Turkey to Scrap Nuclear Plant Deal With Japan Due to Ballooning Costs

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** Turkey project is ending with an “amicable divorce.”

** Building an advanced coal plant with reduced carbon dioxide emissions appears to be among the proposals on the table.

BE2C2 Report (Dec 5, 2018) — Japan’s Mitsubishi-led public-private consortium is set to abandon a Turkish nuclear power project that had been touted as a model for Tokyo’s export of infrastructure, Nikkei reports.

The delayed project’s construction costs have ballooned to around $44 billion, nearly double the original estimate, making it difficult for lead builder Mitsubishi Heavy Industries and its partners to continue with the plans.

“We cannot accept this,” a Turkish government official told representatives from Mitsubishi Heavy Industries, when presented with an estimate of costs of the project in March.

The increase was due to heightened safety requirements in the wake of the 2011 meltdown at Japan’s Fukushima Daiichi nuclear power plant. The recent fall in the Turkish lira has also contributed to the cost increases.

The Japanese and Turkish governments had agreed in 2013 on the project, to build four reactors in the city of Sinop on the Black Sea. Initial plans had construction beginning in 2017, with the first reactor coming online in 2023.

Mitsubishi Heavy submitted the revised cost estimate to the Turkish government in a late-July report but no compromise could be reached with the Turkish government on financing terms, as well as prices for the electricity generated by the plant.

Despite the nuclear plant’s cancellation, the Japanese government intends to continue support for Turkey’s energy sector.

Details remain to be settled, but building an advanced coal plant with reduced carbon dioxide emissions appears to be among the proposals on the table.

Japan’s Prime Minister Shinzo Abe, left, and Turkey’s then-Prime Minister Tayyip Erdogan shake hands after agreeing to deepen cooperation in nuclear power generation in Istanbul in October 2013.

The decision to cancel the project comes as a blow to Japan’s nuclear industry, which is looking for avenues for growth overseas as it becomes increasingly unlikely that a new plant will be built at home post-Fukushima.

It has been making effort to line up more overseas projects aimed in part to maintain the scale of the country’s nuclear power industry, as well as its skill in related technologies.

In 2017, global investment toward building new nuclear projects plunged roughly 70% year on year to $9 billion, according to the International Energy Agency. With safety costs rising, nuclear has grown less competitive with other forms of energy.

A number of aging Japanese reactors are set to be decommissioned soon. Meanwhile, new nuclear projects have hit a standstill in the face of deep public wariness.

Japanese reactor builders, with the support of the government, have been  pursuing business abroad. But with the demise of a Japanese-led public nuclear power project in Turkey underscores the predicament faced by Japanese reactor builders, as orders dry up overseas on top of a long drought at home.

A Japanese government source cited by Nikkei said that the Turkey project is ending with an “amicable divorce.” Japan was continuously compared to Russia and China, from which Ankara also buys nuclear technology, but at a lower price. “The price gap was too large,” a Mitsubishi Heavy executive said. The Turkish lira’s recent plunge played a role as well.

But the reality facing Japan is grim. For a land poor in natural resources such as oil and gas, nuclear power generation was Japan’s golden child. Long considered a leader in technology, Japan has over 400 companies related to the industry.

(The original articles appeared in Nikkei Asian Review)

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