10. World Nuclear Association, 30 April 2020, 'Governments' recovery programmes should invest in nuclear for cleaner and more resilient energy', https://www.world-nuclear.org/press/press-statements/governments-recover...
11. Fatih Birol, 23 April 2020, 'Designing the Covid-19 stimulus: what the 2008 crisis can teach us', https://www.iea.org/commentaries/what-the-2008-financial-crisis-can-teac...
12. António Guterres, 28 April 2020, 'Remarks to Petersberg Climate Dialogue', https://www.un.org/sg/en/content/sg/speeches/2020-04-28/remarks-petersbe...
13. AP, 1 May 2020, 'Follow South Korea and add green deal to virus recovery, says Guterres', https://www.theage.com.au/world/asia/follow-south-korea-and-add-green-de...
14. Yonhap, 21 April 2020, 'S. Korea to spend 322 bln won on nuclear decommissioning research', labhttps://en.yna.co.kr/view/AEN20200421000300320
15. KBS, 8 May 2020, 'S. Korea Unveils Energy Plan to Reduce Coal-powered, Nuclear Power Plants', http://world.kbs.co.kr/service/news_view.htm
16. Elena Anankina et al., 11 Nov 2019, 'The Energy Transition: Nuclear Dead And Alive', S&P Global Ratings, https://www.spglobal.com/ratings/en/research/articles/191111-the-energy-... or https://www.euractiv.com/wp-content/uploads/sites/2/2019/11/Energy-Trans...
17. Jeremy Gordon, 23 April 2020, 'Why nuclear energy needs a reinvention', https://www.neimagazine.com/opinion/opinionwhy-nuclear-energy-needs-a-re...
18. Nuclear Monitor #872‒873, 7 March 2019, 'No-one wants to pay for SMRs: US and UK case studies', https://wiseinternational.org/nuclear-monitor/872-873/no-one-wants-pay-s...
19. Jim Green, 11 September 2019, 'The 'advanced' nuclear power sector is fuelling climate change, and WMDs', https://reneweconomy.com.au/the-advanced-nuclear-power-sector-is-fuellin...
20. Sonal Patel, 24 Jan 2019, 'Global Report Warns of Looming Skills Shortages in Power, Nuclear, Renewables Sectors', https://www.powermag.com/global-report-warns-of-looming-skills-shortages...
21. David Dalton, 15 April 2020, 'Pandemic Will Have No Impact On Nuclear Plans, Says Official', https://www.nucnet.org/news/pandemic-will-have-no-impact-on-nuclear-plan...
22. https://www.world-nuclear.org/information-library/facts-and-figures/worl...
23. https://www.world-nuclear.org/information-library/facts-and-figures/worl...
24. World Nuclear Association, 1 April 2020, 'Russia drafts strategy for low-carbon development', https://world-nuclear-news.org/Articles/Russia-drafts-strategy-for-low-c...
25. Vladimir Slivyak, 2019, 'Dreams and reality of the Russian reactor export', https://ecdru.files.wordpress.com/2019/03/rosatom-report2019.pdf
26. RBC, 21 June 2017, www.rbc.ru/business/21/06/2017/5949f3109a794744052bb41b
27. Dan Yurman, 12 April 2020, 'How the Oil War between Saudi Arabia and Russia Affects their Plans for Nuclear Energy', https://neutronbytes.com/2020/04/12/how-the-oil-war-between-saudi-arabia...