Coal, Gas, or Nuclear: Asia’s Inconvenient Energy Choice
Mark C. Thurber
This working paper considers the potential for natural gas and nuclear power to displace coal in key Asian and Pacific Rim countries and explores the policy levers that could enhance fuel switching.
Because of its wide availability, low cost, and relatively modest infrastructure requirements, coal is the dominant fuel in Asia for nontransportation uses, and Asia is the world’s dominant consumer of coal. However, burning coal causes air pollution problems and is a major contributor to climate change. Renewables and energy efficiency have an important role to play in helping the world move away from coal and other fossil fuels, but over the next several decades, Asia’s carbon dioxide emissions from the energy sector will be a stronger function of the competition between coal, natural gas, and nuclear. Public skepticism about nuclear power has driven countries like Japan, Germany, and Indonesia to pursue policies that comparatively favor coal, whereas public opinion in other countries like China, South Korea, India, and the U.S. has been relatively more negative about coal, and thus their governments have had more scope to pursue nuclear. Even in traditionally pro-nuclear countries like China and South Korea, however, cracks in support for nuclear energy may be emerging. Going forward, government policies on carbon pricing, natural gas pricing, and nuclear support will crucially shape the balance of coal, gas, and nuclear in the supply mix.
In much of Asia, nuclear power is already economically competitive with alternatives in theory; in practice, however, costs can escalate drastically due to regulatory delays, and only states with existing nuclear energy capability and mostly supportive public opinion, such as China and perhaps South Korea, have much prospect of significant growth in nuclear energy over the next two decades.
- In the U.S., low natural gas prices and competitive wholesale electricity markets mean that nuclear energy can only become economic with the advent of cheaper technologies.
- Price liberalization that allows gas prices to be determined by supply and demand rather than set administratively can encourage the development of additional gas supply in countries with significant gas resources.
- Imposition of a carbon price will help make natural gas, as well as of course nuclear, more competitive in Asia and also encourage the development of an energy system that is more resilient against future climate policy shocks.
- There is a strong logic for collaboration between nuclear startups in the U.S., where the regulatory climate for deploying new nuclear technologies is difficult, and pro-nuclear-power countries in Asia. That said, excessively loose regulation would pose risks for the entire global nuclear sector, which would be badly damaged by another accident.