At the end of 2021, in the middle of a European energy crisis which has pushed electricity costs to a record high, Germany defied critics by shutting down some of its last remaining nuclear power stations. Other countries, including Belgium and Spain are planning to follow suit in the next few years. Meanwhile, in the U.K., Rolls-Royce is seeking a location for a factory to make a fleet of small modular nuclear reactors. In the U.S., Senator Joe Manchin is pushing for tax credits to keep America’s fleet of nuclear power stations open for longer.
What can be learned from the Europe’s experience with nuclear power? Bloomberg columnists Javier Blas, Andreas Kluth, Liam Denning and Jonathan Ford got together on Twitter Spaces to discuss more. Here is an edited and condensed transcription of their conversation.
Javier Blas: What has been the reaction in Germany to the latest shutdown of nuclear power reactors?
Andreas Kluth: Just to bring people up to speed, Germany had 19 nuclear reactors. A few weeks ago, it shut down three of the last six. The three remaining plants will be shut down later this year. It’s all part of the nuclear exit that Angela Merkel’s government decided just after the Fukushima disaster. Being anti-nuclear is a religion in Germany, so most of the controversy right now, especially with the Greens in power, is how should the nation react to a move by the EU.
The EU proposed including nuclear in its green taxonomy, which would have investment consequences. This puts Germany in a very difficult position. Among the Green party elite, it’s dawned on them that they’ve gone down the wrong path. Because of the nuclear shutdowns, the country will probably miss its targets for decarbonization.
Javier: In the U.K. we’ve seen the government moving to build more nuclear power stations, do you think there is a change in attitude in Europe – notwithstanding what has happened in Germany?
Jonathan Ford: You have to split what’s happening in Europe between countries like Germany, Belgium and Spain who have very long standing policies to exit the nuclear industry, and other places.
Broadly speaking, there is a bit of a sea change moving in the opposite direction. Countries which have been uncommitted to nuclear in the past like the Netherlands and Poland, are pushing to get into the nuclear space. In central and eastern Europe, that’s driven in part by a strategic concern to achieve a greater degree of energy security. Meanwhile, green issues are driving the Netherlands and the U.K. to look at nuclear energy. It’s one of the only carbon-free, dispatchable options that we have. I think that the Belgian and German decisions are absolutely nuts. By 2030, the carbon in Belgium’s grid will be higher than it is today, as a result of the decisions it’s in process of implementing.
Javier: As Germany was shutting down its nuclear reactors, France was having trouble with its nuclear fleet. France’s EDF has had a lot of trouble with sustaining capacity and budget overruns on its new nuclear reactors. It highlights one of the big problems of nuclear power – it’s very expensive and the technology brings a lot of trouble with it.
Liam Denning: Look at the two half-built and now abandoned reactors in South Carolina at the V.C. Summer project. That plant just so happened to be approved as the U.S. energy market was undergoing a very fundamental shift. When work was given the go ahead, natural gas was trading at double digit prices. In short, any nuclear plant will absolutely mint money when gas prices are that high.
Back at that time, electricity demand was expected to go up by something like 40% by 2030 in the region those plants were being built in. Fast forward to the late 2010s: Gas prices had collapsed, electricity demand was flatlining across the U.S. and the plants just didn’t make economic sense anymore.
Nuclear faces a problematic period of energy transition. It isn’t just changing the source of energy, but other shifts that have occurred such as the fact that energy demand in the U.S. has gone from being a fairly reliable growth market to one that’s even slightly down in some areas. In that kind of a market, it’s very hard to get private capital to commit to a project that is going to cost billions, will almost certainly run over budget and won’t generate a single watt of electricity for a decade. That’s one reason why the vast majority of new nuclear plants are being built in countries where there is a very heavy role of government operating in the energy market or guaranteed prices such as we’ve seen in the U.K.
Jonathan: We are looking ahead at a policy of energy transition. The fundamental question is: What is the credibility of that policy? If people do not believe the government is actually willing to shut or move away from fossil fuels, the headwinds against nuclear power become substantially higher because then you are looking at nuclear energy competing in essentially the market that we already have. That is a tall order given all the known characteristics of nuclear, like the very large cost and long lead times.
Most of the projects that are now underway are first-of-a-kind projects and require very heavy price guarantees like the U.K. project at Hinkley Point. The future of nuclear fundamentally depends on governments ultimately having a credible approach to climate transition.
Javier: Do we have the expertise to do brand-new nuclear?
Liam: Expertise in the U.S. has atrophied to some degree. It’s worth pointing out that the V.C. Summer projects and the Vogtle projects were in one important respect an attempt bring that kind of scale argument to things. Westinghouse Electric Company was building the same type of reactor design. So four reactors, all the same design, and the idea was that would help to bring down the costs. There is talk of addressing that through the development of small modular reactors and different types of nuclear technology.
What this all rests on is a policy decision. On the environmentalist side, they’re having to grapple with a longstanding antipathy towards nuclear power. California’s last nuclear reactor, for example, is about to shut down within the next couple of years which will remove 9% of the state’s power mix and a lot of its zero carbon power mix.
It’s not just antipathy here. There are fears related to earthquake risk and the role of PG&E, which is widely distrusted. But that has to be dealt with. This summer, California had to effectively pay very old, inefficient gas plants to be on standby to deal with a surge in power demand in the evening when the sun goes down. On the kind of climate skeptical side of things, we’re seeing political players such as Senator Joe Manchin tie themselves up in knots to some degree, because on the one hand, they back nuclear power. At the same time though, they don’t really wish to go for a more methodical approach in terms of encouraging zero-carbon technologies in general.
Javier: Recently, we’ve had days of very low wind in Germany, meaning it had to burn a lot of gas and coal. What is the elite in Germany thinking now? They are shutting down nuclear but still need a backup because wind and solar are not always there.
Andreas: Robert Habeck, vice-chancellor of Germany and federal minister for Economic Affairs and Climate Action has already said that Germany will miss this coalition government’s own targets this year and next year for decarbonization. Just to put it in perspective, Germany decided simultaneously to exit nuclear and coal. Renewables like solar and wind made up about 46% of the power mix last year. They want to double that by the end of the decade to 80%. Nuclear’s 13% and will go to 1%. The rest is coal and gas.
There are even geopolitical problems because of Russian President Vladimir Putin and a new gas pipeline from Russia to Germany. The Green party knows it cannot meet its climate goals, their geopolitical goals and be pro-European and good allies, while exiting coal and nuclear at the same time. So something must change.
One irony: Germany has a large neighbor to the west called France, the poster-boy of nuclear energy, and another large neighbor to the east called Poland, the poster boy of coal-fired electricity. Germany will increasingly have to import from the EU grids these two markets’ electricity. So it’ll be importing nuclear power from France and coal-fired power from Poland. That’s the net result of this German policy. When this becomes a big thing, the irony, the absurdity, the perverseness of this will lead to some big political change.
Javier: The approach to nuclear power across Europe isn’t homogenous. There are large chunks of the green movement that actually get that nuclear is needed.
Jonathan: There are environmental arguments against nuclear, against solar and against dams. In the U.K., some of the larger solar developments that have been attempted in recent years have been opposed by groups like Greenpeace on the grounds that they are eating too much land, which could be used for other purposes or for nesting birds. The same issues arise when you look at hydroelectric and pump storage schemes.
The environmental movement is in a situation where it has to choose between what it regards as various evils. The virtue of nuclear is that it has a very small footprint. If you don’t want to cover the countryside in solar panels or wind turbines or you don’t want to flood lots of valleys to create the storage required in a highly renewable market, nuclear is a credible and valid option.
Javier: One thing that’s fascinating for the future of nuclear power is the forecast of electricity demand in the Western world. That was a big problem for some of the early projects we were expecting 15 years ago. Between 1997 and 2007, U.S. electricity demand increased by roughly 20%. Between 2007 and 2019 — that year because it’s the last pre-Covid year — demand for electricity just stagnated and actually came down in the U.S. by 1%. So we don’t know how much electricity we are going to need to generate 10, 15 years down the road.
Liam: If we are going to embrace mass electrification as a tool to address climate change, which I would say we have to, then electricity demand in the U.S. must start to go up again. The problem with that is, in a period of transition, what you want is not really large scale energy, but scalable energy: energy that can be built in a modular fashion and be put up quickly.
That’s one of the reasons why renewables have scaled so quickly in the U.S. despite a fairly unwelcoming political climate in some parts of the country. Now, their problem is that they are intermittent. For new nuclear, especially in the U.S., there are really just two options. One is that the industry finally cracks the code on building small modular reactors. The other is that it gets explicit price support, whether that’s zero emission credits or another credit predicated on the idea of security.
There is a disconnect in American politics, which likes to think that energy operates as a free market when actually it doesn’t and never has because it’s just too important to be left to the market. Nuclear power presents a particular issue because so much of its benefit in terms of security and zero carbon are things that are simply not priced in the market.
Javier: One argument that’s often made is potentially a future nuclear power station in the U.S. won’t just be competing against a massive gas fired power station, or even a wind farm. It may be competing against the solar panels on my roof.
Jonathan: So in the U.K., as far as the National Grid’s planning is concerned, there’s an expectation that demand will triple by 2050. Quite what will happen to broader energy demand is another issue, but I don’t see electricity demand is going to be an issue for building new electrical facilities. The issue will be can you actually build enough in time to deliver the goals that have been set?
That’s a really open question. If you go back to the last time, certainly in Europe, countries looked at the necessity of developing nuclear power from a policy and energy security perspective — for example, Sweden and France in the 1970s — the pace of building was very dramatic. France built 33 reactors within the first decade of the Messmer plan. So it is possible, it’s not an act of God that nuclear power stations take a long time to build.
Javier: It is a technology that we mastered many decades ago. While building new power plants is proving very difficult, perhaps the smart solution for now is to try to extend the life of the nuclear reactors that already exist, which is what Manchin was getting at. The average life of a nuclear reactor in the U.S. is approaching 40 years. Is it safe and technologically-possible to extend the life of the reactors in the U.S.?
Liam: My understanding is that you can extend the life of reactors to perhaps 60 years, maybe even 80 years. I don’t think it’s technologically beyond us to extend their lives. The Diablo Canyon project that’s being shut down in California needed about $1 billion of investment to deal with its seismic and water-cooling issues. Ultimately, they balked at doing that.
Andreas: The price signal is so important, but it’s not just for nuclear, it’s for everything. The EU has the largest scheme in the world for setting the carbon price through an emissions trading system. But policy makers don’t trust that tool enough. They do other things that neutralize the effect, but if you expanded it to the whole economy, not just 40% of it as in the EU right now, a carbon trading mechanism that sets a high carbon price would help nuclear and other technologies become more competitive. It makes the price of the carbon visible. A lot of the focus should be on expanding the carbon trading system in the EU and founding a carbon club with the U.S. and other like-minded countries. Eventually everyone would join the club and we’d have a global carbon price, the way there’s a global oil price. That’s the price signal we need.
Liam: One of the real drawbacks of shutting down an existing nuclear power plant is that you kind of dig yourself into a hole. On one level, you suddenly have to replace that big missing chunk of zero carbon power with something else. The other thing is you bring forward all the decommissioning expenses. It might be better to put that capital to work developing other zero carbon technologies rather than having to spend billions on decommissioning a plant.
Javier: What can we do to reassure the public that this is a safe technology? If you look at the track record of the industry, barring two massive accidents, it has been very reliable.
Andreas: Just from the German perspective, because there is so much hysteria here about it, I think it comes down to two things. One is communicating that nuclear is actually safe, much safer than almost all other, except for wind power, energy sources in terms of people who’ve actually died and that’s with Chernobyl and Fukushima factored in. The second aspect, especially here in Germany is finding a solution to storing the waste. That’s what people here are so uncomfortable with. Possibly with new technologies or new kinds of reactors, we can find a solution to that. But until then, you’re not going to move the German debate.
Jonathan: The safety case speaks for itself. Nuclear’s responsible for 0.07 deaths per terrawatt hour of electricity generated. Coal is 25 and oil is 18. It’s pretty much the safest technology out there apart from renewables. The industry for a long time after Chernobyl shut down the conversation and didn’t really engage very much with the public. If nuclear is going to play a bigger role in the energy system going forward, it needs to kind of come out of the closet and speak for itself about waste.
If you can’t guarantee the whole life cycle is taken care of, people reasonably ask about the security and safety of what’s left on the surface. The example there is to look at Finland where an essentially open process was created by the Finns to encourage communities to essentially bid for the right to host the the nuclear site. It was a bottom up approach and a very rigorous safety case was constructed over a long period of time.
Liam: It is a fairly low risk technology. The problem with risk is that it is probability multiplied by outcome and in the minds of most people, even if the probability is quite low, the risk of a catastrophic outcome tends to loom large. Getting around that is just very difficult. One potential way is to emphasize the alternative risk out there: climate change. Global warming is happening right now, and the outcomes are pretty scary, too. Nuclear energy helps address that crisis now, though, you do have some difficulties here like this ridiculous tribal warfare between nuclear proponents and renewable proponents. They need to get over that and join forces as part of a broader zero carbon coalition. The other thing is, as I mentioned earlier, the same politicians who are pushing nuclear are also very much downplaying the risk of climate change. It’s just a politically untenable and unconvincing message.
The second thing that needs to be done particularly in the U.S. is we designated a nuclear waste repository back in 1987 — Yucca Mountain in Nevada. Yet decades later, it’s effectively been thrown off the table. We still don’t have long term nuclear waste storage set up in this country. I think getting over that might go some way to easing people’s fears.
More From Bloomberg Opinion:
NIMBYism Is Good If the N Stands for Nuclear: Matthew Yglesias
Abandoning Nuclear Power Would Be Europe’s Biggest Mistake: Jonathan Ford
Climate Change Will Kill National Sovereignity As We Know It: Andreas Kluth
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. He previously was commodities editor at the Financial Times and is the coauthor of “The World for Sale: Money, Power, and the Traders Who Barter the Earth’s Resources.”
Andreas Kluth is a columnist for Bloomberg Opinion. He was previously editor in chief of Handelsblatt Global and a writer for the Economist. He’s the author of “Hannibal and Me.”
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal’s Heard on the Street column and wrote for the Financial Times’ Lex column. He was also an investment banker.
Jonathan Ford is a freelance writer. He was the chief leader and city editor of the Financial Times, and has held senior editorial positions at Prospect Magazine, Reuters and Breakingviews.
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