Nuclear power safety upgrades could cost operators €25bn

Safety improvements for Europe’s nuclear power plants could cost the industry up to €25bn, industry observers have warned.

On Thursday, the European Parliament’s Industry, Research and Energy (ITRE) committee voted that Europe’s nuclear operators will have to pay for all safety upgrades recommended from the nuclear stress tests and all costs for which they are liable in the case of a potential accident (see EDEM 24 January 2012).

The ITRE committee’s decision reinforces the European Commission and nuclear authorities’ assessments on the need for safety improvement of nuclear reactors in Europe, which followed “stress tests” after the Fukushima radiation leak in Japan (see EDEM 4 October 2012).

However, smaller or older plants could come under greater threat of closure. Industry observers told ICIS that the safety upgrade recommended by nuclear stress tests will total €10bn-25bn for all of Europe’s active nuclear reactors, which could raise nuclear operating costs by around 1%.

Generation costs

Nuclear generation in Europe is cheaper than other energy sources, costing $50-80.00/MWh (€37-59/MWh), according to data from the Organisation for Economic Co-operation and Development (OECD). However, coal generation costs $65-120/MWh (€48-89/MWh), onshore wind $80-150/MWh (€59-111/MWh) and gas $80-120/MWh (€59-89/MWh).

Sources said that safety implementation costs could be a threat to nuclear cost-effectiveness compared with other energy sources.

Moreover, smaller operators in particular might lose out in competition, as their profits might not fully cover the high safety upgrade costs.

“Nuclear operators will have to take these costs into account,” said Richard Ivens, institutional affairs director of European nuclear lobby group the European Atomic Forum (FORATOM).

“However, I believe that nuclear operators in Europe will remain competitive, [as power production earnings will cover the safety implementation costs].”

Analysts said that nuclear plants may have their life extended if they implement safety upgrades recommended by the stress tests.

An expert from a UK-based university said that the safety implementation costs to existing plants are not significant compared with the expenditure needed to construct new nuclear reactors.

Debt and delays

However, several sources pointed out that the costs of these safety upgrades might increase operators’ level of debt. “For example, these costs might put extra pressure on [French utility] EDF’s capital expenditure, making tighter its budget for the construction of new nuclear reactors in the UK,” one analyst said.

Talks between the UK government and EDF over the country’s first new nuclear plant for 25 years are ongoing, although analysts have flagged the negotiations as undermining financing (see EDEM 21 January 2013).

A source close to French nuclear safety authority ASN suggested that EDF might have to spend €5bn on safety improvements just in France, which relies on nuclear energy for more than 70% of its power generation. However, no plant in France is expected to be closed as a result from the safety implementation imposed by the stress tests’ outcome.

An EDF spokesman was unable to confirm this information before the firm’s annual statement, published on 14 February.

Slovak incumbent Slovenske Elektrarne has already delayed two new units at the Mochovce plant to 2015/2016 from 2013/2014, as a consequence of the additional stress tests (see EDEM 9 March 2012).

Czech nuclear operator CEZ stated that the company is already working on safety implementation on its Temelin and Dukovany plants, expected to cost around €65m.

Next steps

On Thursday, the energy committee also called for new proposals on nuclear insurance and liability to be put forward by the end of 2013. Members of the European Parliament will vote on the resolution on 7 February.

The European Commission plans to present a report on the implementation of stress test recommendations by member states in June 2014. MM