Saturday, 9 January 2010

ROK-on! South Korea

In a recent speech, ANSTO CEO, Dr. Adi Paterson, suggested the global nuclear industry is passing Australia by, and in permitting it to do so, Australia is missing a significant opportunity.

Based on Ian’s comment in the post immediately below, I began to dig around for information on Korea’s nuclear industry. I stumbled upon an August 2009 report, Nuclear Technology and Economic Development in the Republic of Korea. It details the results of Korea’s investments in nuclear infrastructure and human capacity development. Winning recent bids for US $20 billion (possibly $40 billion) in nuclear power plant contacts in the UAE and a research reactor in Jordan are the latest tangible outcomes of their efforts.

A few quotes:

…Over the past four decades, the Republic of Korea has become one of the world’s leading nuclear power countries, with 20 nuclear power plants in commercial operation at the end of 2005, comprising a total generating capacity of 17.5 GW(e). Increasing national participation in the nuclear industry has meant the steadily increased use of locally produced material and domestic staff resources. Meaningful national participation in nuclear power plant construction requires the existence of a capable construction industry; medium and heavy manufacturing including cement, steel, machinery and equipment and chemicals; as well as competency in other services such as civil engineering, quality assurance control and testing; and specialized manpower training including engineering and managerial skills. Domestic industries gradually became the main suppliers to and main contractors for the nuclear power programme…

The industrial sectors that benefited from nuclear power plant construction changed over time as the commercial nature of the construction evolved from imported turn-key plants to greater technological self-sufficiency. For example, before 1990, only two major industrial sectors received significant value added from nuclear power: electric power plant construction, and finance and insurance. After 1990, as the Republic of Korea approached technological self-sufficiency in nuclear power plant construction, the number of sectors affected increased to include primary metal products, general machinery and equipment, electronic and other electric equipment, and business services. The general machinery and equipment sector was the most affected for the years 1990 and 1995, reflecting large expenditures in this sector for new plants.

There are four nuclear power plant sites in Republic of Korea. Each of the host communities has benefited from the construction and operation of these plants. These benefits include tax revenues, financial contributions in terms of local expenditures by the plant for salaries, social contributions and investments, and infrastructure development.

External benefits, like the more familiarly known external costs, are those that the public incurs but that are not included in the cost of production (in the generation cost in the case of nuclear power) and hence are not in the price of the product (electricity). External benefits of nuclear power are thus in a sense by-products of nuclear power generation. Many external benefits often occur in the form of avoided external or even internalized costs. Nuclear power generation, for example, to the extent that it replaces thermal generation, significantly reduces the external costs of air pollution and GHG emissions associated with fossil fuel combustion.

Similarly, nuclear power generation creates benefits in terms of enhanced security of energy supply, and in terms of electricity price stability. Although private investors will make their decisions based largely on internalized costs, government investors and policy makers may wish to make and to affect decisions based on both internalized and external costs. Government decisions can include both public investment and regulatory decisions. With increasing pressure on the environment and human health, regulatory measures increasingly incorporate these externalities in such a way that the external costs are appropriately internalized, i.e., reflected in the cost of production. Governments can thus indirectly affect private investment choices.

No form of energy production or use is without an environmental impact on a life cycle basis. This is true for all energy chains: from extracting resources, building facilities, and transporting material through the final conversion to useful energy services. The traditional air pollutants associated with fossil fuel combustion are principally sulphur dioxide (SO2), nitrogen oxides (NOx) and suspended particulate matter (PM); GHG emissions from fossil fuel combustion include most notably CO2 and methane (CH4). Trace elements and heavy metals, like arsenic and mercury are also associated with coal combustion. Nuclear power plants emit virtually none of these air pollutants associated with fossil fuel combustion. Hence, a major environmental benefit of nuclear power is a significant avoidance of the costs associated with both air pollution and GHG emissions.

These avoided external costs can be difficult to quantify and convert to monetary values; any valuation process remains subjective, and results vary across countries. Despite the uncertainties and the national differences in valuation of externalities, however, several major studies have sought to estimate the external costs of air pollution associated with different electricity generating technologies. Perhaps best known is the ExternE project (providing global and standardized assessments) sponsored by the European Union and Oak Ridge National Laboratory in the USA. A comparison is provided of the external costs estimated by ExternE over time and for different electricity generating technologies. [see report for graphical data]

…nuclear electricity generating costs are less sensitive to changes in fuel prices than are the costs of fossil fired generation. Although the benefits to the economy of the Republic of Korea of the opportunity for lower electricity prices from nuclear power were not estimated, it was noted that insulation from price volatility — another avoided cost — is a positive benefit of nuclear power. The trebling of uranium prices in 2006–2007 resulted in only a 6–8% difference in nuclear power generating costs, while a doubling of international fossil fuel prices translates into generation cost increases of about 35–45% for coal fired electricity and 70–80% for natural gas. Since the competitiveness of nuclear power depends in part on the economics of fossil fuel alternatives, such rising fossil fuel prices tend to improve nuclear power’s competitive standing.

Conversely, Australia opted not to pursue nuclear technologies at about the same time (~1970s). Based on public comments, there seems to be little chance of policy changes in the near future.

How has that decision worked out for us?

Thrust a spade into Terra Australis and you’ll probably be able to sell the contents. This has led to the development of a wombat economy (dig/sell). Our top 25 Exports in the fiscal year 2008/09 are listed below.

Rank, Commodity ($ billion, % growth from 2007/08)

1 Coal ($54.7, 123.9%) – Fossil Fuel
2 Iron ore & concentrates ($34.2, 66.9%)
3 Gold ($17.5, 42.7%)
4 Education-related travel services ($16.6, 22.7%)
5 Personal travel (excl education) services ($11.7, -2.8%)
6 Natural gas ($10.1, 72.3%) – Fossil Fuel
7 Crude petroleum ($8.3, -14.0%) – Fossil Fuel
8 Aluminium ores & conc (incl alumina) ($6.1, 3.3%)
9 Aluminium ($5.3, -3.9%)
10 Beef, f.c.f. ($5.0, 14.4%)
11 Wheat ($4.9, 71.0%)
12 Professional services ($3.7, 12.2%)
13 Passenger transport services ($3.7, -11.3%)
14 Medicaments (incl veterinary) ($3.6, 1.8%)
15 Copper ores & concentrates ($3.6, -13.4%)
16 Technical & other business services (3.4, -2.6%)
17 Copper ($2.8, -13.9%)
18 Refined petroleum (2.8, -23.3%) – Fossil Fuel
19 Business travel services ($2.7, -0.4%)
20 Passenger motor vehicles ($2.7, -20.8%)
21 Alcoholic beverages ($2.6, -6.9%)
22 Other transportation services ($2.4, -5.7%)
23 Meat (excl beef), f.c.f. ($2.3, 14.1%)
24 Telecom, computer & information services ($2.1, 12.1%)
25 Wool & other animal hair (incl tops) ($2.0, -19.2%)

With respect to our technical / industrial capacity, what does Australia manufacture that significantly contributes to our economy via large scale exports? Where is there evidence of sustained technological innovation or engineering excellence (large production volumes at sustained high quality and competitive cost)? Apparently, not much. Removing services, agricultural products, basic and raw materials leaves:

14 Medicaments
18 Refined petroleum
20 Passenger motor vehicles
21 Alcoholic beverages

Looking beyond our wombat like export tendencies, the Australian economy is heavily service oriented. Professional and Technical Services ranks very high in the value added list of Australian business sectors. Examine Australian business data (MS Excel) from the Australian Bureau of Statistics; not much requiring cutting-edge global technology leadership or robust industrial capacity; not much to counter the points made by Adi Paterson.

Australia is a country with many people who 'know', whereas the Koreans are a people who 'do'. Coincidentally, humanity stands at the dawn of a period in our collective history where an unprecedented amount of complex and highly technical work needs to get 'done'. With 40 years of demonstrated nuclear expertise, Korea seems well positioned to take advantage of a sizable opportunity.


  1. The export list reveals some connections and contradictions. I think Australia should cap coal exports and reduce them by 3% a year to help wean other countries off carbon. Aluminium embodies a large amount of mostly coal derived energy. WA iron ore meets Newcastle coking coal in steel mills overseas making them complementary commodities. An import list would reveal large amounts of oil and finished fuel. Gas now exported as LNG could one day replace that as well as provide peaking domestic electrical power. Note that the UK is short of gas this week when they once thought they had plenty.

    Therefore I suggest Australia's exports contain some own goals in emissions terms plus some short sighted giveaways.

  2. Thanks for another good comment John.

    Of course... I should have included our imports to complete the picture. That list is below with the same format as in the post (Rank, Commodity, ($ billion, %change)):

    1 Personal travel (excl education) services ($18.4, 13.8%)
    2 Crude petroleum ($14.5, -13.8% - Fossil Fuel
    3 Refined petroleum ($12.2, 1.4%) - Fossil Fuel
    4 Passenger motor vehicles ($11.6, -23.0%)
    5 Gold ($11.5, 51.7%)
    6 Freight transport services ($9.4, 5.2%)
    7 Medicaments (incl veterinary) ($7.4, 13.5%)
    8 Telecom equipment & parts ($7.3, 8.3%)
    9 Passenger transport services ($6.1, -16.3%)
    10 Computers ($5.9, 6.3%)
    11 Goods vehicles ($5.0, -18.0%)
    12 Technical & other business services ($4.9, 19.2%)
    13 Charges for intellectual property ($3.5, 0.7%)
    14 Civil engineering equipment & parts ($3.4, -13.7%)
    15 Professional services ($3.3, 46.3%)
    16 Monitors, projectors & TVs ($3.0, -3.0%)
    17 Prams, toys, games & sporting goods ($2.9, 24.2%)
    18 Measuring & analysing instruments ($2.9, 11.5%)
    19 Business travel services ($2.9, -7.6%)
    20 Pumps (excl liquid pumps) & parts ($2.8, 65.8%)
    21 Furniture, mattresses & cushions ($2.8, 10.6%)
    22 Electrical machinery & parts, nes ($2.5, 8.8%)
    23 Vehicle parts & accessories ($2.4, -8.4%)
    24 Telecom, computer & information services ($2.2, 13.7%)
    25 Manufactures of base metal, nes ($2.2, 15.5%)

    As expected, our imports are heavily populated with finished / manufactured goods – several of them on the higher end of the technology spectrum.

    3 Refined petroleum
    4 Passenger motor vehicles
    7 Medicaments (incl veterinary)
    8 Telecom equipment & parts
    10 Computers
    11 Goods vehicles
    14 Civil engineering equipment & parts
    16 Monitors, projectors & TVs
    17 Prams, toys, games & sporting goods
    18 Measuring & analysing instruments
    20 Pumps (excl liquid pumps) & parts
    21 Furniture, mattresses & cushions
    22 Electrical machinery & parts, nes
    23 Vehicle parts & accessories
    25 Manufactures of base metal, nes

    But look at number 13, Charges for intellectual property. I interpret this as $3.5 billion annual penalty for Australia outsourcing our innovation.