In a leaked draft document obtained by Energy Post, the European Commission outlines the investments in the EU nuclear industry that it believes are needed out to 2050. The document, originally announced for last year, but off the table again for February, paints a challenging picture for the European nuclear industry. €450-550 billion will have to be spent on new plants and lifetime extensions, costs of decommissioning and waste management are high, competitiveness is a challenge and nuclear’s share in the energy mix will decline from 27% today to 17-21%. Sonja van Renssen investigates.
The “Communication for a Nuclear Illustrative Programme” or PINC is a non-legislative document “periodically” produced by the European Commission, as required by the Euratom Treaty (article 40) that “provides an overview of investments in the EU for all the steps of the nuclear lifecycle”. The last PINC dates back to 2008 so the one currently under preparation will be the first since the Fukushima disaster in March 2011. It “provides a basis to discuss the role of nuclear energy in achieving the EU energy objectives”.
The Commission reminds us of a few facts (see also Box below). Nuclear energy is part of the energy mix of half the EU’s Member States. There, it “has a role to play in ensuring security of electricity supply”. It also plays a part in tackling climate change: “With 27% of electricity produced from nuclear energy and 27% from renewable sources, the EU is currently one of only three major economies [Brazil and Canada are the other two] that generate more than half of their electricity without producing greenhouse gases.”
EU nuclear facts
*In the EU, 131 nuclear reactors with a total capacity of 121 GWe and an average age of 29 years are in operation in 14 Member States.
* Nuclear plants are responsible for more than half the electricity generation in France, Slovakia, Hungary and Belgium.
*New-build projects are planned in ten Member States, with four reactors already under construction in Finland, France and Slovakia.
*Two-thirds of the 80 GW of capacity that may come online by 2050 could from just two Member States: France and the UK.
*Lifetime extensions are expected to represent the greatest cost in the short- to medium-term.
*Only a small share of the projected investments in lifetime extensions and new-build, have already been approved by national authorities.
* France, Germany and the UK account for nearly 80% of the nuclear reactors in shutdown mode in Europe (29 in the UK, 28 in Germany and 12 in France).
*The EU nuclear industry has developed “global technology leadership” across all industry segments and employs 400,000-500,000 directly, plus another 400,000 indirectly.
Looking ahead, safety remains the “absolute priority”. The EU has the “most advanced legally binding and enforceable regional framework for nuclear safety in the world”. Post-Fukushima, this was reinforced by a series of “stress tests” and new legislation on nuclear safety, radioactive waste and spent fuel management, and radiation protection. Critically, all of these laws also lay down requirements for transparency and public participation, the Commission notes.
Steady nuclear in Europe
Globally, nuclear-related investment needs are estimated at around €3 trillion out to 2050, with most of that money due to be spent in Asia. The number of countries operating nuclear plants as well as total installed capacity is forecast to grow to 2040, with China alone expected to add 125 GWe (higher than the EU’s current capacity of 121 GWe).
Prospects are not as bright in Europe. Here, the Commission estimates that nuclear electricity generation capacity will decline by some 20% out to 2025, before growing again in the decade after as new reactors come online and lifetime extensions are pursued. Nuclear capacity would stabilise at 95-105 GWe by 2050. Since electricity demand is expected to go up, it would constitute 17-21% of electricity supply, down from 27% today. All these figures are in line with the analysis underpinning the EU’s 2030 climate and energy goals, the Commission says.
Total investments in EU nuclear energy approaching three-quarters of a trillion Euros are needed from now to 2050, the Commission calculates. It puts this in context: between €3.2 and €4.2 trillion will need to be invested in EU energy supply overall. Nuclear investments are only a “small part” of that effort. For comparison, the PINC’s cost assumptions are above those used by the International Energy Agency’s World Energy Outlook, the Commission says, while its projections of installed capacity are “very conservative”.
Since 2008, 48 new nuclear projects have been notified to the Commission. The biggest chunk of those (20) are for major upgrades related to lifetime extensions or post-Fukushima improvements. The Commission plans to refine the requirements for these notifications. It also plans to provide Member States with fresh guidance on intergovernmental agreements (IGAs) on nuclear (in parallel to new legislative proposals on other energy-related IGAs, notably gas) and on reinforcing security of nuclear supply.
Escalating costs of new-build
Without lifetime extensions, around 90% of the EU’s existing nuclear reactors would be shut down by 2030. But even with lifetime extensions, 90% of existing nuclear electricity production capacity will need to be replaced before 2050. This will cost €350-500 billion, estimates the Commission.
“Different financing models are being examined or used in several EU Member States,” the Commission notes, citing the UK’s Contract for Difference for Hinkley Point C and the Mankala model in Finland. It does not give an opinion on state aid for nuclear, however, although this is fully within its remit. Then the understatement of the year: “Some new first of a kind projects in the EU, have experienced delays and cost overruns.” The Finnish Olkiluoto and French Flamanville projects are both at over three times their original budgets and years behind schedule.
The Commission admits that the costs of new-build projects “are in the high range” of what analysts expected. Hinkley Point C tops the charts with €6.755 per KWe (vs. a €5.290 per KWe average for a “first of a kind” twin unit). There is a “historical trend of cost escalation”, the Commission concludes. Even in France, construction costs per MWe in 1974 were three times lower than those of units connected to the grid after 1990.
One problem is that reactors have got bigger. Larger reactors mean longer construction times. And construction time has a very significant impact on cost (more so than e.g. interest rates). Going for economies-of-scale has not been an obvious winner. Second, safety has been the main driver of innovation and it has driven costs up rather than down.
BOX: Small Modular Reactors (SMRs)
There are currently four SMRs under construction in the world, two in Russia, one in Argentina and one in China. The only operational unit is in China. The nuclear industry has looked to SMRs since the 1950s as an attractive alternative to bigger, more expensive plants, but they have yet to really get going. Too little is known about them to conclude much about their costs, but the Commission believes that investment per KW is likely to be higher than for large plants. They may get entangled in burdensome licensing battles too. This sector will continue getting attention with a more decentralised grid, but no large-scale roll-out is foreseen for now. (Read about the UK’s plans for SMRs.)
There is a question over the Commission’s hopeful statement in the PINC that “future projects using the same technology should benefit from the experience gained.” What could help is more standardisation, the Commission suggests, for example of reactor design and design certification (so that a design approved in one country is valid in another), a long-standing request from the industry.
The Commission admits that the experience of Flamanville and Olkiluoto “undermines the competitivity of nuclear power”. Current investment conditions “might make achieving the projected investments… challenging”. The viability of nuclear new-build in Europe depends on the ability of the industry to cut costs, as well as the electricity price (and therefore market design – proposals due this autumn), concludes the Commission. The minimum carbon price that would deliver the projected new-build from private financing alone is €43-72. Analysts project a carbon price of around €30 by 2030.
Squeezing out lifetime extensions
The average age of the nuclear fleet in Europe is 29 years. By 2030, most of the EU’s nuclear fleet would be operating beyond its original design life. The Commission expects lifetime extensions of 10-20 years to require investments of €45-50 billion by 2050. Note that more than 80% of this would be spent from now to 2030. The post-Fukushima safety upgrades increase the cost of these lifetime extensions by some 5-25%, the Commission estimates.
Important to note is that the Commission’s analysis assumes that France follows through on its plan to reduce the share of nuclear in electricity production to 50% and to cap installed capacity at the current level of 63.2 GW. Due to the size of France’s fleet, the figures presented would be “significantly impacted” if the 50% target was delayed or the operation of nuclear power plants at lower load factors was made more attractive, for example by introducing capacity mechanisms.
Paying for the aftermath
It is the back-end of the fuel cycle – waste management and decommissioning – that is going to claim a rising share of investments in the years ahead. More than 50 of the EU’s 131 reactors are likely to be shut down by 2025, the Commission says. Member States are moving “from research to action” on geological disposal. The first facilities are expected to be up and running in Finland, Sweden and France between 2020 and 2030 (Finland is in the lead with a due date of 2023). Almost all other Member States are at the “preliminary studies” stage. Public acceptance remains a challenge. So does deciding who is finally liable for the waste.
The projected costs of long-term geological storage depositories run from less than half a billion in Slovenia and Croatia to over €20 billion in France, the Commission says. It all adds up to €68 billion, or nearly half of the total estimated waste management costs of €142 billion out to 2050. For these, the average result of €3.23 per MWh is more than double what was estimated in recent studies, the Commission notes. Over a third of the total costs are for France.
BOX: Limited prospects for recycling nuclear fuel
France is the only country in Europe that is still working towards a fully closed fuel cycle with fast neutron reactors and advanced reprocessing technology. Other countries use open cycles. France will be the only country to operate reprocessing facilities after 2018 (when those in the UK are shut down). The partially closed cycle that technology currently permits “is not expected to give a major reduction of the final disposal solution footprint in comparison to an open cycle”. The future of recycled nuclear fuel is limited by the lack of fast-breeder reactors, more safety requirements, a higher risk of proliferation, lower competitiveness, and the fact that it still requires a final waste depository.
The other half of the end-of-life equation, decommissioning, is largely unknown terrain. When a nuclear site is decommissioned, it is released from regulatory oversight. Given “the ageing status of the European reactors, the capability of the industry and regulators to develop safe and cost effective decommissioning programs will determine to a great extent the future of nuclear commercial power in Europe”. This includes greater transparency in cost estimates, it adds. The Commission comes up with a total cost of €126 billion for decommissioning out to 2050. Some will argue that real costs are likely to be far higher.
Estimates of decommissioning costs per unit also vary “significantly” between Member States, from €0.20 billion in Finland to €1.33 billion in Lithuania. Germany and the UK are at the high end (€1.06 billion and €0.85 billion, respectively) while France is at the low end (€0.32 billion). The estimates depend on technology, the size and location of the reactor, and dismantling strategy, the Commission says.
Experience is scarce: although 89 reactors had been permanently closed in Europe as of October 2015, only three had been fully decommissioned. All three were in Germany. Worldwide, only 13 more have been decommissioned; all of them in the US. The Commission suggests a “European Centre of Excellence” to exchange best practice might help.
Not the full picture
In theory, the money for waste management and decommissioning is being accumulated throughout reactors’ lifetimes, primarily through a fixed contribution based on electricity sales. In most Member States, regulators define the method for securing funds (some, such as Germany however, rely on commercial law to require companies to build up reserves in their balance sheets).
Of the €268 billion needed in the EU by 2050, there is already €150 billion in the bank. In other words, as of 2014, European nuclear operators had dedicated assets that would cover 56% of the total estimated nuclear end-of-life costs, for reactors that were 64% of the way through their lives. A “possible explanation” for the difference is that some Member States are anticipating lifetime extensions.
The Commission concludes that “as a reliable low carbon technology and a major contributor to security of supply”, nuclear energy “is expected to remain an important component of the EU’s energy mix”. Maintaining EU technological leadership, including through the nuclear fusion project ITER, is “essential”. But this does not make nuclear energy competitive or affordable, nor does it ensure it can play a useful role in an EU power system dominated by renewables, where flexibility is central.
There are a few other things the draft PINC does not (yet) do. It does not advise on the involvement of foreign firms in supposedly strategic energy projects (e.g. China in Hinkley Point C). It does not draw lessons from recent upheavals in the nuclear industry (e.g. Areva’s bankruptcy). It does not tackle liability, although a former PINC suggested setting up a harmonised system of liability and financial mechanisms in case of an accident. And finally, it does not discuss harmonising strategies for decommissioning funds – also suggested in the former PINC – beyond proposing a European Centre of Excellence.