Ambassadors from the European Union’s 27 member states agreed on 24 June that the fund to wean regions off fossil fuels should not finance nuclear or natural gas projects. 

Article 5 of the regulation establishing the Just Transition Fund (JTF), published on 25 June, says: The JTF shall not support “the decommissioning or the construction of nuclear power stations”. 

The European Commission (EC) aims to set up the €40 billion ($44.8bn) JTF. It will comprise €30 billion from an EU coronavirus recovery fund and €10 billion from the EU budget for 2021-27. The fund aims to encourage a shift from high-carbon industries that would help coal miners to retrain and find new low-carbon jobs, and support regions whose economies depend on polluting sectors to build new industries.

The position is in line with that of the EC, making it likely that the final JTF will exclude nuclear and gas, a policy also reflected in the recent EU taxonomy developed by the EU Technical Expert Group (TEG) on Sustainable Finance. The proposal will be finalised following negotiations between member states, the Commission and EU Parliament.

The JTF is one pillar of the Just Transition Mechanism (JTM), the other two being InvestEU and the public sector loan facility. It is part of the European Green Deal effort to create a climate-neutral economy in Europe by 2050.

IEA report calls for level playing field for nuclear

However, the International Energy Agency (IEA) in a new report – EU Energy Policies 2020 – launched on 25 June, indicates that nuclear should receive support. The extensive 308-page review discusses the energy challenges facing the continent and recommends possible solutions to help it achieve a secure and sustainable energy future.

Noting the EU’s "impressive track record of decarbonising power systems through renewable energy," the IEA also said: “The EU should ensure a level playing field for investors and technologies, including natural gas and nuclear, for those countries and sectors that rely on it.”

It added: “EU rules need to facilitate state aid for public and private renovation (for instance by energy service companies), large-scale infrastructure and technology replacement.”

The IEA report noted that “the TEG has been so far unable to recognise nuclear energy and natural gas as sustainable or non-sustainable, therefore has temporarily classified it as a so-called transitional or enabling activity”. However, gas and nuclear “could potentially be labelled as an enabling or transitional activity in full respect of the ‘do no significant harm’ principle”. It adds: “Natural gas and nuclear energy need to be covered under the taxonomy as transition technologies. If this is not the case, this may have wide impacts on private and public funding for these sectors.”

In the report’s section on nuclear, IEA noted: “Going forward, it is important for the EU to ensure the coherent alignment of all policies, legislation and implementation tools, including EU public and private financing instruments and taxonomy, which are relevant for nuclear energy. This is necessary to enable nuclear sector stakeholders, including policymakers, investors, utilities, the research community and universities, the safety authorities, and the waste management agencies, to effectively play their respective roles.”

According to IEA analysis, without lifetime extensions, EU nuclear capacity would fall from 126 reactors in operation today to 37 reactors by 2030, with 89 being in decommissioning phase beyond the 91 already shut down before 2015. The latest IEA analysis shows that lifetime extension/long-term operation (LTO) of nuclear plants is cost-competitive compared with other investments.

“Without LTE/LTO, the EU would see the largest nuclear fleet decline across advanced economies, with the share of nuclear in the electricity mix falling from 25% in 2017 to 5% in 2040.” 

“The generation gap resulting from already planned coal phase-outs in EU countries together with such nuclear shutdowns would need to be filled by wind and solar power, and natural gas for flexibility, which are not perfect substitutes for nuclear power.” 

On new-build, IEA said there are 7GW of nuclear reactors under construction in EU countries. “These new plants have seen important delays and cost overruns for multiple reasons. These reasons need to be carefully analysed, and the lessons learned taken into account for future constructions to ensure continuation of nuclear power once the existing reactors are shut down.”

Nuclear may also have an increased role to play beyond electricity production in other sectors, IEA noted. This could include district heating; coupling a nuclear reactor with industrial processes that require high-temperature steam supply; production of hydrogen through (high-temperature) steam electrolysis or through thermochemical cycles.

The report stated: “Many of the advanced reactor systems under development are looking at co-generation, or operation in a hybrid energy system, together with renewables. In such systems, baseload nuclear generation can be used to produce either electricity or hydrogen, depending on market conditions, thereby also facilitating the integration of variable renewables in the electricity system. Nuclear power can, therefore, contribute to easing the technical difficulties of integrating variable renewables and lowering the cost of transforming the electricity system by offering the necessary flexibility. EU countries, notably France, also have experience with load following nuclear, but these options are largely limited when the nuclear fleet reaches a certain age, due to maintenance shutdowns needed for LTO/LTEs.”

IEA stressed that to reap the benefits of nuclear energy as a low-carbon electricity source, nuclear should be treated on equal footing with other low-carbon technologies, and that there is coherence between the policies based on EU scenarios.

“This is particularly true for the financing and investment tools developed at EU level, in part to support the decarbonisation of energy supply…of which some already exclude nuclear. In this regard, the implementing criteria of the Sustainable Financing Taxonomy are highly critical, since they will guide EU financial instruments, and other international financing institutions, the private banking sector and investors at large.”

IEA recommends that the EU should:

  • Support the role that nuclear energy can play in the transition towards decarbonisation and sustainability, where this is the choice of a member state. Concerned member states should keep the nuclear option open by supporting LTE of existing nuclear plants as well as new plants, based on a technology-neutral and consistent approach in EU strategies, legislation and financing mechanisms.
  • Support a broader spectrum of research, development and demonstration on advanced concepts and small modular reactors, including for heat production for industrial uses and co-generation, integrating flexible nuclear and renewable sources and progressing towards harmonisation and standardisation, as well as the development of common approaches for licensing.
  • Promote better synergies between the research to increase the effectiveness and impact of the funds. Ensure that financing mechanisms for innovation are open for nuclear-related demonstration projects.
  • Work with EU member states on the proactive development of plans for the final repository of high-level nuclear waste, notably at regional level to accelerate their implementation in a cost-effective way.
  •  Foster international co-operation with non-EU countries and entities, where appropriate, in particular for the use or construction of scarce large nuclear research infrastructure, including fusion research