In the run up to the biggest international climate talks since the 2015 Paris Accords, the CoP 24 summit in Poland this week, the European Commission announced its ambition for Europe to become “climate neutral” by 2050. In other words, the continent will emit net zero greenhouse gases, absorbing as much as it emits.
This call for 100% decarbonisation has followed several reports, which warned that without immediate action the rise in global average surface temperature will exceed the 1.5℃ threshold. A recent IPCC report predicted that the world only has 12 years to rectify this situation and urged an increase in the 2030 decarbonisation target from 20% to 45%. Worryingly, the UN’s Emissions Gap Report 2018 revealed that in 2017 CO2 increased, ending a three year lull.
On the day before the EC’s announcement, a report from Europe Beyond Coal revealed the harmful effect coal has had on Europe, naming ten companies responsible for the continent’s declining health.
Despite this, most eastern EU member states are not currently phasing out coal. In fact, coal still accounts for 80% of the energy mix in Poland, 59% in Czech Republic and 58% in Bulgaria. What’s more, according to the World Nuclear Association, since its nuclear phase out Germany has become Europe’s biggest CO2 emitter.
Boosting renewable energy has been identified by the EC as a key strategy in the pursuit of its aim of climate neutrality. But although renewables have now expanded to as much as 33% of Germany’s energy mix, emissions there have still risen.
The reason for this is simple. Until long term, large scale, flexible energy storage is affordable, intermittent renewables require back up generation capacity to keep a country’s lights on. By phasing out nuclear, Germany has replaced zero-emitting nuclear power with high-emitting coal.
The New Nuclear Watch Institute’s (NNWI) recent study showed that abandoning nuclear energy and trying to replace it with ostensibly cheaper renewables, leads directly to higher electricity costs and increased emissions.
Moreover, positive discrimination in favour of renewables, through targets for them to provide a bigger share of the energy mix and backed up by direct and indirect subsidies, has the effect of distorting the market and making other low carbon sources of dispatchable electricity uneconomic.
Couple this unhelpful approach with the political risks associated with nuclear and the high upfront capital cost of new plants, and the result is that new nuclear build is hardly financeable in the EU apart from one member state.
Little wonder then that the UK government’s insistence that Hinkley Point C, its first new nuclear plant in almost 30 years, be solely financed from private sources forced it to offer an eye watering £92.5 per MWh to get the project off the ground. By contrast, direct government investment in a minority equity stake in another UK new build, Wylfa, lowered the cost of capital far enough to secure a near 20% cut in the final electricity price.
A recent NNWI paper suggested an alternative “delayed privatisation” financing model. This showed that the temporary investment of public funds in new nuclear during the construction phase can almost halve the price of dispatchable electricity. Unfortunately, this creative thinking faces hostility in the EU, whose obsession with leaving new nuclear to an already distorted market seems to be deeply ingrained.
Last June, the Bulgarian government rightly decided to revive the Belene nuclear plant project and invited bidders to express interest, on condition that it must be financed without state guarantees. Ironically, the four potential bidders – CNNC, Rosatom, EDF and KHNP – are all state owned, by China, Russia, France and Korea respectively.
In the UK, a comparable scenario prompted one senior industry executive to observe: “the UK government is happy for our energy infrastructure to be state owned, as long as it isn’t owned by the British state”.
To make things worse, in Bulgaria it has recently come to light that Belene has to be re-approved for construction by the EU. As the Bulgarian MEP Svetoslav Malinov put it: “in practice any new investors will have to agree to a project that is not currently approved by the European Commission”.
The latent anti-nuclear bias in Brussels and the lack of clear rules about what constitutes legitimate state aid to nuclear new build, holds back development of much needed low carbon capacity, not just in Bulgaria but across the continent.
In Prague, the Czech leadership is torn between the benefits of new nuclear and the risks associated with almost inevitable challenges from the Commission and neighbouring Austria. Poland had to push back its nuclear ambitions until 2033, having initially considered 2020 as a deadline for its first reactor start-up.
Having shown commendable determination to accelerate its response to the growing threat of climate change, the EU is now in real danger of tying one hand behind its back. Evidence is mounting that without new nuclear, the EU energy transition is doomed to follow the flawed path of the German Energiewende.
Only by issuing long overdue clear and transparent rules for state involvement in new nuclear build can both the risks and the cost of capital be reduced. Cleaner cities, lower emissions and cheaper electricity are the prizes which await.
