The deployment of renewable energies has far reaching consequences that go beyond the mitigation of climate change and economic competitiveness. Renewables are altering and lowering market prices for electricity on a global basis, and much of the new capacity has fallen out of the hands of large utilities. The large expanse of market share that utilities enjoy is beginning to shrink and in this competitive environment, their electricity sales at peak hours are also reducing. In today’s energy world, utilities must contend with lower profits and credit ratings. Does this energy context spell doom and gloom to nuclear power? The horizon is grim and this is seen in some corners of the world.
The largest nuclear operator in the world, French-based EDF, has been struggling for some time with debts of massive proportions and unrelenting operating costs. Credit rating agency MOODY’s has identified that electricity volumes that the utility sells under a regulated tariff are on a downward slope from 84% to 50% by 2016. These choppy waters have forced European utility electricity companies to innovate in order to remain afloat in the new market conditions. Rebranding and restructuring are the utilities’ two favorite strategies. For instance, E.ON, owner of four of the remaining nine operating nuclear reactors in Germany, announced that the company would split into two. One will remain with the E.ON brand and will focus on efficiency, distribution networks, customer solutions, and renewables. The other company will be called Uniper and it will manage existing generation assets. Another renowned utility, GDF Suez, has opted for a similar route by rebranding its name to ENGIE.
Energy is becoming three dimensional: it is digitized thanks to the incorporation of intelligent systems, decentralized, and decarbonized thanks to the deployment of renewables. Large centralized power stations, particularly coal and nuclear, are being affected on an economic and operational level by the mass-scale deployment of renewable energies. Nuclear power stations are suited as baseload capacity and cannot react rapidly to the changing prices in the market; they will have to continue to generate even when there is no need or when facing operation losses. Renewables like solar and wind have no fuel costs, so they will enter the grid whenever they are able to generate. In addition, they produce power at lower costs. New and efficient electricity systems need flexible energy sources, be it waste-to-energy, decentralized storage, or even conventional micro power plants that support renewables. The adoption of renewables into the energy mix is detrimental to nuclear power and other baseload generators that are structurally rigid and at a disadvantage. The message is clear, large-scale power plants are poised to become the dinosaurs of the energy industry. Enormous and unbending, they will not be relevant for backup power in the long run. While this image may seem radical to some leaders, this is being voiced by eminent financial institutions. For instance, UBS, the largest Swiss bank, published a report in June 2015 stating that solar will one day replace nuclear and coal and become the technology of choice to generate and supply electricity.
The growth of renewables shows no signs of stopping, and this is forecasted by an increasing number of investors and financial entities. Supporters of renewables have celebrated the continuous drop of production costs of technologies, with PV being the most championed. The drop in prices of energy storage is also bound to push forth the imminent transformation of the power industry. According to the UN Environment Programme, global investment in renewables, with the exception of large hydro was of US$270 billion in 2014, a significant 17% increase from 2013’s US$231 billion. The largest portion of funding was allocated to asset financing, which was of US$170 billion, 10% higher than the previous year. The year 2014 experienced a sharp drop in new nuclear investment; only three new units are under construction (BarakahY3 in UAE, BelarusY2 in Belarus, and Carem in Argentina). This is a slight disappointment compared to the ten constructions carried out in 2013 and 15 in 2010. The list of countries that now generate more electricity from non-hydro renewables than from nuclear power is growing, which includes China, Germany, Japan, Brazil, India, the Netherlands, Spain, and Mexico. It is important to note that these eight countries represent 45% of the world’s population.
While the outlook may look grim in some perspectives, nuclear power plants produce more electricity per megawatt of installed capacity than renewables, whose production capabilities are determined by whether the wind blows or the sun shines. Juan Eibenschutz, Director General of Mexico’s National Commission of Nuclear Safety and Safeguards, shines a light on the positive nuclear global trends, “even through some countries like Germany and Italy have moved away from nuclear power, other countries are committed to continuing developing this power source, with the main one being China, and other countries such as Russia, South Korea, India, and even the UK.” As of 2015, 30 countries were operating nuclear reactors for energy purposes, and these generated 2,410TWh of electricity in 2014 alone. In addition, the share of nuclear power in global commercial electricity generation has remained constant over the past three years. Nuclear generation has increased in 19 countries and surprisingly eight have achieved their greatest nuclear production to date, which include China, Hungary, India, Russia, Slovenia, South Africa, South Korea, and Taiwan. The plethora of trends and figures surrounding this sector showcases how the debate about the role of nuclear power in tomorrow’s low carbon world continues to rage on, and countries with nuclear capacity are standing on either side of the fence.