Macroeconomics for decision making assignment 2 individual policy assessment and advocacy

In Vietnam, hydropower and thermal facilities powered by coal and gas produced nearly 85% of the country's energy in the first half of 2022; however, capacity cannot be expanded given hy

® RMIT UNIVERSITY VIETNAM

Macroeconomics for Decision Making

Assignment 2:

Individual Policy Assessment and Advocacy

power plant projects in Ninh Thuan, with Russia

and Japan assisting as major capital lenders

However, after 7 years of sanction and

development, Vietnam suspended the construction

of the two nuclear power plants in 2016 due to

budget constraints and safety concerns stemming

from the 2011 Fukushima nuclear disaster (Nguyen

and Ho 2016) Yet, with the anticipation of 10-12%

rising demand annually, Vietnam now to fulfill

both its electrical needs by 2030 and COP26's

commitment to emit net-zero CO2 by 2050

(Agalwar 2022)

1 Policy explanation:

Nuclear energy is a type of energy that is derived

from splitting uranium atoms inside nuclear

reactors, releasing heat that is converted to

electricity from steam turbines (ONE 2023) Like

thermal plants, it is a non-renewable "baseload"

electrical source, indicating that it can run

continuously, unlike other renewable energy

sources, maintaining a stable power system and

lowering the possibility of frequent blackouts or

power shortages (WNA 2021) Since nuclear

power generates electricity through nuclear

reactions, it is considered as a low-carbon energy

source as it emits no greenhouse gases and has a

high energy density, thereby lowering its carbon

footprint (EIA 2022) In Vietnam, hydropower and

thermal facilities powered by coal and gas

produced nearly 85% of the country's energy in the

first half of 2022; however, capacity cannot be

expanded given hydroelectric reservoirs have

reached dead water levels and coal muning

production has dropped dramatically (Statista

building 5 nuclear power plants is a large- capacity, sustainable approach to diversifying Vietnam's electrical structure and growing future demands

IL Potential economic impacts: Assuming that the project costs USD10 billion (Ninh Thuan power plant) and takes 10 years to complete, consequently, its construction will boost Vietnam's GDP by at least USDIbn a year, or

roughly 0.24% of its 2022 GDP, til finishing

(APEC 2019; WorldBank n.d.j) According to Ministry’s Draft PDP8, the total investment capital for power plants in the 2021-2030 period will be about USD 128.3 billion which refer to the government spending (ITA 2022) Significantly, nuclear power plants contribute either directly or indirectly to employment growth In 2019, every direct job created in the nuclear business delivers 3.2 employment in the EU while generating

€507bn in GDP, €3.2bn in yearly family income,

€1.05bn in tax revenues, and €18.1bn in trade

surplus (WNN 2019) Accordingly, constructing nuclear power plants may boost investment,

consumption, government spending, NX, and long-

run production variables Generally, it promotes Vietnam's ageregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS)

Ill Upsides:

a Consistent and reliable resources The main advantage of this approach is that it it

generates a low-carbon, reliable and consistent

supply of electricity while diversifying the

produced by nuclear, France's electricity baseload

is the most stable and high-capacity in the world,

and its carbon-emission level has continuously

decreased in contrast to the growth in electricity

output (EIA 2023)

b Production efficiency

Moreover, the adoption of techniques in

construction and development of nuclear plants

will contribute to scientific progress and

innovation in other related sectors for the

preservation of foreign collaboration and

production efficiency Importantly, the efficiency

of nuclear power has been shown globally The use

of nuclear energy can generate two times more of

the electricity production from thermal and

hydropower plants, and three times more than

wind and solar plants (ONE 2021) Until 2023, 32

nations have operational nuclear plants and over 30

others are in the process of developing or

launching nuclear plants (IEA 2023) Globally,

nuclear power produced more than 413 gigawatts

of energy, which was 10% of the world's total,

and is expected to rise to 15% by 2030 (HC 2023)

IV Downsides:

a Technical constraints

The construction and operation of a nuclear plant

require a high degree of technical proficiency as

well as a well-developed infrastructure; thus,

Vietnam's nuclear engineering and scientific

capacities would need to be strengthened (Vinatom

2021) Nonetheless, despite extensive security

measures and surveillance, technical accidents

such as radioactive discharges are still probable

Nevertheless, the Fukushima facility utilized

outdated technology (Gen ID, which, combined

3

radioactive leakage catastrophe The two nuclear power facilities that Vietnam intends to construct will use cutting-edge Gen III+ technology, which protects them from all conceivable calamities (VOV 2022)

b Government debt Given the substantial investment expenses

including materials, labor, and specialized

equipment, building a nuclear energy plant could constrain government debt

Specifically, a 1,100-megawatt nuclear plant will cost $6bn to $9bn (TNN 2022) Government bonds, loans, and public-private partnerships are potential debt-increasing financing possibilities Long-term financial obligations for operations, maintenance, and decommissioning impose further burdens on the federal budget Thanks to the financial budget with Russia and Japan and the government's disposable development budget, Vietnam's nuclear power plant capital expenditure

is substantial (WNA 2022) Therefore, the construction have no impact on the national debt level

V Personal position:

Conclusively, I am completely in favor of the nuclear energy development strategy considering it can supplant functions of both thermal and hydroelectric power plants However, the average duration of construction for a nuclear plant is seven years, and each one costs approximately $10 billion (Le 2014) Therefore, the construction of five reactors will cost Vietnam roughly five times

as much money and effort Currently, Vietnam should begin by completing the construction and commissioning of two nuclear power facilities

experience of Japan and Russia (Lang 2022) Before contemplating the construction of new power plants, Vietnam will need to conduct a comprehensive reevaluation of the efficacy, dependability, and function of nuclear energy in its electricity infrastructure If Vietnam can conquer nuclear technology, its long-term strategy will entail the development of smaller-capacity nuclear facilities, which require less time to build and are more effective in terms of regional electricity

TECHNICAL DOCUMENT

Feasibility

Despite the fact that nuclear capital cost can be up to twice as expensive as other energy sources for the same electricity generation, nuclear electricity price may be very competitive with other energy sources due to its ability to generate 10 times more electricity, have a twice longer duration, and emit fewer greenhouse gases (WNA 2022) This indicates that nuclear power plants' running time is significantly longer than other energy sources Additionally, the Vietnamese government claims that the construction will not have any negative effects on national power security or public debt (Pham 2019) Therefore, the price of electricity produced

by nuclear can be even cheaper than other sources, and these initiatives are financially viable

ctric

Figure 1.Comparison of various power plants TEA 2021)

Economic Impact

Each metric ton of uranium can generate the same amount of electricity as 90 tons of coal, 17,000 cubic feet of natural gas, and 149 gallons of oil (NEI n.d.) Since coal accounted for 70%

of overall output, Vietnam will import 50-83 million metric tons of coal each year to fulfill energy demand from 2025 to 2035 (Raj 2022) As a result, Vietnam's import coal value will be

$5bn per year With 210,000 tons of uranium storage and 16 power reactors, 16,000 tons of which may be used directly to create power Accordingly, when nuclear facilities are operational, the government will also be able to minimize coal and fossil fuel imports, increasing its net

With its low operating costs and efficient electricity production, the nuclear power plant will increase supply of electricity in the short-term (SRASI->SRAS2) In the long-run, nuclear energy plants with a longer operating lifespan and low-carbon emissions will improve electricity production and improved energy security (LRAS1->LRAS2) Importantly, the increase in coal prices can have an effect on inflation, particularly in nations where coal is a significant energy source (IEA 2021) However, nuclear energy has been implemented as an instrument against inflation, making nations less vulnerable to fluctuations in the cost of fossil fuels Thus, it can stabilize the electricity price and protected consumer from the soak of electricity bills (AD1-

>AD2) As previously stated, nuclear plants are able to boost all AD, AS, and LRAS and shift them rightward, reflecting an upsurge of both short-run and long-run output

Longer operational lifespan/

low emisSions/ consistent

resources/ higher energy security

> LRAS shift rightward

Price

LRAS: LRASs Low operating cost/ increases

level electricity capacity with

abudant resourees/ quick generation

> SRAS shiftrightward

Lower price votality/

government encouragement

> ADshift rightward

Y 1 Y, 2 Output

« E1: Equillibrium pointofelectricity market before building nuclear power plant

e E2: Equillibrium pointofelectricity marketafter nuclear building nuclear power plant

Figure 2: AD-AS model of nuclear plants’ effect on electricity market in Vietnam

Figure 2 shows that LRSR1, SRAS1, and AD1 all moved to the right at the same pace Resultantly, the country's short and long-run production went Y1->Y2, albeit the price level remained at P This entails that nuclear power plants will improve Vietnam's GDP and manufacturing capacity without generating notable inflation

Location:

Locations of the first two nuclear plants in Ninh Thuan, Vietnam (Le 2016)

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fi Se Ninh Phước XS

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' Nuclear Power Plant 1

™ SMB (PhuocDinh, Ninh Thuan)

Sea Figure 3: Location of Nuclear Power Plants in Ninh Thuan (adapted from Tuoitre website 2016)

Nuclear reactor’s process:

intake from lake or river

nucleai

2 2013 Eneyclopascfa Britannica, Inc

Figure 4: Nuclear reactor’s process (adapted from Britannica website 2023)

NUCLEAR

GEOTHERMAL 2 LR

Capacity Factor sao 6% ait

by Energy

Source in 2020 HYDROPOWER

Source: US Energy Information Adm:

er 40.2%

ENERGY | nuctean enency WIND

A>

Figure 5; Capacity Factor by Energy Source in 2020 (adapted from ONE website 2021)

® - Aøarwal V (14 October 2022) ‘Charting a path for Vietnam to achieve its net-zero goals’,

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nuclear.org/info/inf02 html

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ECONOMIC NEWSLETTER: NUCLEAR ENERGY IN VIETNAM

10

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%20investment%20capital%20for, will%20be%20for%20power%20grids

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%20create%20electricity