It was a decision that took the government that controlled them by surprise, but on Tuesday Sweden’s publicly owned energy giant Vattenfall made a decision to accelerate decommissioning of two nuclear reactors.
To the delight of the co-governing Swedish Green party, Vattenfall’s directors issued a statement saying that two of the nation’s nuclear reactors are due to go offline five years early. Reactors in the nuclear power plant at Ringhals, on Sweden’s North Sea coast, were due to be decommissioned in 2025, but could now come offline as early as 2018.
Sweden was a pioneer in nuclear energy, pursuing an independent nuclear program throughout the 1950s and 1960s. Since the 1980s however it has shown a reluctance to build new nuclear and the current Social Democrat and Green coalition government has ambitious renewables targets.
At first glance this looks like a simple case of a green-minded government changing energy policy, but the situation is more complex, and has a great many lessons for the UK. The first thing I did when I heard the news was ring a contact in the Swedish government to ask when the decision had been made. The answer was surprising. “We had nothing to do with it, at least not directly”, came the reply.
This is not an executive decision, but an example of how nuclear energy and its associated costs can quickly become unprofitable when the market is adjusted to favour other types of production. Although owned by the Swedish state, Vattenfall operates on a commercial basis and decides itself which investments to make. Its primary obligation is to make a profit for its shareholders, the Swedish taxpayer.
In its latest budget the new government, elected last September, has increased tax in a number of areas. Alongside a range of green taxes to incentivise sustainable behaviour, the Greens pushed for the introduction of an increased nuclear tax. Although the increased levy on nuclear energy will bring in little income, it tips the balance further in favour of renewable energy transition for both consumers and power generators.
In Britain the situation is made more complex by the fact that governments have only indirect control of energy policy through setting market terms and – in Scotland’s case – planning permission for new nuclear plants. Nowhere is this better seen than in the decision by the Tories and Liberal Democrats to go ahead with a new nuclear plant at Hinkley Point in Somerset. To make it work the UK was forced to ask the EU for special permission to provide a £17.6bn subsidy. This tax money is being paid to French energy giant EDF and Chinese construction firms to make the new plant a reality. As its critics have pointed out, without such huge state aid the project would simply be unviable. Whereas Vattenfall pays money into the Swedish treasury, in Britain the government is providing direct tax subsidy to run economically unviable nuclear projects.
With Labour, the Liberal Democrats and Tories all in favour of new nuclear it is hard to envisage a point at which UK energy policy as a whole changes along the same lines. The decision to construct new nuclear plants in England ties the UK energy market to the technology for decades to come. The SNP meanwhile are unlikely to push for a change in Westminster, and at a European level there is still a nuclear consensus due to the impressive upfront figures it can guarantee in reducing carbon emissions.
A large part of Sweden’s ability to decommission nuclear reactors depends on energy efficiency reducing demand. Sweden has a policy of reducing energy use by 20 per cent on 2008 levels by 2020 – the same year the reactors are due to be taken out of service. The EU as a whole has targets of increasing energy efficiency by 30 per cent by 2030, but this is related to overall efficiency rather than total use. This means that countries can increase both efficiency and capacity, with new nuclear sucking up that demand. Sweden’s gamble is that it can grow its economy but keep or reduce the same number of nuclear stations through efficiency savings, all the while moving towards increasingly large renewable shares. This can be contrasted to the double capacity strategy taken by the SNP which envisages exporting energy to the rest of the UK on the top of its own 100 per cent renewables target.
Considering the love of markets in almost all UK political parties, they seem reluctant to use them when the market says that nuclear does not pay. Sweden may not quite be there yet, and its environmental record is less stellar than many might believe, but the latest news shows one thing – if you move the goalposts in the right direction you need never kick the ball yourself.