When considering the future of civil nuclear power, it has become conventional to talk in terms of three major regions of the world, where prospects are significantly influenced by rather different factors.
In North America, although both public and political support for new nuclear build is good, the (seemingly quite sudden) appearance of large quantities of cheap unconventional gas have significantly hit the economic case for nuclear. How long gas prices will stay low is hard to judge, but until they settle at levels at least 50% above where they are today, it will be very difficult for new nuclear stations to compete in areas with liberalized and competitive power markets.
In the centrally-planned economies of China and South Korea, by contrast, there is a strong commitment to nuclear by the public authorities which is likely to see continued heavy investment in new plants. Russia can be added here, as its ambitions in nuclear are similar and backed by strong governmental support.
Finally in Europe, despite the strongest commitment to hitting environmental targets by the electricity sector, nuclear faces a huge challenge from the public commitment to renewable energy, backed by significant subsidies. Although the situation varies considerably by country, with acute public acceptance problems in some (Germany) and a firm commitment to new nuclear build in others (the United Kingdom), the overall picture does not currently look very favourable for nuclear.
But there are a significant number of potential problems in reaching the levels of renewables market penetration envisaged in the EU Commission’s Energy Roadmap (see also my February 2012 comment). What is now becoming increasingly apparent are the (rather obvious but hitherto often ignored) challenges Europe is facing in integrating increasing amounts of renewable energy into the power system (and indeed, into the economic system as a whole).
There is now a growing technical problem in several countries where the power system itself can barely cope with the highly-variable input of large amounts of solar and wind power. Also, there is an economic problem that subsidies are distorting the functioning of energy markets, in particular undermining the profitability of conventional power stations, on whose output renewable energy is relying for back-up capacity. Added to this, thanks to the increasing interconnection between national power markets in Europe, electricity increasingly finds its way across national borders. As a result, national support schemes for renewables can also affect the markets of neighbouring countries. But each country has different support schemes for renewable energy, so the renewables revolution is arguably distorting the functioning of the European power market as a whole. Countries are now also trying to cope with the challenge of renewables integration in different ways, by setting up different types of national capacity markets, which is leading to even further market distortions.
What now seems most likely to happen is that renewable generators will be asked to play a bigger role in managing the impact their production has on electricity systems. In addition, they will have to deal with reduced financial support and legal prerogatives as policymakers try to end their previous insulation from mainstream energy markets. Some observers are beginning to see this as the ending of the ‘honeymoon’ period for renewables, and the imposition of much more realistic long-term thinking.
Power system operators are now clearly struggling to cope with the overwhelming introduction of intermittent renewable energy—wind and solar power in particular. Renewables pose two main problems for power supply grids. The first is that their generation capacity cannot be increased upon request by the operator; it is non-dispatcheable. The second is that the very generation of intermittent power requires the presence of fast-responding dispatcheable power units to maintain system balance. So the increased market penetration of renewable energy sources necessitates more efficient management of supply and demand. The big question is: how? What is the best way to smooth the integration of renewables in such a way that system security is maintained at all times? Who will bear which responsibilities?
The expectation until now has been that the electricity grid itself should adapt to the growing presence of renewables. The IEA’s 2011 report ‘Harnessing Variable Renewables’ proposed four main solutions to make power systems more resilient to intermittently-generated energy: reinforcing interconnection capacity, electricity storage, demand-side management and expansion of dispatcheable power generation. Each of these four options would arguably contribute to making the transmission grid more robust and flexible, allowing for an increased market penetration of renewables. One could add that two other developments would also help: the development of fancy new ‘smart grid’ technologies, and the push (albeit facing some resistance) for moving system management from a national to a European level.
Increasingly, however, there are calls for renewable generating units to behave more like their conventional counterparts in order to satisfy the needs of the transmission grid under all operating conditions. According to this view, renewables should start to take on a new, more proactive role in the power system. One major reason in favour of this idea is that a considerable part of conventional generation capacity risks becoming uncompetitive in the future energy market. The problem is that as renewable energy sources have negligible marginal costs; conventional production becomes uncompetitive and is shut down when there is a lot of wind or sun. At the same time, renewable energy needs this same conventional generation capacity as backup if the wind or sun fails to do its job. Conventional production here usually means gas-fired or coal-fired thermal power plants (however, nuclear can also load-follow).
Many thermal units across Europe are also expected to close for environmental reasons: in the UK for example, approximately half of all coal plants will face closure in the coming five years. At the same time, the business case for investment in new thermal capacity has crumbled and little incremental capacity is expected to enter the market in the coming years. Because the conventional power plants play an important role in controlling the frequency of the network, their disappearance would put the security of the entire system at risk. To mitigate this risk, many countries are implementing capacity remuneration mechanisms (CRMs) that reward plants simply for being ready to go. Such schemes create additional revenue flows for the thermal plants that may prevent them from having to close.
These CRMs have many obvious drawbacks; at worst, they could keep a heavily-polluting plant open, when a prime objective of energy policies is to move towards zero-carbon options. They are essentially nationalistic responses to what is in reality an overall European problem. For EU energy policy to create a low-carbon economy on the basis of competitive markets that guarantee security of supply, renewable generators are likely to be burdened with more duties and lose some of their current privileges. If renewables are the main reason that conventional power plants are driven out of the market, then—recognizing that there is little in the short term that can be done about the potential of demand-side response, stronger interconnections and electricity storage—renewables will have to step up their contribution to the long-term security of power grids.
Technical rules are beginning to be revised to ensure that renewable generators actively participate to maintain the power system's frequency within safe margins at all times. New renewables units will have to meet obligations to help stabilize their output. They would have to match their production with demand through the power exchange, or by other trading; failing this they would have to pay a balancing charge, like other market players. The level of this charge has to be set high enough to push for more discipline among renewable generators; in any case it should be higher than the revenues they receive through their support scheme. Making renewable generators responsible for balancing should push them to be more prudent in their forecasts, thus reducing the need for flexible reserves.
The move to a more integrated vision of renewable production and the needs of the power grid should considerably reduce the need for expensive investments in transmission cables. In most European countries, the local system operator is legally obliged to provide any renewables generator access to the transmission grid. As a result, renewable energy project developers have no incentive to build plants near demand, and instead build where the wind is strongest or the sun brightest. Connection costs will now likely shift to the generator by imposition of location-dependent tariff levels that link costs to distance.
Renewables generators will only respond to such incentives, however, if their revenue stream relies at least partly on market prices. Schemes where the market price is largely irrelevant to renewable generators—feed-in tariffs in particular—will not stimulate project developers to build their plants near demand centres. By contrast, support schemes that link the pay-out of renewables to energy market prices in some way will encourage a more-efficient diffusion of new renewable capacity.
Across Europe, there is increasing scrutiny of the level and nature of existing support schemes. Massive government support has led to significant growth of wind and solar power in Europe, but this may not continue as easily as before. The economic crisis has forced all governments to cut back spending; costly attempts to transform the delivery of energy (and specifically of electricity) are under threat. This is particularly true where such policies have included writing off valuable performing assets, such as the shut-down nuclear power stations in Germany. The initial justifications for support schemes—the persistence of market barriers, internalizing the external costs of conventional generation, and the relative immaturity of renewable energy technologies—have lost considerable weight in recent years. Voters understand that power prices will have to rise to transform the energy mix, but the extent of these rises is now becoming an issue.
The harsher and more demanding market environment that renewables will now face should not prevent their ongoing evolution; they will play an ever more important role in the coming years. It would be fair to say, however, that some of the higher projections for the market share of renewables by 2030 or 2050 now be subject to an increasing level of doubt. This greater realism about the impact of renewables will unfortunately not, in itself, cause any turnaround in nuclear power’s fortunes in Europe. The nuclear industry must therefore continue to stress the key attributes of nuclear power in well-established terms of safety, reliability, affordability, and the environment. Ultimately renewables can only meet very high market shares if we go beyond the conception of a centralised electricity market. In the absence of proven advanced smart grid solutions that facilitate supply and demand flexibility at a local level, the intermittency of wind and solar units will always be a problem. And if we do eventually move to small-scale localised power markets, nuclear will be able to offer the smaller SMRs as its own particular solution.
Steve Kidd is acting director-general of the World Nuclear Association, where he has worked since 1995, (when it was still the Uranium Institute). Any views expressed are not necessarily those of the World Nuclear Association and/or its members. This article first appeared in the November 2012 issue of Nuclear Engineering International magazine.