by Maciej Jeziorski, Frost & Sullivan

Introduction

Nuclear energy, supplying over 31 per cent of electricity demand, plays a key role in the EU’s generation structure, and emerges as a comprehensive and cost-effective generating option. It has the potential to reduce carbon dioxide emission, meet the ever-increasing demand for electricity as well as make a crucial contribution to the Community’s energy independence and security of supplies.

Nonetheless, the current situation in the European nuclear sector is very diverse. Overall, there are 145 nuclear reactors in operation and 4 under construction. In the fifteen European countries, which have nuclear reactors, the share of nuclear power out of the total electricity production ranges from only 3.5 per cent in the Netherlands to 78.1 per cent in France. Despite many growth countries like France, Bulgaria, and Finland, there are some countries without nuclear power like Denmark, Portugal, Poland, Ireland, Austria or phase-out countries like Germany, which is set to change the power generation mix towards more renewable energy sources. 

Though the future prospect of nuclear energy in the EU is still uncertain in many member states, the general trend shows a renaissance of nuclear generation, hence the market is expected to witness solid growth over the medium and long term.

The CEE Landscape

The current situation in the Central and Eastern Europe region (for the purpose of this discussion CEE is defined as Poland, the Czech Republic, Slovakia, Slovenia, Hungary, Romania and Bulgaria) is mainly driven by robust economic growth and rising standards of living, factors which are reflected in an increase of electricity consumption.

Notably, most countries in the region, excluding Poland, have nuclear power units in operation. The Czech Republic has six nuclear reactors, generating over one third of its electricity; Slovakia has five nuclear reactors supplying over half of its demand; Slovenia has one nuclear reactor (jointly owned with Croatia), which supplies 40 per cent of the country's demand; Hungary has 4 nuclear units generating more than one third of its electricity; Bulgaria has two nuclear reactors supplying over 40 per cent of the state’s demand; and Romania has 2 nuclear reactors, which account for about 10 per cent of the country's production. The only EU exception in this region is Poland. The country had four 440 MW Russian units under construction in the 1980s at Zarnowiec, but the work was halted in 1990 and the components were put up for sale. Nevertheless, the domestic electricity consumption in Poland, according to the official document  ‘Energy Policy of Poland Until 2025’, is forecast to grow by 80-93 (depending on assumed scenario) per cent until 2025, which requires substantial additional investments in power generation. Moreover, due to the European regulations to radically reduce the Community's carbon dioxide emissions, the country has no better option than launching a nuclear power plant at once, so that the first plant should be operating around 2021-2022 (a timeframe that has been stated in the most recent governmental documents).

Poland has no operational nuclear generating capacity. 
Source: NEA / WNA

Massive Investments in the Pipeline

At present there are globally 439 nuclear power reactors in 31 countries with an installed electricity net capacity of about 372 GW in operation, generating approximately 16 per cent of the world's electricity. Due to the huge capital investments (a new nuclear power plant costs over € 3.5 billion) only a few major players dominate this specific market. The most well-know firms, which manufacture different types of nuclear reactors and deliver to various parts of the globe are: Westinghouse, Mitsubishi Heavy Industries Nuclear Energy Systems, General Electric, Rosatom and Areva.

Currently, there are 35 nuclear power units under construction world-wide, which are being built mainly by the above-mentioned companies. In the Central and Eastern Europe region, where twenty reactors are in operation, there are plans to set up new or upgrade existing power plants. Today, the CEE region has a net electricity capacity of over 11,000 MW and this is forecast to increase considerably. Slovakia, along with Italian assistance, is developing two nuclear blocks in Mochovce’s power plant; and in early 2008, the Russian company, Atomstroyexport and Bulgaria's National Electric Company (NEC), signed a contract for the design, construction and installation of two blocks for the Belene power plant; Slovenia is planning to build another nuclear block in Krško; Romania is currently proceeding with plans for the completion of two blocks in the country’s only nuclear power plant in Cernavodă; Hungary is in the process of discussing the construction of the fifth block of the nuclear power station in Paks; and the Czech Republic, reportedly, is eager to upgrade the Temelín Nuclear Power Station. Furthermore, as Poland may not build a nuclear power plant in the foreseeable future, the country, along with Lithuania, Latvia and Estonia, will probably invest in a new nuclear facility at Lithuania's Ignalina, which would replace the old Soviet-era plant. Interestingly, Belarus may build a nuclear power plant shortly. The construction is expected to begin by 2010, and the operation of the first reactor is expected for 2016-17.

Unquestionably, these projects will boost capacity noticeably, thus nuclear energy in the Central and Eastern Europe states is expected to gain importance in the near future (mostly when it comes to satisfying shortfalls), and will, undoubtedly, present a number of opportunities over the medium to long term. Nevertheless, Areva, the world's largest nuclear equipment company by revenue, holds the largest share of total CEE nuclear generation. Its EPR (Evolutionary Power Reactor) has become a flagship reactor of Europe and it will definitely preserve its leading position. This French state firm is currently constructing, in cooperation with German Siemens AG, Finland’s fifth 1600 MW nuclear block in Olkiluoto, and has recently won a € 8 billion project in China to deliver third-generation nuclear units to the state-owned China Guangdong Nuclear Power Group.

What Drives the Growth

Any expansion of nuclear power generation has been fruitless in the 1990s, due to the notorious accident at Chernobyl in April 1986. It has been ingrained in people's minds for many years and has raised criticism whenever the topic of nuclear power generation has been brought up, especially in the Central and Eastern Europe region, where people were directly exposed to the disaster. Fortunately, the explosion of the fourth block of the Chernobyl nuclear power plant is becoming less significant than other, principally economic, factors. In recent years, CEE countries have been growing rapidly, outpacing the EU-15 by a wide margin. As a result, the electricity demand has been increasing radically (5 per cent GDP growth results in over 3 per cent upsurge in electricity consumption). Moreover, as members of the European Union, CEE states are obliged to considerably decrease carbon dioxide emission. Compared to fossil-fuelled alternatives, nuclear power plants appear to be a feasible green and clean solution, producing no carbon dioxide or other greenhouse gases. Besides, the abundance of coal in this region is limited and fossil fuel resources may run out in the near future. For instance, in Poland, coal is expected to last for another 25-30 years, but without huge investments in the sector, the country might be in a position to exploit this fuel only for another 15 years. Although coal resources are very abundant, it may not be economical to extract it from domestic sources, but to import it from cheaper alternatives. Also, compared to conventional thermal energy sources, nuclear units are expensive to build but much cheaper to operate. Another issue that is invoked whenever nuclear energy is discussed is renewable energy. However, the potential from renewable energy alone will never fill the energy gap and, more importantly, the electricity coming from renewables is, and will remain, much more expensive compared to the operational costs of nuclear power. The last aspects of the nuclear dispute are the increases in oil prices and the sustainability of gas supply. Recently, a series of new crude oil price records were reached, with prices spiking above $120 a barrel and further increases are likely in the medium term. Also, the CEE countries face lower and unsecured natural gas deliveries from Russia, which still has absolute monopoly on gas supply to the region.

Conclusion

The first wave of nuclear power generation in Central and Eastern Europe was held back due to accidents such as Chernobyl and Three Mile Island, which took place many years ago. However, with increasing electricity needs and for various other aforementioned reasons, the time is ripe to expand nuclear energy. As a result, the worldwide installed nuclear capacity will grow considerably, and may reach 600 GW in 2030. In the same period, the capacity in the CEE states will, at least, double. It appears that the region has no better option than investing in nuclear power generation, thus a big increase in this sector is expected to happen in the coming years. 

Maciej Jeziorski is Research Analyst, Energy and Power Systems Group at Frost & Sullivan, in London. If you would like more information about this subject and related research and about our Energy subscription, please send an e-mail to Chiara Carella - Corporate Communications, at chiara.carella@frost.com with the following information: full name, company name, title, telephone number, e-mail address, city, state and country.