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France VS Germany – Battle of the Nuclear


Source: Pixabay


Homer Simpson's work ethic in Mr. Burns’ power plant is a perfect image around the sentiment of nuclear energy since the 90s. Fears of safety & improper storage of waste and insufficient public understanding of the process keeps connecting this industry with 3-eyed-fish swimming in the lake of the fictional city of Springfield. However, the new goals of the world for decarbonisation and a new geopolitical scene and relationships, has brought the possibility of nuclear generated power renaissance in the EU.

 

The frontier of engineering and physics in the 60s and 70s, promising cheap, reliable carbon-free energy for generations to come, neglect and low-investments, ageing technology and safety concerns have polarised the politics of the nuclear industry in the 21st century.

Most EU states have built Nuclear Power Plants (NPPs) in their energy mix, a source used as a base in the electricity grids, ensuring stable availability of electricity to households throughout Europe.


Team Gas & Renewables

Crucial electricity generator countries in the EU, such as Germany and Italy have fully decommissioned their nuclear fleet, in favour of pursuing a mix of renewables and gas power plants (GPPs) as the base for the electricity grid. Together with Austria, Luxembourg, Spain and Denmark, they have lobbied the EU for the nuclear not to be considered as part of the solution for European decarbonisation and energy independence, instead favouring GPPs (a fossil fuel with the lowest carbon footprint) as a transitory base in electricity generation and a more rapid development of renewable energy.

The reasoning behind this approach is the safety concerns regarding Soviet reactors after the 1986 Chernobyl disaster and the Fukushima disaster 2011 in Japan. Throughout Eastern European states, there are around 10 NPPs upgraded to EU safety standards from Russian origins still operating and requiring Russian nuclear fuel posing a significant geopolitical risk for Europe (the supplier Rosatom is still an unsanctioned company).

Furthermore, these countries believe that spending billions of Euros in the development and upgrading of existing NPPs, would take away crucial funds from development of new renewable power plants and new technology towards decarbonization of Europe.

Berlin is afraid that the French would have a significant unfair advantage if it can guarantee a low price for electricity from its large nuclear output as a result of new EU rules.


Team Nuclear & Renewables

France is the most significant voice in this lobby group of 14 EU states. In most of these states, Poland being the exception, nuclear energy is a vital carbon-free electricity source in their energy mix and has proven crucial in stabilising the energy prices since the start of the conflict in Ukraine.

Due to the limited access to natural gas and not enough significant possibilities for renewables, Poland is looking to build new reactors. Despite strong German opposition, they have opted to pursue the idea of going nuclear.

This lobby group believes that nuclear energy could provide carbon-free energy for European industry in the medium-long-term allowing them to compete in energy intensive industries against the USA and China.

In addition, they point out that uranium, imported in via seas and oceans patrolled by EU navies & allies, has significantly less geopolitical risk.

Concerning the safety of the industry, this group believes that EU funding is further needed to enhance the safety of already some of the safest reactors, which would prove a cost-effective investment given the price of MWh (megawatt hour) produced.

The team points out the US and Chinese increasing state investment & policy towards nuclear power to replace coal, gas and other fossil fuel power plants, as a model policy for future energy independence of the EU.


The Current Debate in EU hallways

Most of the hold-up in the Energy Market Reforms and majority of recent energy & industrial policy legislation are difficult to enact due to these 2 opposing sides. It is imperative for Team Gas that nuclear not be included as a low-carbon source justifying a push from renewables.

Thus, in the EU Renewable Energy Directives I, II, III, funding for nuclear energy is not considered as the emphasis on renewable energy sources meaning that all EU states would have to heavily invest into renewables to meet standards set by these directives.

However, recently the sustainability of this model is being questioned given there is no plan for decommissioning of GPPs, thus further emitting greenhouse gases to the atmosphere at an increasing rate.

The European Green Deal is the key legislative package of directives, regulations and policy plans for defining how the EU is trying to limit the emission of greenhouse gases to a potential net-zero by 2050.

At heart of it is the 300bn euro RePowerEU plan, a response to the energy market disruption caused by the Russian invasion of Ukraine. This plan was needed to ensure member states have enough gas to meet their needs by establishing joint procurement and investment funds for renewables. However, together with the European Industrial plan, it recognizes.

the need for nuclear power in the procurement of green hydrogen, eligible for EU funding. A policy win for team nuclear, as it provided legal basis for the nuclear industry, and proved that team Gas has an unfeasible energy policy relying on autocratic regimes.

The latest Energy Market Reform has proven extremely difficult for Germany and France to find a compromise on. This piece of legislation is needed to integrate the energy markets more thoroughly by establishing a more liberalised energy market, allowing easier flows between countries.

The main problem arising from this legislation is the availability of EU states to subsidise domestic energy industries, most notably the French-majority state-owned energy giant, EDF. Berlin would not allow for any legislation where the French government can significantly subsidise the electricity price, undercutting other EU competitors and sponsor EDF.

On the other side, Paris would not support any legislation which would not allow it to keep majority control of EDF and support it with public procurement projects, going as far as to block a key infrastructure project in the Gulf of Biscay for integration of Spain’s renewables with the rest of Europe.

The Energy Market Reform was stuck for nearly 2 years in the European Commission until October 17th, 2023, when a sign of compromise between the two warring pen pals presented itself. The Germans have caved to the French government's demands to have a controlling hand in EDF and French electricity generation. However, with a caveat, the use of European bureaucracy, a new term was introduced in the reform - contracts of difference.

Contracts of difference ensure a floor price for state-funded power plants, meaning that a state would actively match a minimal price at the open European market in electricity, guaranteeing a fixed price. However, to ensure competitiveness of the market, state-funded companies cannot sell their electricity above a ceiling price. The revenues from selling above the ceiling price would be used to finance the policy resulting in cheaper electricity for all consumers.

This legislation would ensure that the EDF and the French government would not enjoy windfall profits, or any other state funded company for that matter. This agreement is still in the process of passing in the European Parliament at the time of writing.


Conclusion & Opinions

The battle for the vision of low-carbon and energy independent Europe is still raging. With the 2 biggest European economies disagreeing on many points for how the future energy and industrial policy of Europe would look like.

Both sides have compelling arguments, but this diplomatic clash has shown to the European citizens that an EU chugging on fully renewable power is still a distant future. All sides of the argument are continuously heavily investing in renewables, the spearhead of the future of EU energy security. However, they cannot agree from which starting point, nuclear or gas, this future would be launched.

The stalemate has significantly hurt European consumers, especially the industry, as the uncertainty and complacency on energy reforms has a cost the European competitiveness in key energy-intensive industries, where European firms used to dominate.

Any further blockings on energy policy reforms and uncertainty regarding electricity production chips away on European firms' market share globally and puts Europe in a more difficult economic position, squashed between 2 economic giants with coherent and devices energy politics: China & the US.


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