Nuclear energy in the EU long-term strategy

Esa HyvärinenPosted by: Esa Hyvärinen
19.12.2018

Last week I attended a workshop organised by CEPS, a leading think tank and forum for debate on EU affairs, in Brussels. The workshop discussed assumptions that underpin the EU’s long-term energy decarbonisation scenario and the role nuclear might play in achieving the Union’s energy and climate policy goals. I also gave an industry view.

Based on several recent analyses and reports – IEA, IPCC, EU Commission, as well as those carried out by the industry (Eurelectric and Foratom) – it is clear that nuclear plays an important role in climate change mitigation. The role is significant already today and, based on those reports, it will either grow or at least remain the same. None of the reports suggest that the importance of nuclear would be diminishing.

This is based on nuclear’s ability to produce a large amount of CO2-free energy. As we expect electrification to move ahead in all energy consuming sectors, including heavy industries, this ability becomes valuable again. Most likely, the word “baseload” will return to the vocabulary of energy policy as quickly as it disappeared a couple of years ago, when “volatility” and “flexibility” took over.

If we take this as a starting point, what should we do to exploit the potential of nuclear energy? I think we should look at the full menu: competitiveness and long-term operations (LTO) of existing nuclear power plants and new builds.

  • Competitiveness

The past few years have been very challenging for nuclear companies. Wholesale electricity prices have been on the downward trend until recently. In the Nordic countries, the average price in 2017 was 40% lower than that of 2010. The low price level has been driven partly by economic downturn and partly by the oversupply caused by subsidies primarily for renewable energy sources.

Basic economics apply: when the supply increases and the demand remains stable, the price drops. At the same time the investment money put into the nuclear plants has almost doubled due to increasing safety requirements and ageing plants.

  • Long-term operations (LTO)

Based on Commission’s assessment, approximately 50 nuclear reactors out of the 126 currently in operation in the EU are at a risk of an early closure over the next ten years or so if the operators do not pursue LTO licenses. I would assume that the reactors to be closed based on political decisions are not included in that number. This in spite of the fact that IEA estimates nuclear LTOs to be the cheapest option to produce electricity on a levelised cost of electricity basis (LCOE).

  • New builds

In today’s world, anything that costs 6, 7, or 10 billion and takes 20 years to build – i.e. doesn’t generate income before that – is very difficult to finance. Therefore, if we wanted to see new nuclear plants – in addition to those six currently under construction in the EU – to be built, they would have to become cheaper and faster to build, and safer at the same time. They would also have to be better adapted to a more volatile power market where and when the market requires that capability. I know that in several countries nuclear power plants have developed their flexibility capabilities already, so it is doable. Also small modular reactors (SMRs) are moving from R&D projects to reality.

Exploiting the full potential of nuclear in decarbonisation

The EU Commission’s Clean Planet for All communication states that, ”By 2050, more than 80% of electricity will be coming from renewable energy sources. Together with a nuclear power share of ca. 15%, this will be the backbone of a carbon-free European power system.”

I was very happy to read this statement and I fully agree with it. It is easy to believe that it was not an easy task to push it through the Commission machinery. The question is how to make this happen.

Time to transform the nuclear industry

Nuclear companies themselves hold many things that can be used to improve the competitiveness of the nuclear industry. We should be more active and open in looking for best practises from other nuclear operators and other safety-critical industries. Digitalisation, fresh and modern leadership skills, and change management should find their ways to the nuclear industry too – it is clear that the world has changed and the nuclear industry must change too.

All nuclear power plants are somewhat unique. Harmonised safety and licensing requirements, standardised designs, equipment and components are lacking. This increases costs. To address this challenge, Finnish nuclear license holders, together with the national regulator, have started a project to develop a standardised licensing and qualification process for the systems and components used in nuclear power plants.

This is the start of a long journey. If we want to create real impacts, we must take it to an international level – starting with the EU and the close involvement of the Commission – as well as supply companies and regulators. It is a modest start, but we need to start somewhere because the status quo is not sustainable.

What should the EU do?

To start with, I would like to quote the Commission’s strategy: We need ”to offer clear, long-term signals to guide investors, to avoid stranded assets, to raise sustainable finance and to direct it to clean innovation efforts most productively.” ”The Action Plan on Sustainable Finance will help connect finance with the EU’s agenda for sustainable development.” And further: ”Environmental taxation, carbon pricing system and revised subsidy structures should play an important role in steering the energy transition.”

”Today, the costs of some of the advanced low-carbon energy carriers and technologies remain high, and their availability is limited. A massive research, coordinated and innovation effort, built around a coherent strategic research and innovation and investment agenda is needed in the EU within the next two decades to make low and zero-carbon solutions economically viable and bring about new solutions not yet mature or even known to market. In this context, a forward-looking research and innovation strategy should be guided by zero-carbon solutions that have the potential to be deployed by 2050.”

While there are issues, like standardisation and harmonisation, that are nuclear-specific to a certain extent, in most general policies the nuclear industry is asking for equal treatment with other low-carbon technologies: similar treatment in the power market, where the ETS should be the main tool to drive decarbonisation; similar treatment in terms of taxation and abolition of nuclear-specific taxes; similar access to financing as other low-carbon technologies; similar approach in research, development and innovation policies to develop new nuclear concepts to meet the demands of the future.

I know that nuclear is a controversial issue in the EU, but it should not prevent us from making reasonable decisions. The Commission’s Clean Planet for all [http://europa.eu/rapid/press-release_IP-18-6543_en.htm] and other recent reports hopefully create a good basis for working together and making sure that the nuclear industry can contribute to decarbonisation with its full potential.

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