Europe's Nuclear Exit Strategy

By: Andrew_McKillop

At this time in April 2012 the nuclear industry has springcleaned its rhetoric and is making predictable rearguard action, claiming it isn't dead yet. What almost any honest observer will say is that just one more Fukushima type disaster will totally seal the fate of nuclear power, relegating the nuclear industry back to only the domains of weapons, medicine, engineering and research. As the Japanese government is obliged almost daily to up the estimate of costs that it and taxpayers will have to bear for the Fukushima disaster - the latest estimate is for a total of around 11 trillion yen to 2020 - Japan moves further to a probable complete exit from nuclear power. The costs were simply too high, like the risks which are perceived by public opinion as far too high.

Japan, with 54 reactors, had the world's third-largest civil power reactor fleet until March 2011. Replacing their output with LNG and oil has been possible, despite the costs and the national post tsunami emergency conditions of 2011, but the chances are now high that Japan will borrow inspiration from Germany, and also plan a total shift away from nuclear power. The German plan for massively shifting away from fossil and nuclear energy, the Energiewende, is as former vice chancellor Joshka Fischer says a risky plan, but the plan is politically decided, multi-layer, and includes technology and science research, and even social engineering inside it.

In the same way that Japan has been prepared to pay the world's highest prices for LNG shipments and has increased its oil demand by 440 000 barrels a day, Germany has engaged spending that far exceeds the narrower definitions of its Enegiewende.

The German plan has acted like uranium and naturally fissioned. Easy to criticize on economic grounds, energy transport and trading grounds and even technology and industrial grounds this ignores the political and social dimension. Until as late as December 2010 the Merkel government was handing out 10-year life extensions for nuclear reactors owned by Germany's big power companies, led by EOn and RWE, in the exact same way these extensions are, or were handed out in other "mature nuclear" countries. But the Fukushima disaster hit a raw nerve at a very bad time for the nuclear industry in these countries: the looming shadow of how to dismantle and safely decommission these vastly dangerous power plants - and the killer question of who is going to pay for it ? Merkel's 180-degree turn on nuclear power in May 2011 surprised many, enraged some, but was one of the most popular political decisions she ever took.

QUIT NUCLEAR AND SINK OR SWIM

Using exactly those words, former vice chancellor of Germany, Joshka Fischer in a November 2011 talk at MIT explained that he fully admitted the nuclear exit decision added a whole new dimension to Germany's already ambitious, perhaps unattainable renewable energy plans for the 8-year horizon of 2020. Today, Fischer says, it is too late to turn back. To be sure, Germany's reactor fleet is far smaller than neighbouring France, whose 58 civil reactor fleet was only slightly ahead of Japan's in March 2011. Following the May 2011 German decision to exit nuclear, 8 of its 17 largest civil reactors, of more than 750 MW each, were immediately closed with the final shut down of the remaining 9 set for 2022 at latest. Replacing the approximate 22% of national power supply from Germany's largest civil reactors (the WNA lists a total of 40 power reactors in Germany, some very small), by the 2022 final exit date, may seem relatively easy but this goal is added-on to already existing Energiewende goals.

Decided in 2009, this mandates the replacement of as much as 50 000 MW of fossil-fuelled power production by 2020, with "something else", to achieve a 40% reduction in national CO2 emissions, relative to 2005 levels, by 2020. In Germany's case the something else will be windpower and some solar power, but the political and social components of the energy plan do not exclude cuts in total energy or power consumption. The German Greens and their far left allies have other policy plans and goals in a highly complex power political trade-off.

Corporate response in Germany was itself a real time exercise in trade-offs. The first response to the nuclear exit decision was total alarm, almost hysteria from RWE's chief Jurgen Grossman, nicknamed Nuclear Rambo who with the head of Deutsche Bank and the head of the even bigger power company EOn wrote an open letter to Merkel saying this was a terrible decision. By 29 March 2012 and not by coincidence, RWE and EOn have announced they are abandoning their previous plans to build and operate nuclear power plants in the UK. Reasons evoked include the costs and possible or probable lack of revenues as the UK, like Germany massively ramps up its windpower capacity.

Drawing on rapidly mounting evidence in Germany, RWE and EOn, Vattenfall, EnBW and others have found that renewable electricity and fossil electricity do not mix and match: building and operating large fixed-capacity fossil plants with high capacity utilization factors (hours operated per year at full capacity) is financially hazardous with a rising amount of wind-supplied electricity, provided with federal and lander obligations to purchase and distribute. Measured by electricity trading indexes such as "dark-light spreads", the cost and market price needed for fossil based versus renewable based power, the declining capacity utilization factors for fossil plants as renewables "ramp up" is a clear trend. This makes it unlikely Germany's utilities, and those of other EU states will decide to invest in high-priced, low emissions new fossil plant, despite their previously better economics.

This sets major risks for the Energiewende and similar national energy transition plans in other EU member states. Forced by the brute force of power production economics, the shift to renewable electricity will have to be maintained. In turn this implies extreme high costs of power transport system expansion and capacity raising - the pan European super grid - where again there is corporate resistance on simple and basic cost grounds.

NUCLEAR EXIT: THE SYMBOL OF ENERGY TRANSITION

Even in France, where decades of state brainwashing on the benefits of nuclear power had created an apparent public-and-political consensus in favour of the Friendly Atom, opinion polls now indicate a straight majority of French want to quit nuclear power. This opinion shift is powerfully aided by now much better information becoming available on the fantastic subsidies and support that have gone to French civil nuclear power since its very origins in 1957. Also due to the sheer size of the French nuclear power system and its age, decommissioning will produce impossible to hide impacts on the power bills of all consumers and users, in a context where new-build reactors to replace retired and dismantled reactors (in a process that can take 30 years for each reactor) are prohibitively costly, at admitted costs as high as 6500 euro per kiloWatt (close to US$ 9000 per kW) for Areva's "Generation III" EPRs. Under any scenario therefore, the percentage-nuclear of French electricity will fall, and have to be replaced by "something else".

The political and social dimension is already in play, in the French case. In March 2012, the Sarkozy outgoing government announced that previously voluntary nighttime cuts, from 1 am to 6 am, in all commercial and street lighting, from shops, offices, advertising hoarding and monuments to lighting on autoroutes, would be made mandatory in the future. These voluntary cuts, made during the peak cold of February 2012 in response to imminent risks of region-wide blackouts, were estimated as able to cut French peak power demand as much as 25%-33%, equivalent to about 30 000 MW. Public opinion responses to cutting the all-day, all-night and weekend lighting of offices and street advertising hoardings were judged highly positive by French politicians aware of how much 30 GW of new-build nuclear, or any other power capacity would cost.

While nuclear power had an undeserved and carefully manipulated image of "clean power", sold as a key solution to global warming and energy security (despite the EU27 states importing 97% of their uranium fuel needs !), coal-fired power has a terrible image and reality, except in the highest-cost and highest-tech "clean coal" plants with edge-of-technology capacities for wringing electrical kilowatthours from the 8 kWh of thermal energy in each kilogram of higher quality energy coal. This essentially leaves gas-fired plant and biomass burning plant as the only thermal-source power generating options. And in Europe, with pipeline gas at close-to oil indexed price levels of around $11 - $12 per million BTU from Gazprom, Statoil and Sonatrach (Russia, Norway, Algeria), or LNG imports from Qatar and other exporters at about the same price level, the cleanest fossil option of gas-source electricity is unable to compete with windpower - when the wind is blowing.

The result in Europe is already clear: gas-fired power plant owners and operators are shutting down their capacity and exiting the business or delaying new-build decisions, as they adapt to the de facto rise of windpower capacity, and (for them) the slowly emerging twin menace of solar PV capacity growth. Currently with totally different economics, much more expensive than windpower, solar PV new-build decisions have the short-term benefit of extreme manufacturing overcapacity concentrated in China and Germany, relative to global market absorption capacity, that have driven down the price of solar arrays to below-cost, as little as $1500 - $2000 per kW. This overcapacity is high, but on industry trends as late as midyear 2011, the industry could have attained 70 GW of annual output by 2014. The number of economically competitive non-nuclear options has therefore grown alongside the growing number of non-fossil options.

ROUND TWO: REAL WORLD ENERGY TRANSITION

Usually ignored by (or even unknown to) many European clean energy boomers, the upstream policy driving the member state renewable energy programmes, the REAPs, sets out to limit European dependence on imported coal, gas - and oil. Hidden behind the global warming rhetoric, plans for cutting European CO2 emissions "by 100% before 2050", as proclaimed by Denmark's political leadership, for example, heavily imply a total abandonment of all fossil fuels - including oil. As at present, no member state REAP has any serious plan for replacing oil, and politicians are left to talk around the subject by "evoking" all-electric car fleets at some conveniently far-distant time, for example 2050. Staying with Denmark, its large amount of national revenues sourced by producing and exporting oil can be set against its proclaimed desire for a world that no longer uses oil.

The global outlook for gas supplies, due to large stranded gas finds and the probable or possible transplant of the US shale gas boom to other continents are for major growth and rather certain falls in prices as gas is de-indexed from oil. Conversely, coal prices may rise to a certain extent from current levels around $100 -$150 per ton, outside the US whose cheap coal exports are growing, while solar PV and windpower capital costs continue falling.

The key point however is that replacing gas- or coal-fired and nuclear electricity with "something else" does not save oil, it only changes the electricity generating mix. In Europe this is particularly real: oil-fired power production has a folkloric image, dating from before the 1980s, despite non-centralized and private generating capacity based on oil remaining quite large. Economizing on imported gas and coal, like economizing on imported uranium may be good for the morale, and can shave trade deficits to a certain but very small amount: EU27 coal and gas imports presently cost about 125 billion euro/year, to compare with EU27 GDP of about 12 400 billion euro/year. Removing coal or gas from the generating mix in fact and in reality has little to do with either economic or strategic security.

Real world energy transition, in Europe, is already in operation in the flagship sector of electric power, for the reasons sketched out above, driven by the "pure economics" of renewables becoming cheaper than fossil-fuelled power production sources, but subject to high variability of supply. How the economy adapts to this is finally as much a political as economic question, but the economic transformation effects of energy transition are at present almost ignored. When the ultra sensitive question of oil replacement is seriously addressed, however, the transformational effects of energy transition will become very evident, and therefore political.

The external and international scene will most certainly not leave the Europeans with an open playing field stretching quietly to 2050. Global oil supplies are very tight and menaced by civil strife and political-origin cutoffs in the Middle East and Africa, and even possibly Russia. The near-term agenda for energy transition therefore certainly includes oil-saving and oil substitution, in a widened process where the political and social dimension becomes harder to ignore and obligatory to include.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

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