EU Energy Policy Blog

There are two major drivers for renewed interest in nuclear power in many countries of the European Union: the need for secure electricity supplies and the need to reduce greenhouse gas emissions. Nuclear power is a very low source of greenhouse gas emissions, but even the most ambitious nuclear new build plans in Europe address only the issue of replace nuclear with nuclear rather than the more challenging policy issue: whether to decarbonize the European electricity system with nuclear power. European historical emissions have, of course, benefited from earlier investments in nuclear generation, but it is not clear that nuclear power will play a larger role than it has previously.

Eight of the twenty-seven member states of the European Union operate nuclear power stations. Together these supply roughly 30% of European Union electricity and roughly 15% of EU total energy. Several EU countries (including Ireland and Austria) remain resolutely opposed to nuclear power while others (such as France and Lithuania) are enthusiastic. The growth of the EU from 12 states to 27 has altered the balance of member state opinion in favour of nuclear power.

Concerns for global climate change have led to the European Emissions Trading Scheme and other policy measures that act in favour of nuclear new build by internalising a key externality and rendering nuclear power more cost competitive. Several measures, however, at a global, European and national level either continue to exclude nuclear power (e.g. the Kyoto protocol Clean Development Mechanism) or are reserved for renewables only (e.g. UK Renewables Obligation Certificates as a support measure for immature technologies). Present policy contains elements of research policy and international development policy that do not necessarily yield the most efficient policies for carbon reduction. More efficient carbon reduction policies would do more to favour nuclear power, but the need for carbon reduction is of course not the only pressure faced by governments.

Issues of electricity security differ greatly across the member states of the European Union. In Western Europe, history has provided a robust and flexible electricity system and market liberalisation is generally well advanced. For many countries in central and Eastern Europe, however, there are extremely high levels of dependency upon natural gas imported from Russia. These countries note with a keen interest the more assertive policies and strategies of the Kremlin and Russian energy companies. It is unsurprising that these same EU states are in many cases those most interested in new nuclear power programmes.

For the world as a whole the fuel of the future is coal – this presents enormous challenges to climate change policy. Generally worldwide nuclear new build is in competition with new pulverised coal plant. In the future there will be a competition with clean coal (e.g. Integrated Gasification Combined Cycle technology perhaps with Carbon Capture and Storage). Looking ahead there are signs that coal may return to the European mainstream with developments underway in Germany, the UK and elsewhere admitting the possibility of future carbon capture and storage. However, in Europe today the main generation choice is between new nuclear build and new investment in combined cycle gas turbine plant. This special choice is a consequence of Europe’s developed natural gas infrastructure and its concerns over excessively concentrated import dependency, especially in the Eastern EU.

In considering a technology choice between gas and nuclear one should note that, while it is true that modern nuclear power plants can operate flexibly and also that many combined cycle gas turbine plants operate as base load, generally nuclear power is much more likely to play a less flexible role than gas. This is primarily an economic rather than a technical matter owing to the more capital-intensive nature of the cost structure of nuclear generation.

It is unlikely that Europe will be able to “speak with one voice” on matters of energy policy in the next ten years and this is especially true of electricity generation mix and nuclear power. Formally all member states accept that the mix is a sovereign matter for each state consistent with subsidiarity principle. This is only tempered by a need formally to show sensitivity to the concerns of neighbouring states.

Nuclear Power policy is shaped by two regulatory pressures: the regulation of electricity markets and the safety regulation of a hazardous and politically contentious technology. While the benefits of a European energy market are widely recognised, progress on the question of pan-European safety regulation is much less developed. International project collaboration is emerging in Eastern EU Member States. These countries tend to highlight the benefits of such an approach to safety while some countries such as the UK note that the dominant approach to safety in Europe could be more efficient by being less prescriptive. In the UK, constructors are given signicficant discretion and flexibility in choosing how best to achieve the required levels of safety.

Economics is central to the future of nuclear power. It is important to note that nuclear power plants can probably be developed in a liberalized electricity market with no direct subsidy. This possibility is favoured by stable and adequate long-term carbon prices; sustained high oil and gas prices and regulatory approval for grid extension and reinforcement by monopoly transmission companies similar to that put in place to assist new renewables projects. Nuclear new build projects in Europe will continue to be consortium efforts led by large energy companies. We expect these companies to hold the economic risks themselves via “corporate finance” rather than by creating new businesses specially for the new build project, i.e. “project finance”. Once it is completed, the economic risk profile of a plant improves and structures beyond corporate finance would appear more favourable.

Nuclear energy was the first large-scale energy system to attempt to fully manage its wastes and its spent fuels. Two main approaches to fuel management remain and European countries adopt different approaches. For instance France strongly advocates nuclear fuel reprocessing whereas Sweden takes the view that spent fuel should be regarded as a waste for disposal. CESSA researchers continue to take a close interest in these matters. It is clear that while uranium yellowcake prices have risen steeply in recent years there is no immediate or medium-term prospect of fuel resource scarcity, nor do rising prices have much impact on the economics of nuclear build.

The proliferation of nuclear weapons rightly remains a major global concern. While there may be merit in European countries leading by example and removing highly enriched uranium and separated plutonium from their civil nuclear activities, it is important to note that all European Union countries are robust in their measures to prevent proliferation. As such, any European member state decision to expand nuclear power would not raise the risk of nuclear weapons proliferation in any direct way.

William J. Nuttall

N.B. The author would like to thank numerous colleagues from the CESSA collaboration, the University of Cambridge, DIW Berlin and those speaking at the first CESSA conference held in Berlin in June 2007 for advice and assistance. These individuals are too numerous to be listed here. The views expressed in this document formally should be regarded as those of the author only.

This entry was posted on Thursday, November 1st, 2007 at 10:47 pm and is filed under English, Nuclear Power. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.