Nuclear Power in the enlarged EUWilliam J. Nuttall

Electricity Policy Research Groupwjn21@cam.ac.uk

9 February 2009

http://www.cessa.eu.com/

EU Energy PolicyThe dominant policy measure is “EU 20:20:2020”

Including a ‘binding’ EU-wide target for 20% of total energy from renewables by 2020 and 20% greenhouse gas emissions reduction by 2020 [Ref: http://ec.europa.eu/energy/energy_policy/index_en.htm]

The UK share of the burden is 16 % emissions reduction c.f. 2005 levels and a 15% renewables in total energy (today it’s at 1.6%).

This implies at last 30% of electricity should be renewable (and that’s energy not capacity!). This implies profound changes to the power system and much greater price volatility forcing demand side changes. How all this would affect planned investments in nuclear is still far from clear.

One European voice on nuclear power?• Throughout the CESSA project we returned to the

question of one European voice for nuclear energy. While we saw a logical basis for such a step, we regarded it as politically unobtainable in the foreseeable future.

• We noted however the idea that the Commission might produce a European Roadmap for Nuclear Energy to assess the contribution that nuclear power can make in European Greenhouse Gas Emissions reductions. We note that in 2007 the EC published a most useful roadmap for renewables.

Country Power Reactors OperatingMay 20082

Power Reactors Building & PlannedMay 20082

Closed by end 20073

First kWh1

GWh 20072 % of electricity generation20072

Belgium 7 0 1 1962 46 54

Bulgaria 2 2 2 19803 13.7 32

Czech 6 0 0 1985 24.6 30.3

Finland 4 1 0 1977 22.5 29

France 59 1 11 1959 420.1 77

Germany 17 0 17 1961 133.2 26

Hungary 4 0 0 1982 13.9 37

Italy 0 0 4 1963 0 0

Lithuania 1 0 1 1983 9.1 64.4

Netherlands 1 0 1 1968 4.0 4.1

Romania 2 2 0 19963 7.1 13

Slovakia 5 2 1 1972 14.2 54

Slovenia 1 0 0 1981 5.4 42

Spain 8 0 1 1968 52.7 17.4

Sweden 10 0 3 1964 64.3 46

UK 19 0 25 1957 57.5 15

sources: 1. Anthony Froggatt, Nuclear Power the European Dimension, in Nuclear or Not?, edited by D. Elliot, Palgrave(2006) except Bulgaria and Romania; 2. World Nuclear Association http://www.world-nuclear.org/info/reactors.html except Italy; and 3. RelevantWNA country briefings: http://www.world-nuclear.org/info/info.html#countries[Note Froggatt reports 19 shut in Germany by 2005, and 2 for Spain]

History of Nuclear Power in the EUIn April 1956, following the 1954 failure of the European Defence Community, an international committee, under the Presidency of P.H. Spaak, the Belgian Minister for Foreign Affairs proposed:• the creation of a general common market; • the creation of an atomic energy community. These became the "Treaties of Rome" signed in March 1957. The first Treaty established the European EconomicCommunity (EEC) and the second the European Atomic Energy Community , better known as “Euratom”. These two Treaties entered into force on 1 January 1958. The EEC Treaty has been modified numerous times whereas the Euratom Treaty remains unaltered. Ref: EU - http://europa.eu/scadplus/treaties/eec_en.htm

Euratom & safety regulation“When the authors of the European Atomic Energy Community drafted the EURATOM Treaty, thoughts of nuclear installation safety and radioactive waste were not uppermost in their minds. For several years there was no Community activity directly dealing with nuclear installation safety. It was not until 1975 that the Community woke up to the seriousness of the issue. By then, nuclear power programmes in its then Member States had progressed and diverged along very different routes. Moreover, not only were many of the installations very different, but the national systems regulating them were also very different.”

Fernando de Esteban, EC 2002

Euratom & safety regulation

“… as a result of co-operation between the main actors in the EU since the 1970s, there is a ‘non-binding acquis’ that is built on fundamental common principles. These form the basis of all the EU national nuclear safety regulations”

Fernando de Esteban, EC 2002

Consensus?However, the absence of amendments to the Euratom Treaty is not a sign of a European consensus on nuclear power.

The EEC treaty has moved towards its aim of “ever closer union”, while in the area of nuclear power there has been a European divergence.

Official Attitudes EU-15 2006Finland UK Luxembourg Germany Ireland

France Netherlands Denmark Belgium Austria

Portugal Italy

Spain Sweden

GreeceThe EU-15 were almost equally divided on nuclear power. This is a personal assessment.

Since 2006 some countries have become more pro-nuclear e.g. Italy and the UK, but generally EU-15 opinion is still finely balanced

Official Attitudes EU-27 minus EU-15Lithuania Poland MaltaRomania Latvia CyprusBulgaria EstoniaCzech Republic SlovakiaHungary Slovenia

The understanding of nuclear energy in the EU-15 is not sufficient for understanding nuclear energy in the EU.

The balance of attitude in the new member states is very different to that in the EU-15. As in the EU-15, recent changes are all in favour of nuclear energy

The European Union is a much more pro-nuclear community than in the 1990s.

Changing language from the Commission?

The European Commission broke the “nuclear taboo” with its Green Paper of March 2006: “The [proposed] Review should also allow a transparent and objective debate on the future role of nuclear energy in the EU” http://ec.europa.eu/energy/green-paper-energy/doc/2006_03_08_gp_document_en.pdf

More European Investment?•The EC is updating its nuclear investment programme, termed “PINC” (French acronym).

•This will accompany the EC's second strategic EU energy review. Last April Energy Commissioner Andris Pielbags noted that nuclear power has an important contribution to make and he said: "In order to make the necessary investments possible, the EC is examining ways to address the difficulties related to licensing, financing and different nuclear liability regimes,"

Sources: Platts & EU Monitor.net April 15, 2008

Two Case Studies for CESSA

Romania and Lithuania

Why Romania and Lithuania?

• CESSA keen to recognise the importance of new member states to the European nuclear experience –hence the choice of Eastern European examples

• Romania and Lithuania had very different cold war histories

Romania and Nicolae Ceauşescu • National independence verging on autarky• Ceauşescu knew and admired North Korea having visited in June 1971• The 1980s:“Economic policies became more irrational through the ‘gigantism’ of excessive capacities in oil refining, petrochemistry and steel production based on raw material imports(…)that were not recouped through the value of exports.” (Turnock, 2007, p. 33)• 1989: violent revolution - Ceauşescu and his wife killed• 1990s: rough politics – e.g. PM Ion Iliescu’s mineriads • Today: Romania a democratic republic in the EU and NATO led by anti-communist former mayor of Bucharest Traian Băsescu.

Nuclear Energy in Ceauşescu’s Romania• In the 1960s Romania sought to increase its distance from the Soviet Union (Turnock, 2007, p.59). Romania chose to partner with Atomic Energy Canada Ltd and develop a fleet of CANDU-6 natural uranium fuelled heavy water cooled and moderated reactors at Cernavoda in the south-east of the country roughly 50km from the Black Sea port of Constanţa.

• The choice of CANDU-6 nuclear power technology suited the development of a wholly indigenous nuclear fuel cycle. Ceauşescu’s aim – ‘energy self sufficiency’ –the naïve way. Romania has uranium mining and a heavy water plant!

Ceauşescu’s Cernavoda DreamFive plants to be built concurrently. Unit 5 was something of an after thought rumoured to have been forced onto the agenda by Ceauşescu himself despite the site being poorly suited for a fifth plant. To compensate for the geological difficulty very large amounts of concrete were injected to form a solid foundation for the Cernavoda-5 plant. Of the four plants part-built at the time of the 1989 revolution the fifth plant was the least complete (at only roughly 4%). It will never be finished.

Cernavoda Today

Following the Revolution of 1989 Cernavoda 1 (706MWe) entered service on the 2 December 1996. Unit 2 became operational in the autumn of 2007. Plans are underway to complete units three and four.In early 2008 there was no shortage of private investment funding available for units 3 & 4. But late in the financing process thegovernment set a controlling interest of 51% much to the consternation of the private sector investors who were keen to have larger stakes in the enterprise.

2008: Romania rejects the ‘Finnish model’

Romania’s Energy Policy TodayThe government’s view is that European and wider energy markets are beneficial for energy security and are not a threat to it. Energy ‘Sufficiency’ is a policy goal, but in a completely different sense to that envisaged by Ceauşescu. Trade is key and the intention is that imports of primary fuels can be balanced by the export of electricity. While an exact balance will be difficult to achieve, a net balance is a policy goal for the country. Romania is well positioned to be an electricity exporter. Nuclear ambitions do not end with the Cernavoda site.

Lithuania and the USSR

From 1940 until 1991 the Baltic states of Latvia, Lithuania and Estonia were constituent republics of the Soviet Union. In contrast to the Romanian experience.

On 6 September 1991 the Soviet Union recognised the independence of the three Baltic States. Only a few weeks later the Soviet Union itself ceased to exist with the dissolution of the Supreme Soviet on 26 December1991.

LithuaniaUntil the completion of the 350MW Estlink electricity interconnector between Estonia and Finland in December 2006 the Baltic States formed an “electricity exclave” or “island” disconnected from the rest of the European Union and unable to benefit from European electricity market integration in the bulk of the EU.

The Baltic States remain connected with the old USSR power grid, both directly to Russia and via Belarus. Reflecting changing geopolitical alignments the Baltic states now seek greater westward connection particularly to Poland and hence to Western Europe.

Nuclear Power in LithuaniaBackground: Ignalina 1 & 2RBMK 1500 MWe units. Same reactor technology as Chernobyl. Project started 1974. Commissioning 1983 and 1987. Original RBMK unit 3 plan construction cancelled 1989. Built as power plants by and for a vast country, but becoming plants in a small country. See: http://www.iae.lt/default.asp

Lithuania and the EUIn the 1990s there was much concern in western Europe regarding the presence of Chernobyl type (RBMK) reactors in the EU and the status of the Ignalina plant became “one of the main issues in the Lithuanian accession negotiations” (Euro.Lt, 2008)).

The terms of the 2003 EU accession treaty remain tricky as Lithuania has recently been seeking to extend the life of Ignalina 2 beyond the agreed date of 31/12/2009.

Lithuania points to a looming serious electricity supply gap.

Lithuania – New Nuclear BuildNew Ignalina 3 – proposal for an entirely new plantTo be a “commercial” plant driven originally by a three country agreement: Lithuania, Latvia and Estonia with Poland having joined later. Based on a new bill submitted to Lithuanian parliament. Three biggest Lithuanian energy companies to be investors. Lithuanian state will have a 51% share. Lithuania has the most liberalised electricity industry of the four partners. Lithuania wants a power bridge to Sweden and Poland this will increase the commercial attractiveness of Ignalina 3.

Ref: Gediminas Kirkilas, Lithuanian Prime Minister, RUSI, London, 21 May 2007

Ignalina-3 – Key issues 1• Economics suggests that in order for the project to be successful the plant must operate with a very high load factor of approximately 8000 hours per year.

• Placing a very large nuclear power plant in a small electricity system raises issues of the system capacity margin.

• It is not yet clear how waste spent fuel would be handled for a project established to serve the needs of one country. Should the four partner countries agree to share the waste burden? Or perhaps the waste burden should fall to the country hosting the plant – Lithuania.

Ignalina-3 – Key issues 2• In contrast to the Romanian experience, none of the four partner countries associated with the Ignalina-3 project has ever built a nuclear power plant before, nor have they engaged the services of a western reactor vendor in such an endeavour.

• Lithuania is blessed from the USSR with significant nuclear operational, engineering, management competence and a world-class nuclear research centre the Lithuanian Energy Institute. These capacities might be regarded as a legacy of the rigorous Soviet approach to the physical sciences and engineering, despite the fact that prior to independence Lithuania had no independent regulatory institutions.

When will Lithuania’s electricity crunch come?

The 2007 Lithuanian Energy Strategy observes that the pressures of Lithuanian electricity security in the coming years are such that the new nuclear power plant must enter service by “2015 at the latest”. As the reactor type has not yet been selected, and some financial issues still remain unresolved, I am skeptical that this requirement will indeed be met in time, in which case there is presumably the risk of a serious electricity security threat looming for Lithuania in the second half of the coming decade as energy constraints in that corner of Europe are likely to tighten.

Conclusions• A European nuclear renaissance is underway and much of the action is in the “New Europe”

• There is no chance of a single European voice on new nuclear build. The generation mix for electricity will remain a matter for each member state individually, with sensitivity shown to the concerns of neighbouring states.

• However, noting changing language from the Commission, perhaps the time is right for stronger European level leadership – perhaps a European Nuclear Energy Roadmap?

• Western Europe has much to learn from recent experience in eastern Europe: e.g. unstoppable political pressure to increase state involvement in generation investments and international collaboration to build big generation sources in small countries (c.f. Benelux?)

Planning New Nuclear Build in the European Union

Raphael J.A. Heffron/ rjh211@cam.ac.uk

PhD candidate - Judge Business School & EPRG,

University of Cambridge

Focus & Direction

• More in-depth focus on Romania• Examination of how Romania arrived at

its nuclear energy policy and its future direction

• Conflicts that their energy policy faces

2: Methodology• Mixed methodology:

- Legal Economist - Political Economist - Ethnography

• Aim of this research here:• To ascertain the political, legal, and economic

structural conditions that result in the most stable platform for new nuclear power build in the EU

• Focus here on Romania which demonstrates the most stable conditions for nuclear power build

Literature Review

• Dearth of literature concerning policy for nuclear new build from 1980 - 2000, created by the fallout from Chernobyl (Holton, 2005; Tweena, 2006)

• Literature Reviewed to-date: - History of Nuclear Energy- Legal articles/legislation/documents- Political articles/Policy documents- Economic policy Articles

2: Nuclear Energy Projects in the EU

• In 2006 nuclear power supplied about 15% of the world’s electricity – EU 30% (IAEA, 2007)

Four items will be dealt with here:• Stable Conditions for New Build• Euratom – Regulatory agency for the EU• EU Energy Policy & Legislation• Brief Member State Assessment

Stable Conditions for New Build Nuclear Power

• Stable conditions: those that would make it attractive for an investor to invest in the project, i.e. Reduce risk of investment in all areas

• Identified as construction, operation, regulatory and market risks (Finon & Roques, 2008)

Euratom• Established: 1957• Exclusive jurisdiction in nuclear supply in the EU (Articles 52-76:

ET)

• Key Powers: Investment; Joint Undertakings; Common supply policy; Pricing Policy; Safeguards; R&D; Nuclear Common market; and Competition.

• Significance of Euratom

EU Energy Sector & State Aid

• EU Energy Policy – EC [Com (95) 682]- Similar general objectives of the Commissions economic policy- Plus: sector specific issues: the safeguarding of supply and the balancing of the pursuit of competiveness with the aims of the environment.

Examples of State Aid• Beneficiaries:

• (1) renewable energy sources and energy conservation

• (2) coal industry • (3) nuclear: UK government to British Energy

(2004) because it was claimed that this protected employment and the environment (Froggatt, 2005).

Relevance of these issues

Advantageous conditions for building new nuclear build in the EU:

• Plant life is increasing to 50-60 years• Investors willing to invest in nuclear new

build are numerous – e.g. Romania• Requirement to insure against disaster is

capped

Basics of New Nuclear Power Build

• Finance• Electricity Pricing Contracts• Legislation and Regulation• Electricity Market Structure• Technology• Planning• Waste Management

Member State Assessment:Finland, France, Romania, & the United

KingdomCountry NP Reactors in

operationProposed NP projects

% share of electricity

Estimated Cost per reactor

Availability of longterm contacts

France 59 1 in 2012, more in 2020

78.8 €4 billion Yes

UK 19 Expected by 2017-2020

15 £2.8 billion, but potentially £4.8 billion

Yes

Finland 4 1 in 2011, more expected 2020

28.4 €2.5 billion but already 50% over cost

Yes

Romania 2 2 before 2015, more in 2020

16.5 €2.2 billion Yes

Member State Assessment 2:Finland, France, Romania, & United Kingdom

Country Planning Legislation Technology Waste Managment

Nuclear Energy Expertise

France Fast Process, strongpublic support, weak public opposition

PWR Good Good

UK Mixed public support, lengthy process

Magnox, AGR, PWR

Limited in long-term facilities

Limited

Finland Fast process, majority of public in support

PWR Good Limited but external support

Romania Fast process, public support but also lack of awareness

CANDU -Canadian Technology

Very lmited Limited but improving

Romania

• Nuclear Energy Operator• Competition• Availability of Finance• Politics• Electricity Market Structure• Legislation Requirements• Waste Management

Electricity Market Structure• Liberalisation has happened• Market Structure

– (1) Hidroelectrica – operator of most of the country's hydro capacity;– (2) Termoelectrica – Romania’s main thermal power generator; – (3) Nuclearelectrica – operator of the country's nuclear capacity; – (4) Transelectrica – the Transmission System Operator; – (5) Electrica – operator of the country's distribution grid; – (6) OPCOM – the wholesale market operator.

• However, these separate companies have all remained largely state owned (17% privatised – Pollitt, 2007).

• Advantage: the Romanian electricity sector has a clear structure Market-entry: very low – ENEL, ON, & CEZ have all invested in distribution

• 84% of the market is open in terms of customers choosing a supplier

Romanian Electricity Predicted Production Evolution -

( TRAICU, R. R.A.A.N. – 2008)

Romania – Nuclear Energy Sector

• State owned company (Nuclearelectrica) operates the current NPPs

• Will be taking 51% of next two plants –indecision here at first was only to take 20%

• Cernavoda 3 (17%) and Cernavoda 4 (14%) are mothballed part built projects.

Finance• Available• Original model: 15 investors expressed

interest in investing, before 6 were chosen, and initially investors were willing to supply 80% of the cost,

• Revised model: private stake reduced to 49%.Now the following are investors: GDF Suez (9.15%), RWE (9.15%), CEZ (9.15%), Enel (9.15%), Iberdrola (6.2%) and ArcelorMittal (6.2%).

Politics• EU Energy Policy focuses on:• (1) Sustainable development and environmental protection• (2) Security in supply• (3) Competition in the internal market• Romania government policy focuses on:• (1) Meeting the above EU requirements• (2) Decreasing dependency on Russia• (3) Increasing nuclear energy supply to replace other high polluting

environmental energy sources (EU Accession requirements) • Progress:• Plans at advanced stage to increase nuclear power• Competition within the electricity sector have progressed slowly and

have all but stalled (only 17% of privatised – Pollitt, 2007)

Waste Management• Radioactive waste management:

– spent fuel is stored at the reactors for up to ten years. It is then transferred to a dry storage facility based on the Macstor system designed by AECL. The first module was commissioned in 2003.

– Final disposal - deep geological repository -preliminary investigations are under way

– LLW waste – near-surface repository near Cernavoda

– A radioactive waste treatment facility operates at Pitesti.

Technology

• Cernavoda 1 & 2 = CANDU-6(Canadian technology)

• Cernavoda 3 & 4: Also CANDU-6(Canadian technology)

Questions & Advice?