Europe is rethinking nuclear energy as a long-term solution to market, climate and security challenges

Sebastien Zank & Anne Grammatico (Scope assessments) | New investment in nuclear power could help Europe stabilize dwindling baseload electricity supplies as coal-fired power plants and old nuclear power plants close – not relying solely on natural gas as an alternative – but only to longer term. Nuclear reactors with a total capacity of more than 20 GW must be decommissioned by 2030.

Europe faced a dual energy challenge – even before the war in Ukraine put energy security at the top of the political agenda.

First, Utilities must meet ever-increasing energy demand. Second, they must adapt to the energy transition: build more renewable capacity; upgrading transmission and distribution infrastructure to handle more intermittent power supplies; and the integration of national electricity markets through interconnections.

Nuclear energy, which should be included in the EU taxonomy, offers at least a partial answer, but for now, the region’s nuclear ambitions are at a curious moment. France has embarked on a nuclear reinvestment program. Last year, the Netherlands scrapped plans to phase out nuclear power by 2033. Others, such as Finland and the United Kingdom, as well as Central and Eastern European countries, stick to existing nuclear energy targets.. Germany remains committed to phasing out nuclear power.

The result is that the region needs alternatives to the projected net loss of 12 GW of nuclear capacity by 2030 – equivalent to building well over 40 GW of combined wind and solar capacity given the different load profiles and availabilities – just to keep power generation stable.

However, the inclusion of nuclear power projects within the framework of the taxonomy would probably facilitate the conditions for financing the European public services concerned in the medium and long term. The most important of these public services is Électricité de France SA, which has a fleet of more than 50 nuclear power stations.

Investors and lenders that use exclusion and/or negative screening in ESG-focused investment approaches could continue to lend to these companies through green bonds and loans. Besides, government co-investment now more likely which could be a major help for utilities, given the high initial investment required for new reactors.

Extending the life of some nuclear reactors would also help fill the order of merit in the short to medium term, alongside an acceleration of the ramp-up of renewables and selected life extensions of power plants. coal.

Judge the potential positive impact on utility cash flow profile who benefit from such extensions is difficult, given the simultaneous demands for capex, without taking into account the uncertainty of future electricity prices.

We estimate the investments at 6-10 million euros per MW at current prices, amounts that would put significant pressure on utility balance sheets given that there is no immediate cash flow from power plants under construction. This paves the way for significant government involvement in new investments.

Extending the lifetime of nuclear reactors generates additional cash, although it also involves higher annual maintenance investments and/or longer maintenance downtimes. Governments could also introduce additional windfall taxes to appease opponents of extending the life of nuclear power plants, Grammatico says.

Mary I. Bruner