CCRES Expert: Nuclear energy 'does not reduce the price of electricity'

CCRES Expert: Nuclear energy 'does not reduce the price of electricity'

Nuclear power plants are attractive for their owners but not necessarily for the consumer, says Alois Tost, independent expert consultant on energy issues.

Alois Tost is an Independent consultant on nuclear energy and renewable energy sources in Europe.

Germany had already started to consider a nuclear phase-out several years ago but things have moved very quickly on the issue since the Fukushima accident. What happened in the political discussion on the nuclear power in Germany during the last years and months?

The nuclear phase-out started to be a serious topic in Germany in the year 2000 at the time of the government of the Social Democratic Party and the Greens. They negotiated with the energy business to agree on the 32 years limit for nuclear power plants' lifetime. The law came into power in 2002.

But during the discussion the other parties in the parliament, especially the Christian Democrats and the Free Democratic Party were giving signals that if they became part of a ruling coalition in the future they would cancel this law. That actually happened after they have been elected in 2009. Even against a strong resistance among the population they agreed to extend the lifetime from the previously agreed dates – it was extended by 14 years for the new power plants and by 8 years for the old ones.

But the reason that launched the whole discussion in Europe was of course the Fukushima accident in March 2011. The whole of Europe not only started to discuss nuclear power but also saw how Germany reacted by switching off eight power plants immediately.

Later on, the German government returned to the original law and has formulated an even more clearly defined schedule for the phase-out. This restored law was not only approved by the ruling parties but naturally by the Social Democrats and the Greens as well.

It even became a subject to criticism as some say that when you have a law backed by such a strong majority you should insert it into the constitution. Because then you will never find a majority which would be able to cancel it in the foreseeable future.

The reaction of German industry to the governments' decision was, not surprisingly, negative. How does the industry deal with the shift away from the nuclear power? Will the phase-out affect the prices of energy and what will be the impact on the competitiveness of the German industry?

Before the government's decision, during the discussion whether to expand the lifetime of the nuclear power plants or not, the industry started several campaigns and lobbying in favour of the expansion of the nuclear plants' lifetime. But as soon as this decision was reneged, industry started to support the expansion of coal power plants. Probably because nowadays we have no party in the parliament that is pro-nuclear power anymore.

Anyway there is still a certain level of criticism towards the nuclear phase-out because many companies think that the change was taken too quickly. They are afraid of blackouts which might appear especially in winter when the demand for energy is higher and renewable sources provide less electricity than in the summer. It has to be taken into consideration that this explanation might mainly aim to support their wish for lower electricity prices.

Of course the companies state that the phase-out will lower the competitiveness. But we have to consider that there is only a very small part of the German industry really dependent on electricity prices, for example the production of aluminium or steel.

But even the steel industry, which is considered to be a big consumer of electricity, is not so dependent on electricity prices. If the electricity cost rises by 20%, the production cost in the steel industry will rise by only by 1.5%. Such change in prices can easily happen also with the costs of raw materials or coal which are also very important in the steel industry.

After a nuclear phase-out, there are several energy sources which can fill the gap. One of them is coal. Will the phase-out bring the expansion of coal thus decelerating the pace of achieving the goal of reducing greenhouse gas emissions by 20% by 2020?

No. We have to consider the emissions trading system. There is a defined cap for the emissions in the EU by 2020. And the production of electricity is part of the emission trading system. There is a certain amount of emission certificates which is allocated to the power plants. If a utility company decides to invest into a coal power plant, of course they have to buy the emissions certificates for the power plant as well. Nobody really knows how the price of the certificates will develop.

Nowadays the prices of the certificates are very low and it seems to be profitable to invest into a coal power plant. There are also many gas power plants that have been built or are under construction in Germany.

This is maybe because the companies await the rise in the prices of the emission certificates when less and less of them will be allocated. So if somebody says that a new coal power plant will cause a rise in CO2 emission, it is not true because the amount is defined and no more emission certificates will be allocated just because a new power plant is being built.

A nuclear power plant does not reduce the carbon dioxide emissions either. Nuclear plants simply do not buy any carbon dioxide certificates and in fact the use of the nuclear power lowers the price of the certificates. I have never heard about this aspect in the Czech public discussion.

In Germany this aspect was publicly discussed already before Fukushima when the government supported the expansion of the nuclear power plants lifetime and was explaining that it will decrease the carbon dioxide emission – but this was not true. The carbon dioxide certificates get cheaper with expanding the use of the nuclear power. You could see it after Fukushima when the certificates immediately became more expensive by nearly 2 euros per tonne.

Another way to fill the gap is renewable energy. To which extent is Germany fulfilling the 2020 target for renewables?

Germany has nearly 20 % of renewable energy in the electricity production; it was 17 % by the end of 2010. However, the 20-20-20 bill does not only consider electricity production but the share of the renewable energy in the final electricity consumption which means electricity, heat and mobility. And in this respect, Germany is far away from having reached the 20 % – at the moment the country is at 11 %. But Germany does not have to reach 20 % as each country has its individual goals. It is 18 % for Germany which has to be reached in 2020 in comparison to 1990.

What is the role of the solar energy in German renewables? Similar to the Czech Republic, in Germany there has also been a boom of the photovoltaics. Is it profitable to support solar energy even though the geographical conditions are not ideal for that in Germany?

Photovoltaics are for sure not the most efficient way to produce renewable energy in Germany because considering that they contribute only 14.2 % to the overall renewable electricity production, their share in subsidies for renewables is 38.6 %. If we consider the current situation it is not so easy for Germany to install solar panels for example in Spain or North Africa because nowadays we do not have sufficient transmission capacities to bring the electricity to Germany. But it is one of the concepts for the future how to realise the idea to produce the renewable energy where it is the most efficient and to transmit it to other regions.

Is it possible to realise similar project as for example the Desertec concept focusing on North-South interconnection and the collective use of solar energy from North Africa and wind energy from North-West Europe?

Yes, it is technically possible already today. However if you see the map, you see that some of the countries supposed to take part have a problem with political instability. So we are rather facing political issues than the technical ones in this question.

The Fraunhofer-Institute for Wind Energy and Energy System Technology institute in Germany has calculated that using renewable technologies available today and a super grid in Europe and North Africa, the price of one MWh fed into the German grid is around 50€. That's very close to today's electricity price at the energy exchange.

But there are also other problems because we would need to strengthen the transmission grid. In Germany this would face a strong opposition of the population of course because usually people want to have clean energy but nobody wants to have wind mills or transmission lines in his garden.

You mentioned before that despite the usual notions, nuclear power does not push down the electricity price in favour of the customer. What is the reason for that?

The price of electricity is formed at the energy exchange and it is always determined by the most expensive power plant which is necessary to meet demand. So we start with those power plants having the lowest marginal variable generation costs and those are usually the nuclear power plants. Then we take the next more expensive power plants which are for example the lignite power plants. And usually it is the gas power plant which is the most expensive and determines the price of electricity. Nuclear power plants are hardly ever the ones deciding the price.

Every power plant gets paid the price which is necessary to pay the most expensive power plant, the so-called marginal power plant. Therefore operating a nuclear power plant is highly attractive for its owner.

If you replace the capacity of a nuclear power plant for example by the capacity of a coal power plant, the price will not change because it is still the natural gas power plant being the most expensive one and deciding about the price. It is a question of capacity. You need sufficient generation capacity in order to keep the prices low.

But if you provide this capacity by nuclear power plants, coal power plants or any other power plant with low variable cost, it will not have an impact on the price. Now somebody can say that when the German power plants were switched off after Fukushima, the prices went up, but this was because the capacity was not replaced by cheap power plants as for example coal but from the power plants which were not in operation before, being outside the marginal price, for example gas power plants.

This is a question of who gains and who pays. When somebody says that the nuclear power plant is cheap, it is for the owner but not necessarily for the consumer.More info at solarserdar@gmail.com

Croatian Center of Renewable Energy Sources (CCRES)