The nuclear problem…

Nuclear energy remains a major source of debate and the lack of consensus on EU energy policies does not help dispel doubts. To maintain stability, electricity consumption and meet the goals of climate change, nuclear is not the ultimate solution, but it still plays a vital role.

This source of generation is the basis on two of the three pillars of energy policy (security of supply and competitiveness) while sustainability due to waste management remains the big problem.

Nuclear power in Spain has been the main source of electricity. In fact, with more than 7% of the installed power capacity, 22% of the electricity consumed has been produced, and all this because the overall operation of the plants has been almost 90%. No other technology is able to maintain this level of operation. Nuclear has provided stability in price and equilibrium in the system. In fact, we continue to buy large quantities of energy from France whose share of nuclear production is over 70%.

Nuclear situation in Spain

However, the operating permits of the 8,000MWe installed in Spain will expire completely before 2025 and, despite the Government’s facilities; there is no clear intention on the part of the electricity companies to extend their useful lives. Moreover, the European reality is not very different.

WHAT IS THE PROBLEM?

The energy policy of the European Commission is to develop an activity against climate change. If Europe wants to maintain its energy mix, it will have to renew more than 100 nuclear reactors over the next 25 years. In addition, so far, there is no real alternative to nuclear power. Currently the renewables have not yet demonstrated to be able to give the stability that the plants contribute, so much needed by the grid, nor being able cover the expected increase of the demand.

However, each country in the European Union has its own energy policy. There are 28 States that needing much effort or skill to accomplish an agreement. Especially, in the light of the effect of the Fukushima accident on public opinion.

There is no global vision or consensus to agree on an energy development in the next 10 years at European level. The Lisbon treaty itself states that each country must be responsible for its energy mix and how it is developed. This is crazy to be able to establish a common policy among all countries. This situation generates a lot of uncertainty in the industry.

The speech is sometimes “diverted” and focuses on the useful life limit of plants (started in the 1980s). There is no technical and safety reason for not thinking that a plant can continue renewing licenses and producing energy during 60 or 70 years.

New reactor development projects suffer significant interruptions and delays. These delays are largely since companies must fight against falling wholesale electricity prices, the contraction of markets and consumption in mature economies, high levels of debt, rising costs and, above all, Competition against renewable energies. The new nuclear power plants continue to have large investment costs and, over their lifetimes, they are expected to remain competitive against most sources of electricity (base load). Its use as a capacity swing tool, along with renewables, is limited and unlikely to compete with other sources of energy and storage. Nuclear safety, waste disposal and dismantling are also major obstacles to the growth of the sector. Given the need to eliminate the old nuclear capacity, just keep the generation at current levels is already a challenge.

With this scenario, the companies that currently support the technical and economic management of the plants are reluctant to request the revision of the operating permits until they have long-term regulatory guarantees. The Spanish government continues to pave the way and giving facilities to the companies holding the nuclear so that they can prolong its operation beyond the 40 years.

The gap between government and companies in the nuclear sector in Spain has been reopened amid the disagreements over the future of the Garoña plant, which closed in December 2012. The reopening of this plant has been devised, as a launching point for other Centrals will extend the operation beyond the 40 years; but this plan is not so easy. The companies fear that the business is no longer safe.

The situation remains entrenched between the government facilities and the companies requesting to negotiate a change in its remuneration system. They ask for subsidiaries that guarantee the profitability of the business. Companies claim that the accounts do not come out due to the increase in the taxes of recent years on the sector. Complaints that, on the other hand, may be familiar to us in other generation technologies. (This topic will be discussed in an upcoming article).

In addition, we continue without a long-term strategy that should establish what kind of technologies and how much will Spain use in the coming decades to generate electricity. However, the feeling is that we always work with a limited 4 years horizon … while the problem continues to accentuate.

If this situation is not solved, we will face a gradual disappearance of nuclear generation from 2020 onwards and completely by 2025. This will lead to a significant increase in price volatility in the wholesale market and consequently prices in the derivatives markets on which the invoices of our industry are based.

Once again, tax burdens, rates, subsidies and any government intervention in a free market is the basis of the problem for a balanced development. With the objective of reaching a sustainable generation mix we can lead to an excessively expensive market … but this is already an issue that we will delve into in a later article.

Alejandro de Roca | Operations Director