Europe’s newest reactor to salvage part of strained energy market

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(Bloomberg) — A corner of the European energy market is about to become much less dependent on foreign supplies.

After more than a decade of delays due to licensing and construction issues, Finland started up its first new nuclear reactor in more than 40 years on Saturday. The country has long relied on electricity imports from its neighbors – mainly Russia and Sweden – to keep the lights on, which the new facility could help complete one day.

Olkiluoto-3 opens in an era of record electricity costs and will help relieve the region’s energy-hungry industries that keep northern economies running. The energy crisis and Russia’s invasion of Ukraine show how crucial domestic supplies are, even in generally well-connected markets.

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With Russia becoming increasingly isolated, Baltic grid operators said earlier this month they were reducing the country’s electricity imports and increasing local generation and flows from other countries. The new facility, which cost Teollisuuden Voima Oyj around $6.4 billion, will help Finland reduce flows from abroad by up to 60% when regular production begins in the summer.

“Above all, the reactor will increase stability in the eastern region,” said Johan Sigvardsson, an analyst at Swedish utility Bixia AB. “Finland will get a stronger energy balance and the southward flows will help the Baltic region.”

Finland imports around a fifth of its electricity, with flows from Russia peaking at around 15% of consumption in 2009. Swedish supplies became more important after a change in Russian export tariffs a decade ago.

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The European Union plans to wean itself off Russian energy, starting by cutting gas imports by two-thirds this year. As fuel continues to flow, uncertainty is pushing gas and electricity prices around record highs. Millions of homes and factories across the continent are facing unprecedented bills, just as other living costs are also skyrocketing.

Although nuclear reactors are extremely expensive and take years to build, they are a reliable alternative to wind and solar farms and produce zero carbon emissions. Atomic energy is also gaining popularity elsewhere in Europe.

German nuclear operators have said they are ready to discuss extending the lifetime of their remaining plants. In Finland, Fortum Oyj plans to extend the life of its two reactors at the Loviisa power plant by 20 years to 2050. But Russia’s key role in a new project means Fennovoima Oy’s plan to build a sixth reactor in Finland is currently suspended.

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The United States is considering sanctions against the Russian atomic energy company Rosatom Corp., a major supplier of fuel and technology for power plants and a partner in the Fennovoima project.

TVO said it buys fuel for its reactors from “multiple” sources and that commercial relations with Russia are limited. Still, Rosatom has a large market share and any interruption in its supplies could disrupt the global market just as Olkiluoto-3 ramps up.

The start is poised to bring some relief to high Nordic electricity prices, but it’s hard to say by how much. This is also good news for some utilities and energy-intensive users in sectors such as forestry and chemicals who are co-owners and can access electricity at the cost of production.

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Once destined to be the largest reactor in the world, the 1,600 megawatt Olkiluoto-3 facility has become the poster child for a nuclear industry touting itself as a stable, virtually emission-free source of energy as renewable energies were developed. Construction began in 2005, but huge cost overruns and disputes between the operator and the builders delayed the start several times.

The new reactor “is a big boost,” said project manager Jouni Silvennoinen. “For Finland, we will significantly increase our nuclear production and this is an important contribution to our share of CO2-free electricity.”

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