BRAZIL: ECONOMICS OF THE NUCLEAR ALTERNATIVE

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06820800
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 8
• Document Creation Date: March 9, 2023
• Document Release Date: September 18, 2020
• Case Number: F-2017-01987
• Publication Date: May 12, 1977

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Brazil: Economics of the Nuclear
Alternative
This publication is prepared for regional specialists
the Latin America Division. Office of Regional
casional contributions from �thin' offices within
Comments and queries are welcome. They should
individual articles.
-- Approved for Release:
in the Washington community by
and Political Analysis, with oc-
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be directed to the authors of the
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Brazil: Economics of the Nuclear Alternative
Brazil is laying the foundation for a nuclear in-
dustry to meet its electric power needs when hydroelec-
tric potential approaches full utilization toward the
turn of the century. To reduce import dependence as
well as to exploit the substantial cost advantages of
nuclear power, Brazil hopes to achieve nuclear self-suf-
ficiency by establishing a complete domestic nuclear
fuel cycle.
The large investments needed may worsen Brazil's
balance-of-payments situation over the next decade or
SO; in the long run, however, establishment of a nuclear
industry will result in substantial savings of foreign
exchange. Without a nuclear program, real costs for
imported fuels would triple during the first decade of
the next century (and perhaps sooner), and Brazil's
dependence on imported energy sources would accelerate
rapidly.
Current Energy Situation
Imported energy now accounts for nearly 30 percent
of Brazil's total import bill and is the largest single
component of the huge current-account deficits suffered
in recent years. Imported energy, almost entirely pe-
troleum, supplied about 47 percent of total energy re-
quirements in 1976, up from 43 percent in 1970.
'Hydroelectric power, the major domestic energy
source, supplies one third of the economy's energy demand.
Total hydroelectric potential is estimated at about 150
million kilowatts (kw), of which 18.4 million kw had
been developed by the close of 1976.
About 55 percent of energy needs are met with pe-
troleum, more than 80 percent of which is imported at a
cost that exceeded $3.5 billion last year. Coal, half
of which is imported, supplies 4 percent of the energy
supply. The remainder is supplied by sugar cane bagasse
and charcoal.
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Projected Energy Consumption
by the Economy's Modern Sector
I I , 4
Imwon Tons' Wariade OM Equivalent ,t�
(.3 I _*
I 1.1500� '
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Projected Energy Requirements and Resources
Demand for electricity will continue to grow rapidly,
and the economy could require as much as 180 million kw
of electric power capacity by the turn of the century,
up from 21.8 million kw at the end of 1976. Hydroelec-
tric capacity is expected to reach only 110 million kw
by the year 2000, because its growth will slow steadily
after 1990 when potential near the main consumption cen-
ters will approach full development. Only about one
third of the total potential is in the central south,
where nearly three fourths of all electricity consumption
takes place. About two fifths of total potential is in
the Amazon region, too remote for economical transmission
to the large consumption centers.
While the country is stepping up fossil fuel use,
it plans to have only 15 million kw of conventional ther-
mal capacity by the turn of the century unless large
petroleum reserves are found. Although Brazil has fairly
large coal reserves, this resource has been neglected
because of its low heat and high sulfur and ash contents.
The government has increased its effort to find oil,
spending $400 million on domestic exploration last year.
compared with only $140 million in 1973. Moreover, Bra-
zil has broken a long-standing policy to bring foreign
oil companies back into domestic oil exploration.
The Nuclear Option
While policymakers are hopeful that major new re-
serves will be discovered they are turning to nuclear
energy against the contingency that oil discoveries will
fall far short of requirements. They are urgently seeking
to reduce Brazil's dependence on foreign energy sources,
and the nuclear option makes good economic sense because
of the relatively low cost of nuclear fuel compared even
with the current cost of fossil fuels. Should oil be
discovered in large quantities, Brazil would still be
interested in nuclear power for reasons of prestige and
because of its tradition of seeking the most advanced
technological solution to any problem.
The 1975 nuclear agreement signed with West Germany
is designed to meet Brazil's requirements for the period
through 19908 the first stage of the current nuclear
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development program. program. Under the accord, Brazil will buy
four 1,300 megawatt (NW) reactors with an option on four
more. Brazil will also receive a pilot uranium enrich-
ment plant that can be expanded to commercial scale, a
fuel fabrication plant, and a fuel reprocessing plant.
If the agreement is fully carried out, Brazil will have
10,000 NW of nuclear capacity by 1990, enough to meet
5 percent of the economy's energy needs.
Reported cost estimates for the West German agree-
ment range from $4 billion to $10 billion. Assuming that
Brazil acquires the full package�eight reactors and a
complete fuel cycle large enough to support them--we be-
lieve the total cost will approach $13 billion. The two
reactors already purchased cost $2.6 billion, of which
nearly $1.8 billion is foreign exchange cost to be financed
by a consortium of West German banks. The total cost for
eight reactors would be approximately $10 billion, and
the fuel cycle would add another $3 billion.
Brazil's known uranium resources are inadequate to
support its nuclear development plans. Official reserves
are estimated at about 26,000 tons of U308, only enough
to provide the first core and 10 annual reloads for the
8 reactors. Brazil's geology suggests that undiscovered
uranium may exist in significant amounts, however, and
the exploration now under way already has turned up
evidence that uranium deposits axe present at a number
of sites.
Implications for the Balance of Payments
During its early years, the nuclear energy program
could add slightly more to Brazil's foreign exchange
expenditures than would thermal power. in the longer
term, however, the nuclear option should greatly ease
energy import expenditures, as compared with conventional
energy sources.
The first 1,300 NW reactor--scheduled for completion
in 1983 under the West German agreement--will cost about
$1.3 billion, of which $900 million will be financed by
a group of west German banks. If this loan were amortized
over a five year period with interest at 7.5 percent
annually, total foreign exchange expenditures to finance
the reactor's imported components would be nearly $1.1
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billion. In In addition, the initial fuel charge, costing
about $80 million (at 1976 prices), and the first few
annual reloads, costing some $40 million each, probably
would need to be imported. Fuel imports gradually will
phase out, however, as Brazil begins to exploit its
domestic uranium resources and as the fuel cycle begins
to provide enrichment and fuel fabrication services.
Including capital costs for the fuel cycle, total foreign
exchange expenditures required for the reactor would be
approximately $1.6 billion, almost all of which would
be spent during the first 5 years of its expected 30-year
life.
If an equivalent conventional powerplant fired with
imported oil were built instead of a nuclear reactor,
foreign exchange costs over the 30-year period probably
would exceed $4.5 billion at 1976 prices. Costs for
imported conventional components probably would not exceed
$75 million; conventional plants cost less than nuclear
powerplants and Brazilian industry could supply more than
90 percent of an oil-fired plant. Fuel imports, however,
would cost about $150 million annually (at 1976 prices),
and these costs probably would continue indefinitely.
Foreign exchange savings per unit will increase as
additional reactors are built and as Brazilian industry
gradually expands its ability to supply reactor components.
By the late 1980s or early 1990s, Brazil probably will be
able to manufacture 80 to 90 percent of the components
for its new reactors. Unless large uranium reserves are
found, however, an expanding nuclear power industry will
require growing fuel imports. Nevertheless, barring a
radical change in uranium prices compared with those of
other fuels, uranium import costs would be relatively
small. Imported enriched uranium fuel for a 1,300 NM
reactor operating at 70 percent of capacity would cost
about $40 million annually at 1976 prices. Domestic en-
richment would cut this cost in half, and recycling the
uranium and plutonium contained in the spent fuel could
reduce it to as little as $14 million per year--about one
tenth the cost of the oil imports needed to generate an
equal amount of power.
Despite large foreign exchange savings per reactor.
Brazil's nuclear program may have little beneficial impact
on the balance of payments until after the year 2000, when
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the growth of hydroelectric capacity levels off. If nu-
clear power were not available to replace hydroelectricity,
however, the cost of energy imports (at 1976 prices) by
the end of the first decade of the next century would be
nearly twice the cost of fuel imports with a self-suf-
ficient nuclear industry�and perhaps considerably more.
Moreover, Brazil would depend on foreign energy sources
for 70 percent of the total energy supply by 2010. In
any event, continued dependence on imported conventional
energy would not be a feasible alternative if the rela-
tive price of oil and other fossil fuels rises prohibi-
tively.
�
The First FRG Reactor: Fordo Emboss RoperRum
Collated oda Cads at a Carreatlaord rawer /bat
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