It’s green light for the EU

It’s green light for the EU
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First Published: Thu, Nov 22 2007. 11 03 PM IST
Updated: Thu, Nov 22 2007. 11 03 PM IST
Nuclear energy emerged as a clear answer to the oil shocks of the 1970s, growing from near-irrelevance to supply almost one-third of Western European power needs by 1990. Today, as oil prices continue their unrelenting ascent and concerns mount over climate change, some argue that Europe needs a nuclear renaissance. But this time, things are slightly different.
At the moment, 32 nuclear power plants are under construction around the globe, totalling roughly 27 electrical gigawatts. Europe is home to only three of these plants, with one reactor in Finland and two in Bulgaria. Europe is lagging behind other regions because new nuclear stations face not only the obvious political obstacles but commercial ones as well, despite the current high price of power. A primary commercial issue is the significant slowdown in electricity demand growth. In the 1970s and 1980s, annual demand growth for power averaged 3.2% and 2.6%, respectively. It is a much more modest 1.6% this decade. Higher energy prices are encouraging large power users to implement efficiency measures or even relocate industrial plants outside of Europe. This demand growth may go below 1% a year next decade. So even existing plants are threatened, though policymakers are raising serious questions about earlier decisions to retire nuclear power plants in Germany and elsewhere in Europe.
What’s more, renewable energy sources—particularly wind, small hydro and biomass—have been growing quickly, thanks in part to the EU energy policy. Europe is close to meeting its target of using renewables to produce 21% of its electricity generation by 2010. According to the EU’s renewable energy road map, January 2007, Europe may reach 19% by 2010, and Brussels is evidently quite serious. The European Commission has begun infringement proceedings against six member states for not fulfilling their renewables obligations. A second push comes from an ambitious, binding target of 20% for all EU energy needs by 2020. We should also expect renewable sources to increasingly cover other needs, such as heating for homes.
As electricity demand continues to slow down, the use of conventional sources—oil, natural gas and coal—should stabilize or even decline. The challenge is to replace existing and ageing oil-, gas- or coal-fired power plants more efficiently. The need for this will be more acute towards the end of the next decade, so the incentive to build new nuclear stations seems less pressing now. Nevertheless, these plants take a long time to be built, so planning is critical. In Finland, construction is taking six years, rather than the four years first planned, obliging the world’s leading nuclear constructor Areva to make significant financial provisions.
Another obstacle for nuclear is structural. The electricity industry in the 1970s and 1980s was typically organized around vertically integrated monopolies, primarily responsible for the long-term planning, building and operation of power stations. No doubt, the development of large-scale and highly capital-intensive projects benefited from this market structure, as there was little market uncertainty under the controlled system. The liberalization process in the EU introduced significant regulatory uncertainties and made high-cost investment decisions riskier for privately owned energy companies.
There are, of course, a myriad of other issues surrounding nuclear energy, including the safe transport, disposal or storage of nuclear waste, as well as the risks posed by the threat of a terrorist attack. But the commercial issues alone mean that nuclear energy appears to have a dimmer future.
(The Wall Street Journal)
(Edited excerpts. Bruno Brunetti is senior director for European electricity at PIRA Energy Group. Comments are welcome at otherviews@livemint.com)
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First Published: Thu, Nov 22 2007. 11 03 PM IST