Nuclear developers stumble over technology and financing

Project delays and the Fukushima disaster have dented the appeal of atomic power
© AFP

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Olkiluoto island on the west coast of Finland is a showcase for the best and the worst of nuclear power.

Perched on a shoreline with the Baltic Sea on one side and miles of pine forest on the other, two nuclear reactors have been churning out reliable and low-carbon electricity here for almost four decades.

Olkiluoto is one of the world’s most efficient power stations, operating at an average 93 per cent of its generating capacity in 2016, compared with 73 per cent for nuclear reactors globally and about 40 per cent for offshore wind farms.

Yet next door to Olkiluoto’s two working reactors is a reminder of why, for all the appeal of splitting atoms to produce electricity, the nuclear industry remains so deeply controversial.

Construction started in 2005 on a third reactor at Olkiluoto which was supposed to come on line in 2009 at a cost of €3.2bn. More than a decade later, the European Pressurised Reactor (EPR) being built by Areva of France is still at least a year from completion and almost three times over-budget at €8.5bn.

The project has become an emblem of the technical and financial difficulties involved in building nuclear reactors — particularly since the 2011 meltdown at Japan’s Fukushima power plant laid bare the unique risks of the technology.

Increasing safety requirements since Fukushima have been pushing up the cost of nuclear power as rapidly as those of alternative technologies, such as wind and solar, have been falling. Simon Bullock of the environmental group Friends of the Earth says nuclear power is a “stumbling, inflexible dinosaur” being overtaken by “fleet-footed mammals” in the forms of renewable energy and battery storage.

Simulation training at the new OL3 EPR nuclear reactor being built at Olkiluoto © AFP

There is no shortage of evidence to support Mr Bullock’s view. Project delays such as the one at Olkiluoto have forced the French government to engineer a €5bn bailout of Areva, while Japan’s Toshiba has been plunged into financial crisis by heavy losses at its Westinghouse nuclear division.

Some of the world’s biggest economies, meanwhile, are shifting decisively away from nuclear. Germany has been closing its reactors since Fukushima and most of those in Japan remain shut six years after the disaster.

With more than half the 450 operational reactors around the world over 30 years old and nearing the end of their planned lifespans, the industry faces a battle to persuade countries either to renew reactor fleets or adopt nuclear for the first time.

The best prospects for growth are in developing countries scrambling to meet rising energy demand. Of the 60 reactors under construction globally, a third are in China. Olkiluoto is one of just six being built across western Europe and the US, although the UK is bucking the trend with plans for several new reactors in coming years.

Ground preparations are under way at Hinkley Point in south-west England for the first new UK nuclear plant since the 1990s. The project will be an important test of the industry’s ability to learn lessons from recent failings because it is based on the same EPR technology being installed at Olkiluoto.

Pekka Lundmark, chief executive of Fortum, the Finnish power company which owns a quarter of TVO, the consortium behind Olkiluoto-3, says greater standardisation of technology and regulations would help reduce costs.

“One reason why reactors are extremely expensive and difficult to build is because every country has its own regulations, which means that reactors have to be redesigned for the specifications of each country,” says Mr Lundmark. “If Boeing had to make a separate aeroplane design for each country that would be extremely expensive too.”

It would not have been surprising had the Olkiluoto experience turned Finland against nuclear power. In fact, public support has remained robust, with the latest polls showing 41 per cent of people in favour of nuclear and 23 per cent opposed.

This reflects public recognition of Finland’s precarious energy security. The country’s four existing reactors account for just over a quarter of electricity production. Olkiluoto-3 will help reduce dependence on imported power from Sweden, Norway and Russia as coal power is phased out.

“We have a long cold winter where there is very little sun and on the coldest days often no wind,” says Mr Lundmark, explaining the limitations of wind and solar power in Finland. “It is very hard to see how we can decarbonise and maintain energy security without nuclear.”

In addition to its backing for Olkiluoto-3, Fortum is also part of a separate consortium led by Rosatom of Russia planning a new nuclear plant called Hanhikivi-1 in northern Finland. As with Olkiluoto, financing will come from a combination of power companies and energy-intensive Finnish manufacturers, such as steelmakers and paper companies, which are guaranteed a share of the electricity output.

However, the economic case for investment in nuclear risks being undercut by rising imports of subsidised wind power from Sweden and Denmark. This has reduced the price of electricity in the Nordic market to a typical range of €25-€30 per megawatt hour, compared with €55 in 2010.

“It is not possible to make a profit from new nuclear at current prices,” says Mr Lundmark. “Wind subsidies have distorted the system. We would like to see a much higher price levied on carbon emissions and then let the market do its work.”

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