Fears hit EU nuclear plans, boost gas prospects

BRUSSELS/VIENNA Fri Apr 1, 2011 10:54am BST

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BRUSSELS/VIENNA (Reuters) - Japan's nuclear crisis will speed the elimination of nuclear power from some European countries and render many planned projects too risky, ultimately increasing Europe's dependence on gas.

The depth of change, however, still depends on how quickly Japan can stabilise the crippled Fukushima nuclear plant.

For a region with little history of earthquakes, tsunamis or even major power blackouts, Europe's reaction to a crisis on the other side of the world has been striking.

Talk of a European nuclear renaissance had so far amounted to nothing more than half-finished plants in France and Finland, and a lot of unrealised dreams. Those dreams now appear dead.

German Chancellor Angela Merkel swiftly suspended operations at seven ageing reactors in the wake of the Japanese disaster, and the nuclear issue has become a political football in a country where anti-nuclear sentiment has run high since the 1986 Chernobyl disaster.

Austrian Chancellor Werner Faymann has vowed to push for a pan-European phase-out and promises a "hard confrontation".

Italy and Poland are wavering over plans for a nuclear future.

In Brussels, European Union bureaucrats see a chance to take control of an area that has long eluded them.

"The European Commission is trying to identify where it can be more active, and nuclear is definitely one of those trans-boundary issues -- the Commission is testing how far it can go," said Christian Egenhofer at the Centre for European Policy Studies (CEPS.L), an independent think-tank.

"That works well for Merkel if the Commission manages to get the job done and she can keep her hands clean."

STRESS TESTS

Last week, EU leaders agreed that Europe's 143 reactors should face a series of 'stress tests', the details of which will be prepared in the next few weeks by energy commissioner Guenther Oettinger, himself a member of Merkel's party.

The tests are likely to focus on resistance to flooding and earthquakes or prolonged loss of power, accident management procedures and the storage of spent fuel, analysts say.

While the tests are unlikely to have legal teeth, public pressure will probably force expensive upgrades at plants that fail. The governments of Spain, France and Germany have already said closure could be an option.

"The cost of nuclear power could rise by around 10 percent," said Colette Lewiner at French consultancy firm Capgemini. (CAPP.PA)

What of the costs of new nuclear projects?

France is pushing for the highest standards possible for nuclear safety, in the hope that its expensive, new generation European Pressurised Reactor EPR.L reactor will be the only design to get a passing grade in the future.

However, analysts say estimates for the cost and timetable for building new nuclear plants in France and Finland had already proved over-optimistic. Finland's Olkiluoto 3 project is running four years late and way over budget.

More costs to improve safety could tip the economic balance against new nuclear at a time of high political risk.

"I don't see new nuclear being competitive in a liberalised European energy market. It takes 15 to 20 years to get a profit out of a nuclear plant, and I can't see anybody doing this without heavy government support," said CEPS's Egenhofer.

"I don't see Poland building one; they just extended a long-term contract for Russian gas. And even if Lithuania wants to build one, they run the risk of stranded assets."

The International Energy Agency, however, has urged patience in judging the risks of nuclear power and said it is needed to help cut carbon emissions.

FILLING THE GAP

Eurelectric, which represents the electricity industry, says any problems meeting demand will be regional.

"If all the nuclear power plants older than 30 years were to close, the EU 27 would lose 14 percent of its nuclear power generation capacity -- around 19,000 MW," said Eurelectric analyst Susanne Nies.

"Some regions would face problems, especially in cases of incidents and related difficulties to get the system started again," she added. That means new plants will be needed.

Renewable energy faces several hurdles to filling the gap, most importantly it needs a continental grid to allow states to transfer surges in renewable power across borders.

"You can't transfer electricity from west to east because the connectors aren't there to make it possible," said Miranda Schreurs, a policy researcher at Berlin's Free University.

Sources say Germany is at particular risk of grid disruption, having prepared for nuclear plants to shut off in 2015 -- not 2011.

Coal-fired generation is not an easy option either, because it faces tighter EU laws to improve air quality.

"We do not think as a general rule that conventional coal plants are a viable new-build option any longer," Deutsche Bank analysts said in a report last week.

That leaves just gas. "We conclude that (gas) imports will rise to 71 percent of total EU-15 supply by 2015, compared with 66 percent in 2010," Deutsche Bank said.

(Additional reporting by Muriel Boselli in Paris, editing by Jane Baird)

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