This article excerpt is taken from the forthcoming issue of Renewable Energy Focus magazine (March/April issue). To register to receive a digital copy click here.
In the past few weeks, two of Europe’s biggest utilities, E.ON and RWE announced their decision to pull out of Horizon Nuclear Power, the joint venture with plans to build nuclear power stations in the UK – at Wylfa, Anglesey, and Oldbury-on-Severn, near Bristol.
The plants were set to form two of the 8 nuclear power stations that comprise the UK’s 16GW new nuclear power programme, leading some in the renewable energy industry to hope that new nuclear power – long seen as a threat to the development of renewables – might be stopped before it had started.
In addition to long lead times, and long payback times the two companies blamed difficulties raising finance for the projects, as well as financial difficulties arising from the forced closure of their nuclear power portfolio in Germany.
Both firms were hit hard by Angela Merkel’s decision to force the closure of seven of Germany’s 17 nuclear power plants in the wake of the Fukushima nuclear disaster in March 2011, with the rest set to follow by 2022.
A tough year for nuclear
A little over 13 months ago, nuclear power was looking at a renaissance all over the world. Now, in addition to difficulties with nuclear in the UK and Germany’s phase out, Belgium, Austria and Switzerland are facing nuclear closures, and Italy’s nuclear renaissance has been nipped in the bud. In China, where half of the planned nuclear power stations are set to be located, Fukushima has prompted massive delays and questions about the safety of nuclear power, a pattern that is repeated in the U.S., India, and in many other countries across the globe.
So what is the difficulty for nuclear? According to Michelle Davies, Head of Clean Energy at law firm Eversheds LLP, many problems for renewable developers in Europe stem from the recession, with has caused policy changes with resulting uncertainty, which in turn has led to investor uncertainty in some cases.
“A significant capital investment is required but there needs to be certainty within the regulatory regime to providing the support,” she told Renewable Energy Focus. “And because most European jurisdictions are in some form of downturn there is significant political pressure in a way that there hasn’t been before.”
Emmanuel Fages, head of European energy research at French bank Societe Generale, agrees, but believes that nuclear closures have only been accelerated in countries where they would probably have happened eventually anyway: “Public acceptance is really a problem in Europe,” he said. “That’s why in these countries, when public opinion was against [nuclear] it leads to closure.”
A perceived problem with nuclear is in relation to the waste generated which further erodes the public perception of nuclear. Meanwhile Fukushima has added to the fear of nuclear in the public consciousness – and has added significant costs as nuclear developers are faced with heightened safety requirements.
But, said Fages, although delays are inevitable, the Fukushima disaster is unlikely to shut down nuclear plants in most areas of the world, especially in fast growing market like China.
“It’s a slow down. It’s a slower renaissance, but except in Japan and some European countries, it won’t lead to abandonment of nuclear,” he said.
Davies agrees. “[Nuclear] will happen, because it has to happen,” she said. “If you look at it logically, many jurisdictions, including the UK, have got energy security issues in addition to carbon reduction commitments. We need a sustainable energy mix and nuclear has to be part of the solution.”
She added: “If you listen to the experts, most energy security issues are expected to kick in in about four to five years’ time. As we start to approach that deadline, in about two to three years’ time we may start to see a change of opinion so that then in 4-5 years’ time when things become more challenging, we’ll probably see more activity. My sense, and that of my colleagues, is that the nuclear industry will revive. But it’s not going to happen in the short term.”
In the UK, the announcement on Horizon follows a decision by Scottish and Southern Energy (SSE) in September last year to sell its 25% stake in NuGen, the consortium that is planning a new nuclear facility in Sellafield, west Cumbria. The company said it was pulling out to focus on renewable energy, prompting the question – can both renewables and nuclear prosper together?
In the UK in particular, this question hangs in the balance.
The UK Government has refused to “pick winners” in its long term energy policy, preferring to see which of nuclear, renewables, and carbon capture and storage (CCS) bears out in a battle to cut costs and attract investment.
Indeed, the Government’s preoccupation is with competitive costs (that could stall capital-intensive nuclear power before it has begun) rather than any policy signals one way or another.
The UK’s Electricity Market Reforms are still yet to be finalised, and while continued financial support for renewables seems certain, the taboo of financial support for nuclear has not been confirmed – or ruled out. For the renewables sector and the green lobby alike, the prospect of nuclear subsidies has prompted fears that nuclear power could monopolise financial resources.
As a result, when E.ON and RWE announced the end of their participation in Horizon, the UK renewables industry took the opportunity to speak out publicly on nuclear power for the first time.
“This decision speaks volumes,” said Gaynor Hartnell, the Renewable Energy Association (REA)’s chief executive. “In comparison with nuclear and carbon capture and storage, renewables win hands down. Renewable energy is cheaper, proven and reliable. It assists with security of supply, creates more jobs, the fuel doesn’t run out, and there is no need to find permanent storage for wastes -which must be isolated indefinitely.”
Hartnell went on to accuse the Government of adopting a “lukewarm” approach to renewables, and giving out “mixed messages” on energy technologies:
“We understand the logic behind not placing winning technologies on a higher pedestal than other technologies, but giving the winners less support than the other technologies makes no sense whatsoever,” she said.
But according to Davies, nuclear is vital to ensure that a high penetration of renewables is possible, whilst keeping carbon emissions down.
“The safest and most beneficial energy policy is one which ensures that there is a good mix of different technologies,” she said. “So paradoxically renewables could suffer, as a result of the nuclear programme not being built, because the other options are coal and gas. Gas could be expensive, and there’s clearly a carbon concern with coal. Accordingly, there may not be a clean stable supply of power to provide the back up at times when the renewables sector is unable to provide that stability.”
But for Fages, the development of nuclear in the UK, at least, has a direct bearing on the development of renewables, not least because the two are similar in set up – not competitive without subsidies, and therefore competing for financial support.
He said: “You have two non-competitive energies here. And so if you have less nuclear, it leaves more space for renewables to penetrate. And maybe they can, if there are some public schemes to foster the penetration of this kind of non-competitive industries. They will be more able to benefit from these public funds.”