White Paper - 01. Offer guarantees against political fluctuations.

Page / - last modified by Ad Min on 2021/04/24 22:49

01. Offer guarantees against political fluctuations.

last modified by Ad Min

on 2021/04/24 22:49

Table of Contents

Energy companies and suppliers from megawatt to gigawatt-scale power plants are reluctant to embark on large and long-term projects, as governments have shown themselves to be unreliable in the past. Examples are the Atomausstieg in Germany, the nuclear exit in Belgium and the biomass failure as well as the situation around the Eemshaven power plant in the Netherlands. Recent nuclear power plant projects in France, Finland and Britain have been hampered by a stacking of government-enforced changes in preparation and construction. The government itself thus poses an unacceptable high risk to these commercial ventures. By designing a long-term vision including a state guarantee or state participation, the government can become a reliable partner again.

There are a plethora of examples showing why people are reluctant to invest in large-scale energy facilities that require a long-term commitment, including from the government.

For example, there is the claim for damages by the owner of the Eemshaven power station because they built it and put it into operation after having received several indications from the Dutch government that the plant was needed, and now they must close it. There is the stalled process around the biomass power plant in Diemen. More generally, there is the failure around the use of biomass for energy generation in the Netherlands thanks to a 180 degree turn from subsidizing biomass to wanting to eliminate it by the government. The Dutch government indicated for years that new coal3 —and biomass— plants were necessary to ensure security of electricity supply to Dutch customers. The government did this—among other things—by making subsidies (SDE+) available for biomass co-use and biomass in coal-fired power stations.4,5 Now it appears that these measures were premature, and that relatively new coal & biomass-fired power stations must close prematurely. The operators (RWE) are now filing lawsuits against the Dutch government.

We see a similar pattern in Germany where Vattenfall had to close three nuclear power plants prematurely.6 In 2011, the Merkel Government decided to force the premature closure of the remaining nuclear power plants, leading to a loss of profits and lawsuits.7 A settlement between the companies and the German government has been reached recently. Now, Germany must pay them 2.4 billion Euro in damages.8

There are similar problems at the Dutch Pallas reactor project. The Dutch government bears responsibility for the emergence of an unnecessarily complicated situation. On one hand, the government determined that the High Flux Reactor was aging and needed to be replaced.9 On the other hand, the government doesn’t want to provide sufficient guarantees to enable the financing of the Pallas reactor. This causes a lot of uncertainty, and it is questionable whether the Pallas project will continue.10

Finally, we want to highlight that the increasing costs of the ongoing European Pressurized Reactor (EPR) construction projects in Europe has damaged confidence. These projects involved a complex confluence of circumstances. A study conducted by the Massachusetts Institute of Technology (MIT)11 shows that the government played a crucial role in continuously increasing costs. Consider, for instance, the major design changes demanded by governments, while construction was already underway. This led to large-scale technical and financial reconsiderations.12 A prerequisite for bringing new nuclear power plants online is a government that ensures that the operational life of a new power plant is at least equal to the initially estimated service life. The alternative—to ensure that the operator has other financial guarantees against swinging policies—is conceivable but socially suboptimal.

3 Quote: “in the past, the Dutch government has designated the ports of the Maasvlakte near Rotterdam and the Eemshaven in Groningen as locations for new plants, due to the presence of ports for the import of fuel and the availability of sufficient cooling water.RWE accepted the invitation of the Dutch government and has built a state-of-the-art coal-fired power station in the Eemshaven with a capacity of 1,560 MW, which was commissioned in 2015.”- https://www.group.rwe/nl-NL/ons-portfolio/onze-vestigingen/kolencentrale-eemshaven
4 Quote [2012]: “One of the cheapest renewable energy options in the Netherlands is to add and use biomass in coal-fired power plants. The government therefore wants to make the updating and re-use of biomass in coal-fired power stations mandatory in the coming years.” - https://web.archive.org/web/20120321170628/http://www.rijksoverheid.nl/onderwerpen/duurzame-energie/bio-energie
5 Quote [2014]: “Co-operation and co-use of biomass in coal-fired power stations will be supported in the SDE+ 2015, according to the Parliamentary Letter of 11 November 2014, in which the Minister of Economic Affairs announced the plans for the SDE+ 2015.” - https://zoek.officielebekendmakingen.nl/blg-456169.pdf
6 https://group.vattenfall.com/what-we-do/our-energy-sources/nuclear-power
7 https://www.world-nuclear-news.org/C-Vattenfall-sues-Germany-over-phase-out-policy-16101401.html
8 https://nos.nl/artikel/2371323-duitsland-compenseert-energiebedrijven-voor-vervroegd-sluiten-kerncentrales.html
9 https://www.rijksoverheid.nl/documenten/kamerstukken/2020/12/09/kamerbrief-over-stand-van-zaken-pallas-reactor
10 https://www.rijksoverheid.nl/documenten/kamerstukken/2021/03/11/voorzieningszekerheid-van-medische-isotopen
11 http://energy.mit.edu/research/future-nuclear-energy-carbon-constrained-world/
12 https://www.world-nuclear-news.org/Articles/Stuk-requests-more-details-on-EPR-systems