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European Leaders Want Nuclear Listed as Low-Carbon Fuel

Oct. 17, 2013—At the behest of Germany and Austria, the European Commission last week informally decided to exclude nuclear energy as a low-carbon technology in its new guidelines for state funding of renewable energy projects, although investment support for nuclear projects will still be considered on a “case-by-case basis.”

In response, representatives of Poland, the Czech Republic, Hungary and Slovakia―known as the Visegrad group or V4―said that nuclear energy “is being discriminated against.”

Speaking on behalf of the group, Hungarian Prime Minister Viktor Orbán said at a summit in Budapest that the European Union should facilitate Central Europe’s nuclear capacity rather than impede it and urged the EU to rethink its position on state funding of energy-related investment projects.

“We … believe that every country has the right to generate its own energy requirements from the resources it has at its disposal, according to its unique characteristics and interests,” Orbán said.

Other EU member countries that are seeking to develop their nuclear energy sources―including the United Kingdom, France and the Czech Republic―have long argued that nuclear energy should be treated as a low-carbon technology, on an equal footing with solar, wind and hydropower.

Meanwhile, the chief executive officers of 10 of the largest European electric utilities called for an end to the EU-wide subsidies for wind and solar energy that have been in place since 2008. Speaking at a news conference in Brussels last week, the executives said that overly generous subsidies have produced too much renewable energy in a market that must already deal with overcapacity.

Renewable energy facilities in Europe have priority access to the grid at fixed, above-market prices, said the CEOs, making thermal generating capacity—from nuclear, coal and natural gas-run plants—uneconomic to run. Partly as a result, 51 gigawatts of natural gas-fired capacity have been taken off line. The loss of this capacity is jeopardizing Europe’s energy security because the gas-fired plants are essential to back up intermittent wind and solar energy, GDF Suez CEO Gerard Mestrallet said.

“European energy policy has run into the wall,” Mestrallet said.

The executives are urging the creation of a European-wide capacity mechanism that would pay utilities for keeping generating capacity on standby.

The 10 utilities, which include France’s GDF Suez, Germany’s E.ON and RWE, Spain’s Iberdrola, Italy’s Eni and Enel and Sweden’s Vattenfall, own roughly half of Europe’s generating capacity.

The CEOs are members of the Magritte Group―so called because they first gathered earlier this year in Brussels, Belgium, at the museum of that name. The group plans to press EU policymakers for a change in energy policy in advance of an energy summit slated for early next year.

Although wholesale power prices have fallen by roughly half since 2008, retail prices for consumers have risen by 17 percent over the past four years, reaching near record levels. The difference has much to do with the above-market “feed-in tariffs” that are paid to producers of wind and solar energy.

“More than 50 percent of the [electricity] bill [that] European consumers are paying today has nothing to do with power generation and networks,” said Ignacio Galan, CEO of Iberdrola.

In addition, the CEOs warned, because of low prices on the European Union’s Emission Trading Scheme (ETS)—the largest carbon market in the world—there is no incentive for low-carbon generation such as natural gas and nuclear energy.

Prices on the ETS have plummeted from roughly 20 euros ($27) per metric ton of carbon in 2011 to a low of $3.30 earlier this year. Too many permits to emit carbon were issued, and the glut, which reached 2 billion metric tons in 2012, caused a 70 percent drop in the carbon price. In August, the European Parliament voted to delay the sale of some permits in a bid to support prices.

The price collapse has made coal one of the cheapest fuels, another factor spurring the closure of natural-gas fired plants. In Germany, lignite-fired plants have benefitted most from the lower carbon prices. Still, the carbon price would have to go much higher to allow a profitable switch from coal to natural gas in that country, according to German industrial sources. Their estimate is 40 euros ($54) per metric ton.

In the United States, by contrast, low prices of natural gas for now have meant that coal generation is being taken off line (see related story in this week’s Nuclear Energy Overview). Ironically, nearly half of U.S. coal exports went to Europe in 2012.