What if nuclear power becomes as cheap as gas generation by 2050?

Electricity / Energy

What if nuclear power becomes as cheap as gas generation by 2050?

By Nicholas Newman

Power Station
Power Station

Over the past few decades, we have heard the promise that nuclear power will become so cheap, it will be not worth metering. The trouble is, although the operational costs are competitive, the capital costs of nuclear power, remain eye wateringly expensive! In addition, despite the promises of nuclear power manufacturers and builders, we still are not managing to deliver projects on time and budget. In part, this is due to ongoing improvements in technologies and nuclear safety. However, it is also due to great public concern about nuclear technology. Certainly, events at Three Mile Island, Chernobyl and Fukushima have not helped this profoundly safe and environmentally friendly technology.

However, the point of this piece is to examine the likely impact that affordable nuclear power, that is competitive in both construction and operational costs in supplying power to the market in competition with electricity supplied by fossil fuel plants and renewables would have on the market in Europe.

In terms of public opinion, such a prospect is likely to be mixed, with many governments and the majority of public opinion either welcoming or indifferent. However, public opposition, in some countries, is likely to remain a problem, especially in markets such as Germany, where the antinuclear opposition is extremely vocal by some environmental groups, even though such nuclear power has such positive greenhouse gas benefits. It also has not helped that some project promoters in the past, have failed to adopt social license to operate strategies to fully inform both local decision makers and members of the public of the case for such technology, not only on economic, but environmental grounds.

A threat to fossil fuel power stations and renewable power plants.

The arrival of nuclear power is likely to be seen as an economic threat to operators of fossil fuel power stations and renewable power plants. This is especially the case for operators, whose business model is in the provision of base load capacity. As such, such a prospect is likely to turn much non-nuclear power generation into zombie power plant capacity. An experience that many gas power plants in Europe have suffered due to competition from heavily subsidised renewable power and competition from cheaper coal power in the past few years, which has led to many gas power plants being placed in cold storage.

As for the impact on energy trading in Europe, the arrival of such investment is likely to increase the volume of potential power that can be traded across Europe. Already, some of the power used to operate trains on the London rail network is supplied by French nuclear power stations. However, for an increase in the ability of the European market to switch such power across the continent, much more investment needs to be made in transcontinental high voltage power lines is to overcome capacity problems at many border crossings.

An opportunity for new entrants

The arrival of such technology is likely to prove a threat to Europe’s energy giants like E.ON SE and Électricité de France S.A (EDF); it is likely to encourage new non-traditional entrants to enter the market. We are already seeing in Scandinavian ownership of nuclear power plants by consortiums or cooperatives of industrial companies and local public bodies, e.g. Sweden’s Teollisuuden Voima Oyj. It would not be surprising if large energy intensive companies like Bayerische Motoren Werke AG (BMW) decide to build their own nuclear power plant, to meet their needs and sell the surplus to the grid. In addition, we are likely to see the return of locally owned power plants, supplying power to a particular region only, a business model common in the early days of Europe’s power sector. There are media reports that Transport for London (TfL) is looking at plans to reduce its dependence on external power sources.

Moreover, in terms of grid supply security, the provision of a nuclear power plant is likely to improve the quality of regional power supplies, specifically in energy market islands such as the Baltic States, Sicily, Malta and Cyprus.

As for energy storage technology as it relates to nuclear power, it is likely to make nuclear power plants, more competitive as surplus power can be stored for more profitable peak times in demand, especially at times when there is no wind is available from wind or solar farms.

A new source of affordable power

As for the potential on Europe’s competitiveness, the arrival of an independent affordable power source should be of great benefit to Europe’s energy-intensive industries, particularly car making, plastics, refining and steel manufacturing, which should mean the creation of many more new jobs.

Lastly, it should mean governments would be able to cut energy subsidies to Europe’s power industry, and enable government and regulators to encourage real competition in the market.

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