The latest communication from the Saudi Arabia government on the plans to engage in nuclear power generation indicates that the country is committed to dedicating more than 80 billion dollars in the construction of 16 nuclear power plants by the year 2022 (Said 1). The intention is to have the nuclear power generated to complement the power generated from alternative power generation mechanisms in the country (Ahmad and Ramana 1). However, a great concern would arise from any concerned individual on the feasibility and viability of the project and the likely impacts to the economy. Moreover, one would be concerned with the level of competitiveness that the energy would have to the dominant fossil power energy as well as the impacts of the technology to both the local and regional economy in the short and long run.
Therefore, in this paper, we set out an analysis to seek for such answer as would be appropriate to explain the concerns highlighted. In particular, we intend to focus on the economics of the nuclear power and compare it with the other well-known sources of electricity in the country, which are the natural gas as well as the solar power. The research, therefore, utilizes the computations of the costs incurred in generating electricity, desalinating the water, and the opportunity cost as associated with the foregone gas and oil revenues. The findings are used for qualitative comparison of the viability of the fossil power generation and the generation of energy through a nuclear reaction.
The Saudi Arabia country has been known for its stand and limited interest in the nuclear technology (Said 1). In the year 1978, the country entered into a technical cooperation with the International Atomic Energy Agency. Such initiative would have made other countries to expect that Saudi Arabia would engage in the exploitation of the nuclear energy, which has taken long to come about. Most of the support for the country to invest in the nuclear power has been inclined to the growing need and demand for electricity as well as desalination of water (Ahmad and Ramana 1). However, the opinions would not have triggered the thought to initiate the project until currently when the government appears to be taking such interests. In fact, such pressure came about after 2006 when the GCC countries announced their intention of investing in the joint nuclear development program. In fact, the government appeared to concentrate on the nuclear power generation for increased production of power for domestic and industrial use.
After founding and engaging the King Abdullah City for Atomic and Renewable Energy (KA-CARE), the government was to get the estimated projections of the capacity of the generation and the country’s consumption of renewable energy (Ahmad and Ramana 2). Accordingly, the KA-CARE estimated that by 2032 the country would be producing about 123GWe electricity with 18GWe coming from the nuclear power plants. The plan was to have the construction of the plants commence by 2014, but the commencement faced some challenges in the initial plans. However, amidst the challenges realized in the initial steps of the project, the government has now come clear with the intentions to invest in the project. However, it is worth appreciating that the country has had many dependencies on the fossil fuel in the past (Rahman, Shafiqur and Mohammed 274).
Saudi Arabia Oil Production, Export, and Domestic Consumption
(Fig 1: Saudi Arabia oil production, export, and domestic consumption 1980-2013)
The government of Saudi Arabia and other concerned parties perceive that the use of natural gas and oil for the production of electricity is unsustainable; hence, the need for the alternative source of power (Payne 723-726). In fact, the United Kingdom has been quoted to be on the way to becoming a net oil importer by the year 2030 according to Lahn and Stevens (49). Besides, the study by Lahn and Stevens indicate that the instability in the production of oil by Saudi Arabia would have direct effects on the global economy. Finally, the nuclear power generation would be motivated by the need for diversification and avoidance of over-reliance on the use of natural gas and oil for the generation of electricity (Payne 723-726). However, there were fears that Saudi Arabia would have been motivated to invest in the nuclear power generation as a counter plan to Iran’s strategy of developing nuclear weaponry (Ahmad and Ramana 3). The chart below illustrates the continued exploitation of fossil fuels by the economy; hence, indicating the declining exploitation in the future.
(Fig 2: conceptual production forecasts)
The general observation in power consumption in Saudi Arabia has pointed to a perpetual increase in the rates of consumption of electricity (Payne 723-726). Rational and efficient energy consumption would be pointed as an alternative solution to the projected crisis. The primary sources of the energy as has been known over the decades have been the natural gas and the oil (Rahman, Shafiqur and Mohammed 274). Besides being utilized for industrial purposes, the power generated has been exploited for the desalination of water for domestic and industrial use. It is worth appreciating that Saudi Arabia faces an acute shortage of water; therefore, relies on the desalination process to meet the demand of the commodity for domestic and other uses (Payne 723-726). Therefore, much of the energy would be committed to the process of desalination. The production of energy through nuclear reactors, therefore, provides a definite alternative or substitute to the electric energy previously used (Bauer, Robert and Gunnar 16805).
The cost of production of electricity would be considered regarding discounted rates and the construction period of the generating plants. Moreover, the calculation of the cost of electricity would depend on such other factors as the years and the nature of the distribution. From a critical analysis as presented by Ahmad and Ramana (7-8) in their research, the costs of producing power through nuclear power plants were found to be extemporary high. The findings would be justified with the approximated decline in the production of oil and gas. Besides, the increase in the demand for energy for desalination of water would support the alternative in investing in nuclear power production.
The Opportunity Cost
The primary opportunity cost observed in the economics of utilizing natural gas and oil for production of power for domestic use would be the forgone returns from oil and gas exports. However, for the country, the opportunity cost would be, particularly significant if the prices for oil being exported would considerably rise (Rahman, Shafiqur and Mohammed 274). Nevertheless, currently, Saudi Arabia records no imports or exports of the natural gas. Therefore, the study would not substantiate the opportunity cost of natural gas currently, but because the opportunity costs of oil and natural gas are considered linear, then estimating the cost would be easy through the oil analysis (Rahman, Shafiqur and Mohammed 274).
The majority of the people are not certain about the future of the nuclear power with others anticipating the nuclear energy to hold the future of the ever-increasing demand for power. In fact, the supporters of nuclear energy cite the reduction of greenhouse gas emissions. However, as the discussion above indicates, some people feel that nuclear energy may be a potential threat, especially when harnessed for nuclear weaponry (Rahman, Shafiqur and Mohammed 274). By comparing the study’s findings of the economic prospects of the nuclear power generation and the exploitation of natural gas and oil, this study finds that the investment would be viable in the short run (Payne 723-726). However, the long-term viability of the project cannot be confirmed as the costs of investing in the project would greatly affect the stability of the country’s economy and consequently the economy of the other countries in the region. The paper, therefore, established that the nuclear power is not viable when compared with oil and natural gas (Payne 723-726). However, the analysis of the needs of the power as compared with electricity would be contingent upon the future of the oil and gas production. Similarly, the viability of the nuclear power compared with the solar power would be contingent with the future variables in the economy and the region (Payne 723-726).
From the analysis, solar energy appears as the most justified approach to meeting the energy needs of the economy, especially both in the short and long run. Exploiting solar energy would be most preferred and economically feasible because of the relatively low capital requirement and the perpetuity of the solar as a resource as compared to the other non-renewable energy sources (Bauer, Robert, and Gunnar 16807). More specifically, the nuclear energy generation would prove to rank least in the competitiveness scale when compared to fossil fuels both in the short and in the long run (Rahman, Shafiqur and Mohammed 274). However, the exploitation of nuclear energy would be encouraged for the assumed least effects on the environment by the minimization of environmental emissions. However, the nuclear power would compare with the solar energy, which has also been associated with least environmental effects (Bauer, Robert, and Gunnar 16805). On the other hand, the fossil fuels have been widely criticized for contributing to environmental degradation through the gaseous emissions. Such effects would not be limited to the country, but would be detrimental to the welfare of the whole region.
The ambitious plans of Saudi Arabia towards investing in the nuclear power generation have been found justifiable from the ever-increasing energy needs. As such, the project would be justified on the grounds of contributing greatly to the energy production in the country. The needs of energy in the country have been soaring, with more power being directed towards the desalination process. Moreover, the projects of the country’ production and export of oil and natural gas show a declining scale. Therefore, the government would justify the need to invest in the nuclear energy production. However, this paper evaluates the project from the economic viability point. Accordingly, the paper concludes that the project would have undesirable effects towards the economy, both in the short run and in the long run. The competitiveness of the energy as compared with the fossil fuels has also been shown to be low. The ranking is explained by the massive capital input towards the nuclear power plants as compared to the fossil power generation. The long run and short run analysis confirm the low competitiveness of the exploitation of nuclear power in comparison to the fossil fuels. Finally, the technology of nuclear power generation has been shown to have relatively low effects to the environment locally and at the regional level due to reduced gas emissions as compared to the fossil fuels. In essence, this study, recommends exploitation of such non-renewable energy sources like the solar power as against investing in the nuclear power generation.