Electricity and the Quality of Life – Part 2
Date: November 19th 2020
Author: Danijel Levičar
The electricity shortages in Germany and California have revealed the flawed energy strategy and policy in these two countries. Both have been transitioning to renewables for several years and both have been using them mainly to substitute nuclear power plants.
RES together with nuclear, not instead of it
We cannot always predict natural events, and we cannot trick nature. At a certain point or period, nature will bare its teeth. One of the consequences of the autumn heat wave was a lack of wind. In Germany, this meant a 15–20 GW loss of wind power output.
The lack of wind, combined with the sun setting in the evening, proved unmanageable in California’s case when people came home from work in the afternoon/evening hours and turned on their ACs and other devices which enable or modern way of life. The production outage and the increase in consumption led to an urgent disconnection of more than two million electricity consumers.
A strategic and considered approach to electricity supply planning therefore cannot rely solely on one single energy source (or a group of less reliable sources), but must work to secure a suitable energy mix. Only a mix of sources can allow for an efficient and balanced approach to all three dimensions of the energy trilemma challenge: energy security, environmental sustainability, and energy equity. In their development strategies, countries choose different energy mixes with varying degrees of success in terms of achieving these objectives. The French and Swedish models, for example, offer a counterpoint to the German and Californian model.
Because of its stability, nuclear enables the integration of renewables into a secure energy mix. As a nuclear state, Slovenia has an excellent starting point for drafting a reasonable strategy for its future energy supply.
Nuclear and the quality of life
In order to truly grasp the significance of preserving and increasing the use of nuclear in Slovenia, we must look several decades into the past. How has this cleverly designed infrastructure, which is connected to the existing nuclear power plant (NPP) in Krško, affected our lives? How is the secure operation of this unit felt in our everyday lives?
Older readers (including myself) will still remember the electricity reductions and nights by candlelight in the 1970s and early 1980s. As soon as the Krško NPP was connected to the grid, the reductions stopped and there was no need to store candles in our drawers anymore. This has crucially affected the security of our electricity supply.
Over a period of 37 years, the Krško NPP produced 180 TWh of electricity. This is enough to meet Slovenia’s needs for a full 12 years even if this unit was the country’s sole source of energy supply.
In addition to the secure supply of large amounts of electricity, another advantage of nuclear is its effect (or the absence of it) on the environment, that is, on the climate and the area. In a little over three decades of operation, the Krško NPP has prevented the emission of 180 million tonnes of CO2 (not to mention the emission of dust and other particles) that would otherwise be caused by the production of the same amount of electricity in coal-fired thermal power plants.
As for the spatial aspect, the Krško NPP produces over a third of the electricity consumed in Slovenia on no more than 1 km2 of space. It therefore produces a lot of energy without taking up a lot of space. If one of our aims is to preserve the environment, the ecosystems, and the habitats, then nuclear is the right solution, as it can help preserve all 38% of Slovenian territory protected under the Natura 2000.
The Krško NPP therefore produces clean electricity, which is accessible to all citizens and which ensures the competitiveness of the Slovenian economy, especially the energy-intensive part of the industry. It provides a solid foundation for our plan to further expand nuclear capacity.
The Krško 2 NPP project through the prism of strategic thinking and state-building
The Krško 2 NPP project is a strategic infrastructural investment relating to a new nuclear unit at the existing Krško location. The investment vehicle is the Slovenian company GEN energija (the parent company of the GEN Group), or GEN for short, which is wholly owned by the Republic of Slovenia. The project encompasses the planning, construction, operation, and decommissioning of the unit.
So how do we view the Krško 2 NPP project at GEN and why do we assert that Slovenia needs it? The new unit will assume the role of the power system backbone – initially alongside the Krško NPP and then also when the existing plant concludes its operation. The second unit will therefore fulfil its mission of providing a public service: a secure supply of low-carbon electricity at an accessible price for all citizens. We expect the Krško NPP to continue operating until at least 2043. Without a substitute for its output, Slovenia’s electricity import dependence will increase from 15% today to as much as 60% in 2050. Such high import dependence can undermine our independence and the ability to make sovereign decisions – as the decisions will instead be made by those operating the ‘energy tap’. Many countries in the world and even in the EU are now painstakingly trying to shake off their energy dependence.
Regarding the choice of technology, experts have had positive experiences with pressurised water reactors (PWR) both in Krško and around the world and so this type of reactor, reaching 1,000–1,200 MW, is envisaged also for the Krško 2 NPP. For comparison: the existing NPP in Krško has a nominal capacity of 696 MW.
GEN has also examined potential technology suppliers. In the last ten years, the number of suppliers increased by 40%, coming from Russia, the U. S., China, South Korea, Japan, and France. There are 54 new NPPs currently being built around the world. This increase is a sign that the competition is growing and this is the best indicator of a nuclear renaissance.
The Krško 2 NPP as an intergenerational infrastructure project
When considering the price of the new unit, we must take into account that it is an intergenerational infrastructure project with a lifetime of 60 to 100 years and a payback in the first 20 years after starting operations. When it comes to strategic infrastructural projects, we expect reliable operation, zero emissions, and a competitive and accessible product – profitability is also vital, but only in the next stage.
The Krško 2 NPP investment amount will largely depend on the way in which it is financed. Consider the Hinkley Point C new build project. The existing financial construction envisages a 13% WACC, which means that the capital costs take up 2/3 of the total projects costs. Such high expectations in terms of profitability and interest are usually associated with short-term investment. If the financial construction were based on the requirements of long-term infrastructural projects with a lower (4%) WACC, the cost of the project would halve. Incidentally, the Slovenian Decree on the Uniform Methodology requires that infrastructural project in Slovenia have at least a 4% profitability. In contrast to the UK, Czechia opted for a model with soft government loans. The Czech Dukovanye NPP project was therefore supported with a long-term loan with a 2% interest rate.
Figure: Breakdown of the production price of the Hinkley Point C project. The high project price (left column) is the result of a high WACC (13%). A lower WACC, as specified in the Slovenian Decree on the Uniform Methodology (4%, right column), would halve the cost of the project and with it the final price of electricity (summarised results of a study commissioned by the Dutch government. Link: https://t.co/IRdN17wUAB?amp=1)
Considering the Krško 2 NPP’s current level of development, it is still too early to discuss its cost. However, we can learn from the experiences of other countries with nuclear new build. According to global data, a nuclear power plant can be built for a cost of less than EUR 3 billion, whereas the average is EUR 5 billion; this depends of course on its size and local specifics.
GEN has so far concluded the first phase of the project, which relates to the pre-investment study and preparations for strategic decision-making. The results of the research, studies, and project documentation show that the Krško 2 NPP is necessary, feasible, and economically viable. We therefore submitted an energy permit application to the Slovenian Ministry of Infrastructure in January. We expect to have it approved by the end of the year.
Proud of the fact that Slovenia is a nuclear state
GEN is very proud of the fact that that Slovenia is a nuclear state and has often made this clear. It is one of the 30 countries with a developed nuclear programme. The country has a functioning nuclear infrastructure in place, encompassing legislation and a regulator (URSJV), scientific/research and educational institutions, strategic mineral reserves, a decommissioning fund, and of course an owner and a production unit with excellent management.
All this provides a springboard for a substantiated and systematic consideration on the advantages of the Krško 2 NPP project and the related benefits for Slovenia’s society and welfare. The project addresses all the key energy challenges of our future. Nuclear power is our most reliable domestic source, which increases the country’s electricity self-sufficiency. The Krško 2 NPP project will help us actively lower the carbon footprint and the effects on the ecosystems. The produced electricity will be accessible to all the citizens and will stimulate a competitive economy.
Without access to electricity, there is no dignified modern life. Therefore, at GEN Group, we consider the supply of clean and reliable electricity to be part of meeting basic human needs and promoting positive social change.
However, this positive change will only be possible once we, as a society, are capable of considering key values in an honest way and of having a discussion based on cooperation and not only on opposition. As soon as we are all ready to take part in a rational debate, backed with facts and numbers, the acceptable solutions will present themselves.
The opinions expressed by the author do not necessarily reflect the opinions of Energetika.NET.
This article is available also in Slovene.