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ACADEMIC PAPER SERIES
May 21, 2013
Reactor Race: South Korea’s Nuclear Export Successes
and Challenges
By Chen Kane and Miles A. Pomper
Abstract
South Korea hopes to become a major exporter of nuclear
plants. Its success in building up its domestic nuclear industry,
winning a $20.4 billion contract to build four nuclear power
plants in the United Arab Emirates (UAE), building Jordan’s first
research reactor, and providing training programs and best
practices to nuclear newcomer states indicates that established
vendors should take this determination seriously. If South
Korea draws the right lessons from its experience with the UAE
and builds upon its competitive advantages in the international
nuclear energy market—low cost, high credibility, high
performance, strong political backing, attractive financing, and
U.S technology at a low cost—it could record similar success in
the future.
Introduction
South Korea hopes to become a major exporter of nuclear
plants. Fresh off winning a highly competitive $20.4 billion
contract to build four nuclear power plants in the United Arab
Emirates (UAE), building Jordan’s first research reactor, and
providing training programs as well as sharing best practices
with nuclear newcomer states, the ROK in 2010 announced
that it would seek to export 80 nuclear reactors by 2030.1
Subsequently, the 2011 Fukushima nuclear accident in Japan,
the global financial crisis, and the limitations of South Korea’s
nuclear industry have forced the ROK to scale back these
ambitious objectives. Nonetheless, South Korea remains intent
on securing additional global reactor contracts in countries
such as India, Vietnam, Poland, Saudi Arabia, and South Africa,
as well as bigger markets such as China and the United States.
If South Korea draws the right lessons from its experience with
the UAE and builds upon its competitive advantages in the
international nuclear energy market, it could record similar
success in the future.
Nuclear Deals
The UAE selected in 2009 a consortium led by Korea Electric
Power Corporation (KEPCO), a South Korean government-owned
electric utility, for a contract to design and construct four APR1400s in Barakah. The APR-1400 design is an advanced version
of the Combustion Engineering (now Westinghouse) System
80+. Shin-Kori Units 3 and 4, currently under construction in
Korea, will serve as the “reference NPPs” for Barakah 1 and 2.
Jordan has been collaborating with South Korea on building
Jordan’s first research reactor and training Jordanian personnel.
In March 2010, Amman signed a $130 million agreement with
South Korea to supply Jordan’s first nuclear research reactor. The
Korean Atomic Energy Research Institute (KAERI) and Daewoo
would construct the reactor at the Jordan University of Science
and Technology (JUST). The reactor is expected to be online
and operational by 2015. Jordan will receive 3.5 years’ worth
of fuel supply from South Korea and is looking to either secure
additional nuclear fuel from various international vendors or use
fuel from Jordanian uranium enriched abroad.2 South Korea has
agreed to finance most of the project, providing a $70 million
soft loan, which includes a feasibility study on environmental
Chen Kane and Miles A. Pomper are Senior Research Associates at the James Martin Center for Nonproliferation
Studies. Dr. Kane and Mr. Pomper’s paper is the fifty-eighth in KEI’s Academic Paper Series. As part of this program,
KEI commissions and distributes approximately ten papers per year on original subjects of current interest to over 5,000
Korea watchers, government officials, think tank experts, and scholars around the United States and the world. At the
end of the year, these papers are compiled and published in KEI’s On Korea volume.
For more information, please visit www.keia.org/aps_on_korea.
Reactor Race: South Korea’s Nuclear Export Successes and Challenges
Korea Economic Institute of America
1800 K Street, NW Suite 1010
Washington, DC 20006
www.keia.org
1
ACADEMIC PAPER SERIES
impact. The ROK also plans to establish a nuclear training and
technology center at JUST where Jordanian nuclear engineers
and technicians would be trained by South Korean experts.3
South Korea is also considered a leader in nuclear energy
training and human development. KEPCO International Nuclear
Graduate School (KINGS), established in 2012 by KEPCO in
cooperation with George Mason University, plans to enroll
foreigners as half of its student body, stating, “Raising talents
from potential export countries such as Turkey, Jordan, Vietnam
and Indonesia will produce valuable networks we need in the
future.”4 The 62 students accepted in 2013 came from fifteen
countries.5 Additionally, South Korean companies and agencies
such as KAERI, KINS, Korea Nuclear International Cooperation
Foundation (KONICOF), and Korea International Cooperation
Agency provide training for nuclear newcomers.
Of the two deals South Korea secured so far, the UAE deal is far
more significant in terms of its financial impact, as a symbol of
South Korea’s emergence as a global nuclear player, and the
precedent it sets for other potential nuclear deals. As such, it is
worth examining the factors that led to the UAE contract.
Why the ROK Won the UAE Deal and Lessons for
the Future
The ROK’s successful bid for the UAE contract can be ascribed
to political, technical, business, financial, and cultural factors.
Political Factors
The nuclear deal was not the first large contract the ROK won
in the UAE. The countries have been cooperating in strategic
sectors, including oil production, finance, and health care.
The close ties Korea has cultivated with the UAE in trade and
infrastructure projects were of great importance in winning the
bid. The UAE is the second-largest oil and natural gas exporter
to Korea, and the Emirates have become South Korea’s largest
export market in the Middle East.6
Moreover, the Korean government was adept at using various
policy channels to support the Korean consortium, including
leadership at the highest levels, including then-Korean President
Lee Myung-bak. That Lee was the former CEO of Hyundai
Engineering and Construction, a central actor in the Korean
consortium, added credibility to the diplomatic exchanges and
the Korean bid.
2
I t
i s
“Of the two deals South Korea secured
so far, the UAE deal is far more
significant in terms of its financial
impact, as a symbol of South Korea’s
emergence as a global nuclear player,
and the precedent it sets for other
potential nuclear deals.”
also not uncommon to add diplomatic “carrots” to a nuclear bid
to make it more attractive. In the South Korea case, in addition
to the nuclear deal, the countries also agreed to cooperate
on renewable energy, education, shipbuilding, information
communications technology and human resource development,
as well as the strategic storage of six million barrels of Abu
Dhabi oil in Korea. As part of the military cooperation, the
ROK military committed to provide two years of special forces
training to its UAE counterparts. The two countries will also
hold joint military exercises and exchange defense industry
technology and high-ranking military officials.7
South Korea’s close relationship with the United States and
Westinghouse’s participation in the Korean consortium also
played a key role. The UAE appreciated the fact that the South
Korean nuclear design is of U.S. origin and Westinghouse would
be involved in the project, making it difficult for the United
States, its primary security benefactor, to object to the deal.8
Technical Factors
With 23 nuclear reactors in operation, KEPCO is renowned
for having the highest “capacity factor”—the proportion of
time that the reactor is generating electricity—and the lowest
“unplanned shutdown” rate in the world, at only 0.3-0.5 times
per month compared to 3.2 times per month in France (based
on South Korean reports).9
South Korea also appealed to the UAE’s desire to initiate and
complete the project quickly, which not only shortens the time
until electricity would be available but also reduces construction
and financing costs—the primary cost-drivers in nuclear energy
production.10 Korean companies have proved themselves able
to build nuclear power reactors in a relatively short time and
follow a predictable schedule. South Korean engineers have
2
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Figure 1: KEPCO Consortium14
main criteria in awarding the contract to South Korea was the
ROK’s “commitment and detailed planning for human resource
development in the UAE in support of the development of a
sustainable, domestically-sourced nuclear energy workforce
that is dominated by competent national talent.”16 The ROK has
also been assisting the UAE with upgrading its quality assurance
standards and capabilities as well as training Emiratis both in
the UAE and in South Korea.
Financial Factors
developed methods to speed up construction through the use
of special quick-drying, high-quality concrete and management
techniques that allow tasks to be performed simultaneously.11
The overseas capacity of Korea’s nuclear industry will
undoubtedly be judged based on its performance in the UAE,
its first project outside of South Korea. While the APR-1400 is
a new reactor that has not yet been completed in Korea and
will have to be modified in order to comply with the regulatory
and geographic specificities of the UAE, so far construction
is on schedule, or even ahead of schedule, and Korea seems
confident it will complete the project before the deadline.12
Business Model
KEPCO and its core group of subcontractors (see Figure 1) have
worked together for years on the domestic Korean nuclear
power program using a model similar to the one that the UAE
is planning to implement. These factors compared favorably
with the lack of coordination between Areva and EDF, EDF’s
late inclusion into the bid, the high cost of EPR technology, and
the fact that Areva planned to outsource some aspects of the
reactor construction.13
In addition, while in the initial French bid construction and
operation risks were divided between Areva, TOTAL and GDFSUEZ, in the Korean consortium all these risks are borne
by KEPCO. This risk allocation puts responsibility on one
organization, it reduces the litigation risks in case of delays or
performance problems and increases the incentives for the
contractor to meet the project delivery objectives.
As a nuclear newcomer, the UAE was looking for a supplier
that would be willing and able to support local personnel
development with extensive training, human resources
development and education.15 According to the UAE, one of the
As part of the Korean deal, the Korean government attached
a letter of intent to the agreement to finance the project.
The financing package includes investments, direct loans and
external debt guarantees for the special purpose vehicle as well
as preferred loans for domestic suppliers.17 The 23-year deal
carries very low interest rates of 1.75 percent to 2.6 percent,
with full government guarantees on the various project risks.18
KEPCO’s profit is intended to come out of the payment for
the construction of the nuclear plant, a 60-year contract
for equipment replacements and potential equity interest.
Additional follow-on contracts for long-term operation and
maintenance of the Barakah plant, worth as much as another
$20 billion over 60 years, are being discussed with KEPCO and
other vendors. Moreover, while the UAE has not declared
publicly that it will standardize its nuclear reactor design and
choose ROK as the supplier of future reactors, a senior UAE
official indicated that this would be the case.19
The ROK has relatively low execution costs, a distinct competitive
advantage. The APR-1400s built in South Korea are the most
inexpensive nuclear reactors in the world (the overnight cost20 is
about 60 percent lower than that of the EPR in France and that of
the AP1000 in China).21 It is estimated that even after taking into
account the 10 percent cost of capital and the various adaptations
of the reactor design to fit the UAE unique circumstances, the
cost of the UAE APR-1400 came in only about 30 to 40 percent
above the declared cost of the APR-1400 under construction in
Korea—still a very attractive price.22
It is not surprising, therefore, that the price tag of the South
Korean bid was significantly lower than that of the other
bids. While it is unknown what the final bid was for each of
the proposals, it was reported that the South Korean price
was unmatched.23 The Korean low price was in fact criticized
within South Korea, with the opposition party claiming it was
Reactor Race: South Korea’s Nuclear Export Successes and Challenges
3
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commercially unviable and that future buyers would expect
similar terms.24
Cultural Factors
At least from the South Korean side, there is a feeling that
the two countries have similar historical backgrounds: both
have experienced a colonial period, both are newly developed
countries with “similar value systems,” and both have a concern
for the preservation of traditional “ethics and manners.”25 The
UAE leadership appreciated the fact that KEPCO formed a “war
room” in the second basement of its Seoul headquarters in
which 75-80 executives from the consortium coordinated the
proposal and sales push for more than seven months.26
Future Export Possibilities
How well will these advantages translate into other ROK
nuclear exports? Recently South Korean nuclear insiders have
acknowledged that the worldwide decline in nuclear reactor
demand after the Fukushima disaster and the global financial
crisis, as well as shortages of qualified personnel, mean a more
realistic expectation for South Korea to export ten nuclear
plants (which can contain several reactors) by 2030.
South Korea’s nuclear reactor exports will be shaped by the
broad pull of global nuclear demand, the demand of individual
potential customers, and how well South Korea stacks up
against competitors in meeting those demands. According
to the IAEA, 68 reactors are currently under construction in
thirteen countries.27 Of the seventeen reactors commissioned
over the past five years, twelve are located in Asia.28
Most nuclear plant customers choose to buy their plants
based on their political relationship with the supplier and
the economic criteria of reactor price (including financing),
scheduling, and quality. In the future, the key question for
South Korea is whether it will be able to meet these criteria
for future customers in the same way it did for the UAE in
the 2009 deal. For the economic criteria, two particular areas
of importance will be financing and the availability of key
resources needed to meet cost, scheduling, and quality goals.
On the political side, Seoul’s ability to maintain and improve
relations with the United States and with certain regional
players is likely to prove essential.
Reactor Price, Financing, and ROK Profit Margin. South Korean
4
nuclear insiders have said that the ROK does not expect to offer
as generous prices, and especially financing, to future customers
as it did to the UAE, with one terming the UAE deal “the golden
case that will not happen again.” Yet, other customers are likely
to seek to pay similar prices as the UAE deal, potentially placing
the ROK in a difficult position given the limits of its financial
resources. A build-own-operate (“BOO”) model would be even
riskier for Korea than the UAE financial conditions, and this
kind of business scheme has no proven record of success in the
nuclear sector. So far, only Russia has made such an attempt,
building four nuclear reactors in Turkey, but the arrangement
was pushed by the Russian government as part of a broader
energy cooperation agreement. Rosatom, as the implementer of
the project, is a reluctant participant, doubting the project could
prove profitable.
Resource Availability: Personnel. Another concern that could
prove an obstacle in future ROK export deals is a shortage of
sufficient Korean personnel given the number of domestic
reactors under construction and the need to staff the UAE plant.
It is estimated that KHNP alone will involve 415 to 1,798 people
in the UAE nuclear project between 2012 and 2020.29 According
to Park Goon-cherl, president of KINGS, “Korea is running far
short of high-skilled manpower for industrial use of nuclear
energy.”30 For future bids, the ROK would need to enhance its
personnel and likely need to partner with personnel from other
countries including Japan and the United States.
A crucial question will be the degree to which South Korean
exports will have to compete for personnel, financial, and
manufacturing resources with the construction of domestic
plants. Previously, South Korea planned to increase the nuclear
share of electricity generation to 59 percent by 2030. For this
purpose, five nuclear units are currently under construction
and four more units are planned to be completed between
2018 and 2021.31 According to industry experts, the new
government of President Park Geun-hye is unlikely to seek to
initiate the construction of additional nuclear power plants as
the presidential transition team prioritized ensuring nuclear
power plant safety. If the new administration decides to hold
off on initiating further construction of domestic nuclear plants
this could free resources for exports.
Safety. Following the 2011 Fukushima nuclear accident, South
Korea hosted safety reviews by both domestic authorities
and the IAEA at all of its operating reactors. As a result, the
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government has pledged an investment of $1 billion over the
next five years to further bolster nuclear safety.32 Nonetheless,
South Korea’s nuclear energy program has recently come under
scrutiny after several safety scandals, such as the discovery of
microscopic cracks in tunnels that guide control fuel rods and
forgery by eight companies of 60 quality and safety certificates
for 7,000 parts of “non-core” components used in two reactors
between 2003 and 2012.33 During 2012 the country’s nuclear
reactors experienced temporary unplanned shutdowns more
than fifteen times and in December 2012, due to maintenance,
other glitches and the fraud investigation, seven of South Korea’s
23 nuclear reactors were closed, and the heads of KEPCO and
KHNP resigned.34 While Emirati officials assessed that the UAE’s
nuclear plants are “unlikely to be affected by the safety issues
dogging Korean reactors,” safety, ethic, and organizational
culture problems will certainly have to be seriously addressed
by the South Koreans to reassure potential future clients.35
Political Factor—the US link. As noted above, the ROK’s
links to the United States, both politically and commercially
were important to winning the UAE deal. The connection to
Westinghouse provided a testament to the quality of ROK
reactors for the UAE which took a risk in becoming the first
buyer of the ROK’s nuclear power plant exports. Politically,
the U.S. connection allowed the UAE to avoid offending its
primary security benefactor and provide a U.S. company with
a piece of the economic pie.36 This indicates that the ROK may
have a better shot at winning deals in those countries that
enjoy similar strategic relationships with the United States
such as Saudi Arabia. This is particularly important for the
ROK because its major competitors have a more global reach
and can offer greater security or other “carrots” while South
Korea is considered a “middle power” in global terms.
At the same time, however, it leaves South Korea vulnerable
to any disruption in the U.S.-ROK nuclear relationship. In April,
South Korea skirted but didn’t eliminate this threat when it
agreed to a two-year extension of the current bilateral civil
nuclear agreement which had been set to expire in March
2014.37 Assuming that the agreement is approved by the two
countries legislatures, it means the countries will have two
more years to try again to reach agreement on a new nuclear
cooperation agreement.
The decision to extend the agreement is very important to
South Korea’s ability to cut export deals over the next three
years. In addition, a failure to reach an agreement could have
had major implications for both the South Korean and U.S.
nuclear industries: South Korea is dependent on U.S. nuclear
material and technology while many U.S. reactors are built with
Korean components. An inability to reach an agreement could
also have been perceived as a major blow to the alliance.
The key stumbling block in the talks has been South Korea’s
desire that the U.S grant advanced consent to enrich and
reprocess (pyroprocess)38 “U.S. origin” nuclear fuel. U.S.
law since the late 1970s has sought to discourage nuclear
Nonproliferation Treaty (NPT) non-nuclear-weapon states
like South Korea from engaging in such “alteration in form or
content,” which can produce fissile material (enriched uranium
or plutonium) that can be used either in nuclear weapons or
civil nuclear fuel.
Leaving aside the domestic justifications ROK mentioned for
reprocessing and enrichment,39 one factor some South Korean
technical specialists offer for the program is their belief that
if the country adopted pyroprocessing for handling its own
nuclear fuel it could then supply the reprocessing service
to other countries, bolstering its reactor exports or at least
enabling KEPCO to avoid the deep discounting that it was
forced to offer in the UAE. Such a service, however, is unlikely
to be viewed by ROK politicians as politically viable. It is Seoul’s
difficulties in finding appropriate locations to store or dispose
of its own spent fuel which have generated some of the ROK’s
interest in pyroprocessing. This political opposition is likely to
be even higher in highly nationalist South Korea when it comes
to accepting foreign spent fuel for reprocessing. And the service
is only likely to prove attractive to other countries, however,
if South Korea was willing to accept the high-level waste that
would remain after pyroprocessing—a political non-starter in
the ROK.40
Some ROK officials are also interested in enrichment as a
nuclear export component to reap both direct profits from
selling enrichment services and perceived additional profits
from being able to offer more of a “full-service” package when
it sells nuclear reactors.41 Notwithstanding whatever domestic
benefits Korea would reap from such an enrichment capability,
Reactor Race: South Korea’s Nuclear Export Successes and Challenges
5
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South Korean investments in a domestic nuclear enrichment
capability make little commercial sense. South Korea would
likely find it difficult to compete with established enrichment
suppliers who can add additional centrifuges at a much lower
cost than building whole new facilities with indigenous ROK
technology (Japan has struggled for years to build a domestic
enrichment capacity). Nor have the existing suppliers expressed
a willingness to transfer technologies to the ROK, even if they
could maintain control. In addition, outside of some former
Soviet clients who initially had little choice but to buy all frontend services bundled together —uranium mining, conversion,
enrichment, and fuel fabrication— utilities prefer to strike
separate deals for each service in order to obtain the best price.
Not to mention the global enrichment market is a much smaller
market in any case than the nuclear reactor market.42
While the extension decision does not solve the fundamental
disagreements between the two countries on pyroprocessing
and enrichment, it does buy time. Negotiations are reported
to resume as early as June. Yet, even under a successful
negotiation of a new agreement, South Korea is still likely to
chafe at some elements of U.S involvement. In particular, the
U.S. government is still likely to have a stronger say over ROK
nuclear power plant exports than some ROK proponents of
“nuclear sovereignty” may like.
KEPCO formed a consortium with Westinghouse and its
Japanese partner Toshiba Power Systems because there are
technologies that South Korea has not mastered and some
technologies that are patented by those companies. The
inclusion of U.S. components and technology in the plants and
the fact that commercial-scale light-water reactors (i.e., APR1400) Korea plans to exports are based on a Westinghouse
design means that U.S. approval is required for such re-export
under sections 123 and 131 of the Atomic Energy Act.43 In
addition, Westinghouse would likely need to seek Part 810
Authorization (named after the relevant section of the U.S.
code) from the U.S. Department of Energy and other U.S.
agencies before it and its employees can conduct nuclearrelated business abroad.
The re-export of major U.S.-origin nuclear reactor components
may also require the ratification of a nuclear cooperation
agreement between the U.S. and the importing country. Such
a requirement may prove a challenge, at least with regard to
6
new nuclear aspirants, until the U.S. decides whether to include
obligations to forgo enrichment and reprocessing in future nuclear
cooperation agreements. It would also prove problematic for
ROK future nuclear export if the U.S.-ROK cooperation agreement
was to expire. Any uncertainty and potential delay as a result of
an expired nuclear cooperation agreement would undoubtedly
be a major source of concern to future Korean customers.
Conclusions
Analyzing the reasons that the UAE has chosen South Korea
as a supplier for the first four nuclear units highlights several
advantages the ROK enjoys. First, South Korea has developed
a distinct competitive advantage in terms of low cost, high
credibility, and high performance. Second, South Korea
sacrificed some of its potential profit margin to pass on its low
costs to the customer and make the deal happen. In addition, it
has benefited from strong political support from its government
and president, and the deal included attractive financing. Third,
South Korea provided U.S technology at a low cost and closely
cooperated with Westinghouse, preventing any rupture in the
UAE’s relations with its key security benefactor.
So far, South Korea has signed nuclear cooperation agreements
with 27 states.44 But based on South Korea’s competitive
advantages, it is fair to conclude that its most likely prospects,
with the lowest risk factors, are in the Middle East—with lesser
possibilities in Southeast Asia, South Africa, and even the United
States (if it secures U.S. license approval for the APR-1400).
As the UAE experience shows, the Middle East looms as a
particularly attractive market for South Korea. Like the UAE,
several other countries in the region are faced with growing
electricity demand and want to limit the potential economic and
environmental costs of using fossil fuel for power generation,
and are engaged in, or seriously considering, the development
of civil nuclear power. In the Middle East, the main nuclear
energy program after the UAE’s will be Saudi Arabia, with
plans to generate 17.6GW of power progressively by 2032. In
December 2011, the Saudi government announced it would
invest more than $100 billion in the construction of sixteen
nuclear power plants.45 Even if only some of these investments
materialize, Riyadh is clearly looking at an ambitious program
where financing will not be a decisive factor and is a country
where U.S. ties could prove helpful.
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In addition, the ROK has proven experience and prominence in
running and operating mega projects in this region, especially
in the energy sector. Korean construction companies have
played a leading role in new infrastructure—including
quality assurance, desalination and grid upgrades—in many
Middle Eastern states. Indeed, in 2012 South Korean firms
dominated six of the top ten EPC Middle Eastern oil, gas, and
petrochemicals contracts, and Doosan is leading numerous
thermal water desalination projects in the region.46 The fact
that South Korea understands and operates successfully in
Middle Eastern cultures is a great asset and much appreciated
by most governments in the region. This could work to South
Korea’s advantage in securing future nuclear deals.
The experience South Korea will gain from adapting its APR1400 to the specific security and geographic characteristics of
the UAE,47 as well as providing training, quality assurance and
grid upgrade support, will provide South Korea with another
competitive advantage over potential competitors. This will
further strengthen South Korea’s existing advantages such as
low cost, high credibility, high performance, strong political
backing, and attractive financing.
When discussing future Middle Eastern contracts, especially
with oil and gas suppliers, it is important to note that
winning the UAE nuclear deal, even with a very small profit
margin, proved profitable for South Korea in the long
term when considering the multiple contracts other South
Korean companies won as a direct or indirect result of the
main agreement. Trade between the two countries grew 24
percent to $22 billion in 2011, with UAE exports to Korea
rising by 21.2 percent in 2011 and Korean exports to the UAE
growing by 32.4 percent.48 Another benefit the ROK secured
as a result of the nuclear deal is a more stable supply of oil
and gas. For example, the two countries agreed to store six
million barrels of oil from Abu Dhabi in Korea and to enable
Korea to use it in emergency situations. South Korea was
also able to significantly increase (from 5 to 15 percent)
of the ratio of its oil and gas imports secured through
development and production by Korean firms.49 It is easy to
envision similar benefits from other Middle Eastern gas and
oil producers in the event that South Korea wins nuclear bids
in these countries.
Recommendations
First, reaching agreement on a long-term nuclear cooperation
agreement with the U.S. is crucial for future ROK nuclear
exports. Seoul should use the two-year grace period granted
by the extension to carefully weigh its strategic interests. Any
uncertainty in the future and potential for delay related to the
status of the 123 agreement would undoubtedly be a major
source of concern for future costumers. On the other hand,
focusing on particular technologies such as enrichment or
pyroprocessing should be seen as less important than finding a
“win-win” solution where the two countries can work together
to address Seoul’s core concerns: short-and medium-term
storage for spent fuel, sufficient fuel supplies for South Korea’s
nuclear fleet, and enhancing South Korea’s nuclear export
potential. In particular, the ROK and U.S. should continue to
build on recent initial discussions on how the U.S. can support
future ROK nuclear exports.50
Second, instead of emphasizing enrichment and pyroprocessing
as attractive options for future customers, South Korea should
strengthen its competitive advantages. South Korea will be better
off expanding into using nuclear energy for desalination, as well
as offering training and maintaining qualified and experience
engineers, managers, technicians and sales specialists. It could
invest in the construction of additional centrifuge capacity at
existing enrichment plants in return for guaranteed output.
Third, to minimize Korean reliance on the U.S., the ROK should
consider promoting Small Modular Reactors and KAERI’s
“SMART” small nuclear reactor for export to small countries:
smaller reactors that are cheaper, easier to manage and more
adaptable to weak transmission networks and, therefore, better
address the needs of many newer nuclear clients. For example,
the SMART reactor design is not based on American technology,
and it was certified by the Korea Institute for Nuclear Safety
(KINS) in July 2012.51 This reactor would allow countries with a
limited electricity network to access nuclear energy and could be
particularly attractive to some countries in the Middle East due
to its advantages in thermal heating, desalination, and lack of
U.S.-origin technology.
Fourth, Korea should concentrate on counties that can afford
nuclear energy, especially those in the Middle East that can
provide the ROK with greater energy security. So far, South
Korea has been targeting emerging economies that have limited
Reactor Race: South Korea’s Nuclear Export Successes and Challenges
7
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financing capacity, and that have made supplier-provided project
financing a key criterion; however, a more viable scheme for
Korea would be to offer financing through export-import banks.
In the long run, a market reform of domestic electricity tariffs
in the ROK (that is ending substantial domestic subsidies to
industry)52 would be helpful to support KEPCO’s financial capacity
for overseas tenders and permit it to offer to take equity shares
in future nuclear export tenders and thus reinforce the financial
position of the Korean consortium.
Last, while it is so far unclear whether the safety scandals
South Korea experienced last year will hamper its efforts to sell
nuclear technology globally, quick and decisive action will be
important to ensure that it does not damage the ROK’s image
as a leading nation in nuclear quality and safety.
Should Seoul follow these recommendations, South Korea has
the opportunity to make its nuclear reactor exports to the UAE
the first of many.
Endnotes
1
“South Korea Seeks to Boost Reactor Exports,” World Nuclear News, January 13, 2010, www.world-nuclear-news.org/NP-South_Korea_seeks_to_boost_
reactor_exports-1301104.html.
2
Ibid.
3
“Seoul to Help Jordan with Nuclear Infrastructure,” World Tribune.
4
“Korea Creates International Graduate School on Nuclear Power Studies,” January 1, 2010, http://larouchepac.com/node/12984.
5
“2013 Students’ Entrance Ceremony held,” KINGS News, March 4, 2013, http://kings.ac.kr/eng/viewBoard.do?field=1102&boardIndex=372.
6
“UAE strengthen trade relations with South Korea,” Albawaba (Amman), March 19, 2012, http://www.albawaba.com/uae%E2%80%99s-trade-relations-southkorea-grow-stronger-417509.
7
“UAE/South Korea: Agreement on oil exploration,” British Embassy Abu Dhabi, March 2012, http://www.ukti.gov.uk/export/countries/asiapacific/middleeast/
unitedarabemirates/premiumcontent/272660.html.
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This indirect support manifested in three aspects. The U.S. could have blocked the Korean bid as the Korean nuclear technology is still partly based on American
technology and needs to comply with U.S. nuclear technology export control laws but chose not to do so. Also, it seems the U.S. communicated to the UAE
its preference for an international tender (as opposed to an over-the-counter agreement) which favored the Korean bid. Last, the U.S. might have directly
sought to support the Korean bid as a strategic choice. See Michel Berthélemy and François Lévêque, “Korea nuclear exports: Why did the Koreans win the UAE
tender?,” April 2010, CERNA Working paper 2011-04, http://hal-ensmp.archives-ouvertes.fr/docs/00/58/53/16/PDF/Korea_CernaWP_version.pdf.
9
Korea’s N-Power Plant 30-Year History, Industrykorea.net, http://www.industrykorea.net/BCS_Com/Project/PDF/Old/%EC%9B%90%EC%9E%90%EB%A0%A53
0%EC%A3%BC%EB%85%84%EC%98%81(%EC%B5%9C%EC%A2%85).pdf and, Chang Min Lee and KunJai Lee, “A Study on Operation Time Periods of Spent Fuel
Interim Storage Facilities in South Korea,” Progress in Nuclear Energy 49, 2007, pp. 323-333.
10
According to the Nuclear Energy Agency (NEA), China, Japan and South Korea have successfully built new power plants in less than five years. See NEA, Nuclear
Energy Today, 2nd edition, 2012, p. 84, http://www.oecd-nea.org/pub/nuclearenergytoday/6885-nuclear-energy-today.pdf.
11
Charles Ferguson, “The Implications of Expanded Nuclear Energy in Asia,” in Ashley Tellis eds., Asia’s Rising Power and America’s Continued Purpose, Strategic
Asia 2010-11, Nuclear Energy and Nonproliferation, The National Bureau of Asian Research, 2010, http://www.nbr.org/publications/strategic_asia/pdf/
Free/10252012/SA10_Nuclear.pdf.
12
It is reported South Korea will receive a $200 million bonus if completed construction before the deadline. See April Yee, “United Nations watchdog hails UAE’s
Dh73 billion nuclear vision,” The National, Jan. 30, 2013. The bonus amount is mentioned in Michel Berthélemy and François Lévêque, “Korea nuclear exports:
Why did the Koreans win the UAE tender? Will Korea achieve its goal of exporting 80 nuclear reactors by 2030,” CERNA Working Paper, April 2011, http://halensmp.archives-ouvertes.fr/docs/00/58/53/16/PDF/Korea_CernaWP_version.pdf.
13
Berthélemy and Lévêque, “Korea nuclear exports: Why did the Koreans win the UAE tender?”.
14
Kepco, Investor Presentation, Feb. 2012, https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDkQFjAB&url=http%3A%2F%2Fc
yber.kepco.co.kr%2Fkepco_new%2Feng%2Fcommon%2Fdownload.jsp%3Ffolder%3Dinvestor%26file_in%3D478308731617011_0%26file_out%3DInvestor_
Presentation(Feb2012)_ENG_FV.pdf&ei=EagnUZqlDfKy0QG0wYHoCQ&usg=AFQjCNFaGCDc3GVbWhBb2gX7eyV_KzhJHw&bvm=bv.42768644,d.dmQ
15
UAE assessed it would need 900 to 1,000 “preoperational” staff by 2016 and a permanent staff of some 2,200 in 2020 when the four reactors are scheduled to
be operational. See Charles Ebinger (Ed.), Human Resource Development in New Nuclear Energy States: Case Studies from the Middle East, Policy Brief 12-02,
November 2012, http://www.brookings.edu/~/media/Research/Files/Papers/2012/11/nuclear%20energy%20middle%20east%20banks%20massy%20ebinger/
nuclear%20energy%20middle%20east%20esi.pdf.
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ACADEMIC PAPER SERIES
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“UAE Selects Korea Electric Power Corp. Team as Prime Contractor for Peaceful Nuclear Power Program,” WAM Emirates News Agency, December 27, 2009,
http://www.wam.org.ae/servlet/Satellite?c=WamLocEnews&cid=1261832658351&pagename=WAM%2FWAM_E_PrintVersion.
17
Korea Eximbank, entrusted to support the export of national strategic industries, has provided in the past $2.1 billion in project financing for ten power plants
in six different countries including Saudi Arabia and Jordan. See “Shareholders’ composition for UAE project to be finalized in Q1,” Korea Eximbank Press
Release, March 8, 2010, http://www.korea.net/NewsFocus/Policies/view?articleId=80538.
18
“EMEA: UAE - ENEC delay,” November 21, 2012, http://www.nuclearenergysummit.com/TR/media_news.asp, and “ENEC still waits for Barakah nuclear approval,”
ProjectFinance.com, February 5, 2013, http://www.projectfinancemagazine.com/Article/3151481/ENEC-still-waits-for-Barakah-nuclear-approval.html.
19
Hamad Alkaabi, “UAE Nuclear Energy Program Overview,” August 9, 2010, http://www.jaif.or.jp/ja/wnu_si_intro/document/2010/alkaabi_uae_program_
si2010.pdf.
20
The construction cost of a nuclear power plant is based in part on the “overnight cost” of construction. This is the cost of construction if such could be done
overnight and includes the sum of the basic equipment and construction labor for the plant’s power system, and ancillary expenditures (e.g. cooling facilities,
onsite buildings and land). See Michael T. Hogue, “A Review of the Costs of Nuclear Power Generation,” February 2012, http://www.bebr.utah.edu/Documents/
studies/Nuclear_Report_Final_Web_7Mar2012.pdf.
21
According to the World Nuclear Association (WNA), nuclear overnight capital costs in 2010 for APR-1400 in South Korea was $1,556/kW, CPR-1000 in China
$1,748/kW, AP1000 in China $2,302/kW; VVER-1150 in Russia $2,933/kW, ABWR in Japan $3,009/kW, Gen III+ in US $3,382/kW, EPR in France $3,860
and $5,863/kW in Switzerland. See WNA, The Economics of Nuclear Power, updated March 2013, http://www.world-nuclear.org/info/Economic-Aspects/
Economics-of-Nuclear-Power/#.UVT2V5OG3oI.
22
A rise of the cost of debt from 5 to 10 percent leads on average to a 10 to 15 percent increase in the project overall costs. Based on the calculation in
Berthélemy and Lévêque, “Korea nuclear exports: Why did the Koreans win the UAE tender?,” pp. 5-8.
23
“’Lauvergeon: French lost UAE bid because of expensive EPR safety features’,” Nucleonics Week, Jan 14, 2010, and Stanton, “Nuclear bid to be industry norm,”
and “UAE to Become the First Arab State to Use Civilian Nuclear Power”, ISN Security Watch, March 4, 2011, http://oilprice.com/Alternative-Energy/NuclearPower/UAE-To-Become-The-First-Arab-State-To-Use-Civilian-Nuclear-Power.html.
24
Lee Tae-hoon, “Senior DP official says President lied about UAE nuclear deal,” Korea Times, Feb. 16, 2011, http://www.koreatimes.co.kr/www/news/
nation/2011/02/119_81531.html.
25
Daniel Bardsley, “Nuclear link just the latest in UAE-South Korea ties,” The National, Aug 25, 2010, http://www.thenational.ae/news/uae-news/nuclear-linkjust-the-latest-in-uae-south-korea-ties#ixzz2AEl7hs2u and interview with representatives from the Asan Institute, August 2, 2012, Washington D.C.
26
Ki-Chan Park and Françoise Chevalier, “The Winning Strategy of the Late-Comer: How Korea Was Awarded the UAE Nuclear Power Contract,” International
Review of Business Research Papers, Vol. 6, No. 2, July 2010, p. 225 and 234.
27
Key Statistics, IAEA Bulletin, March 2013, http://www.iaea.org/Publications/Magazines/Bulletin/Bull541/54104711616.pdf.
28
Alexei Arbatovand and Vladimir Dvorkin (eds.), Nuclear Reset: Arms Reduction and Nonproliferation, Carnegie Moscow Center, Moscow, 2012, http://
carnegieendowment.org/files/nuclear_reset_Book2012_web.pdf.
29
Jeng Ho Lee, “Capacity Issues for Korean Nuclear Industry – Supply Chain and Human Resources,” presented at Asan Institute Workshop on Korea as a New
Nuclear Supplier, South Korea, February 18, 2013.
30
“Korea Creates International Graduate School on Nuclear Power Studies.”
31
KHNP, Plant Status, http://www.khnp.co.kr/en/03000100.
32
Sangim Han, “South Korea to Invest 1 Trillion Won in Safety Check of Nuclear Reactors, Bloomberg, May 6, 2011, http://www.bloomberg.com/news/2011-0506/south-korea-to-invest-922-million-in-safety-check-of-nuclear-reactors.html.
33
“Another S Korea nuclear reactor shut down due to malfunction,” Platts, Jan. 17, 2013.
34
S’Korea Widens Nuclear Lapses Probe; KEPCO Chief Resigns, Ministry of Foreign Affairs, December 8, 2012, http://nga-abuja.mofat.go.kr/webmodule/
htsboard/template/read/legengreadboard.jsp?typeID=16&boardid=6162&seqno=687260&c=&t=&pagenum=1&tableName=TYPE_ENGLEGATIO&pc=&dc=&wc
=&lu=&vu=&iu=&du=.
35
Allan Jacob, “KT Exclusive: UAE nuclear team in S. Korea,” Khaleej Times (Dubai), November 15, 2012, http://www.khaleejtimes.com/kt-article-display-1.
asp?xfile=data/nationgeneral/2012/November/nationgeneral_November255.xml§ion=nationgeneral.
36
Westinghouse reportedly received 7 percent of the ROK-UAE deal, see “Korea needs foreign nuclear partners.”
37
United States-Republic of Korea Agreement for Peaceful Nuclear Cooperation Extension, Media Note, U.S. Department of State Spokesperson, April 24, 2013,
http://www.state.gov/r/pa/prs/ps/2013/04/207922.htm
38
The U.S. government considers pyroprocessing as a form of reprocessing. See, “U.S. Sees Pyroprocessing as Nuclear Fuel Reprocessing: Official,” Global Security
Newswire, April 5, 2011, http://www.nti.org/gsn/article/us-sees-pyroprocessing-as-nuclear-fuel-reprocessing-official/
39
See for example, Seong-won Park, “Why South Korea Needs Pyroprocessing,” Bulletin of the Atomic Scientists, 26 October 2009; Jun Bong-geun, “The ROK-US
Nuclear Partership for the Peaceful Use and Nonproliferation,” EAI-CSIS Workshop on US-ROK Cooperation for Global Nuclear Governance, 16 November 2012,
and Seongho Sheen, “Nuclear Sovereignty versus Nuclear Security: Renewing the ROK-US Atomic Energy Agreement,” Korea Journal of Defense Analysis, Vol.
23, No. 2, June 2011, pp. 273-288.
Reactor Race: South Korea’s Nuclear Export Successes and Challenges
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ACADEMIC PAPER SERIES
40
For background on South Korea’s spent fuel issues and the role of pyroprocessing see Ferenc Dalnoki Veress et al, The Bigger Picture: Rethinking Spent Fuel
Management in South Korea, Occasional Paper, James Martin Center for Nonproliferation Studies, February 2013. http://cns.miis.edu/opapers/pdfs/130301_
korean_alternatives_report.pdf.
41
See Kim Ji-hyun, “Seoul Considering Options to Improve Nuke Efficiency,” Korea Herald, March 30, 2010, http://biz.heraldm.com/common/Detail.
jsp?newsMLId=20090708000058.
42
Miles A. Pomper, “How to Unsnag US-South Korea Nuclear Negotiations,” Bulletin of the Atomic Scientists, 25 September 2012; Fred McGoldrick and Duyeon
Kim, Decision Time: US-South Korea Peaceful Nuclear Cooperation, Academic Paper Series, Korea Economic Institute of America, March 13, 2013.
43
Atomic Energy Act of 1954, as amended (P.L. 83-703), August 30, 1954.
44
U.S., Canada, Australia, Belgium, France, Germany, UK, China, Argentina, Vietnam, Turkey, Russia, Brazil, Czech Republic, Egypt, Chile, Romania, Ukraine, Jordan,
UAE, Kazakhstan, South Africa, India, Indonesia, Japan, Saudi Arabia and Finland.
45
“Saudi Arabia Aims to Build 16 Reactors: Official,” Global Security Newswire, June 2, 2011, http://www.nti.org/gsn/article/saudi-arabia-aims-to-build-16reactors-official/ and Atomic Energy for Peaceful Purposes, KA-CARE, http://www.kacare.gov.sa/en/atomic-energy-peaceful-purposes.
46
“South Koreans a dominant force,” Middle East Economic Digest, September 13, 2012, http://www.meed.com/sectors/construction/south-koreans-a-dominantforce/3150447.article.
47
For additional information on the adjustments, see FANR, SER Summary-CLA Barakah Units 1&2, Abu Dhabi, July 2012, http://www.fanr.gov.ae/En/AboutFANR/
OurWork/Documents/Final%20SER%20for%20Braka%20Units%201%20%202%20CLA-%20EXECUTIVE%20SUMMARY%20FINAL.pdf.
48
CNN, “South Korea and UAE: ‘Beautiful cooperation,” June 22, 2012, http://business.blogs.cnn.com/2012/06/22/south-korea-and-uae-beautiful-cooperation/.
49
Yoon Ja-young, “UAE deal bolsters Korea’s energy security,” Korea Times, March 13, 2011, http://www.koreatimes.co.kr/www/news/biz/2013/01/602_83036.html.
50
Yonhap, “US Agrees to Support S.Korea Export of Nuclear Power Plants,” April 19, 2013, http://nwww.koreaherald.com/view.php?ud=20130419000833.
51
Walter KIM, “Nuclear Safety Regulation in Korea,” Presented at Technical Meeting on Recent Licensing of New Nuclear Plants, Nov 7-9, 2012, Rio de Janeiro,
Brazil, http://www.abdan.org.br/download/encontro/coreia.pdf
52
See for example, US Energy Administration, “South Korea” analysis briefs, January 2013 http://www.eia.gov/countries/analysisbriefs/South_Korea/south_
korea.pdf,; “South Korea Increases Power Prices Second Time To Curb Demand,” January 9, 2013, http://www.bloomberg.com/news/2013-01-09/south-koreaincreases-power-prices-second-time-to-curb-demand.html.
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