Austria’s pushback against British nuclear energy plans casts a shadow over the future of Hinkley Point -- and the common European energy market.
- By Keith JohnsonKeith Johnson is Foreign Policy’s acting managing editor for news. He has been at FP since 2013, after spending 15 years covering terrorism, energy, airlines, politics, foreign affairs, and the economy for the Wall Street Journal. He has reported from Europe, the Middle East, Africa, and Asia and, contrary to rumors, has absolutely no plans to resume his bullfighting career.
European countries are at each other’s throats over energy — and for once it’s not about dependence on Russia and its oft-fickle supplies of natural gas.
Austria is going ballistic at Britain’s plans to help underwrite the construction of a big new nuclear power plant to help the U.K. fend off the specter of a looming energy crunch. Vienna has made good on previous threats and vows to appeal Britain’s nuclear plan to Brussels — which greenlighted the British nukes after some initial reservations — arguing that plans to subsidize pricey nuclear power are a violation of European Union rules.
But hell hath no fury like a Tory scorned: Prime Minister David Cameron is livid at the Austrian opposition, and Britain has reportedly threatened to take “every opportunity to sue or damage Austria” if Vienna persists, according to leaked diplomatic cables reported by the British press. Austria, in turn, says it won’t be intimidated by threats; it has until late March to file the appeal.
The fight threatens Britain’s plans to provide enough electricity capacity to avoid blackouts in the future. Électricité de France (EDF), the French utility that is hoping to build the $37 billion Hinkley Point nuclear plant, just pushed back again its final investment decision due to all the uncertainty over the legality of British government support.
“I would think it’s something that could imperil the timeline for Hinkley Point, and I suppose that’s the Austrian objective,” said Raphael Heffron, a nuclear expert at the Center for Integrated Energy Research at the University of Leeds. “The longer the delay, the greater the cost,” he said.
What’s more, the row further divides European countries right as Brussels is trying to finally forge something resembling a common, E.U.-wide energy policy. The European Union is set to unveil its blueprint for an “Energy Union” later this month; that’s a plan to herd the 28 EU cats into something like the same direction when it comes to energy policy. But the legal spat over Britain’s nuclear subsidies could end up calling into question the entire European energy market.
“It seems clear that there’s a case of market distortion here, and that’s significant for the rest of Europe,” said Paul Dorfman, a nuclear energy expert at the Energy Institute at University College London. “If this goes through, you’re messing with the European internal energy market and you’re messing with the state aid rules as well.”
For Britain, Austria’s challenge is a reminder of just how tricky it is, both politically and economically, to build new nuclear power stations these days. Hinkley Point is a 3.2 gigawatt monster that is meant to come online early next decade, just in time to pick up the slack for a number of older power plants that will be retired. British officials have said they need to build new power stations or the country could face the threat of blackouts in decades to come as aging power plants are mothballed.
But coal- and gas-fired power plants emit greenhouse gases, and aren’t compatible with Britain’s ambitious climate-change goals; nuclear power is carbon-free, but terribly expensive. Britain’s major political parties agreed this weekend to phase out coal-fired electricity due to its climate impacts, though it’s not clear when that will happen. London has sought to make the economics of nuclear plants work by letting EDF charge twice the normal electricity rate at the plant — essentially subsidizing the construction of a plant that otherwise cannot compete in the market.
The British government defends the decades-long, guaranteed subsidies because it says that Hinkley Point and other new nuclear plants are “vital” to the country’s energy security in decades to come. Critics in Britain, including Dorfman, complain that the government’s nuclear deal, including long-term price support, lack transparency and put all the economic risk on the back of consumers.
“It’s not a question of whether you agree with nuclear power or not,” Dorfman said. “The deal itself is a terrible one, except for EDF.”
Austria’s objections aren’t exactly rooted in Hayekian, free-market principles. Rather, it’s the fruit of Austria’s longstanding tradition of opposing nuclear power and clashing with Brussels over how EU policy is applied in member states. Austria has often gone its own way, for instance, on genetically modified organisms; at other times, it has criticized how Brussels treats member states struggling with budget deficits.
Vienna says that state aid for energy projects is fine — as long as it goes toward zero-carbon energy that Austria likes, such as wind and solar power. Germany, for example, just secured exemption from Brussels for its own multibillion-euro subsidy scheme to prop up renewable energy, approved over the deafening silence of zero Austrian complaints.
Britain’s travails at Hinkley Point aren’t unique. Outside of China and some developing countries, nuclear power faces obstacles almost everywhere. That’s because other power sources, such as gas, coal, and renewables are often cheaper, and because nuclear reactors cost huge amounts and many years to build. Nuclear accidents, such as the 2011 meltdown at Japan’s Fukushima plant, have also muddied the outlook for nuclear energy, even though such incidents are extremely rare.
Germany is phasing out all of its nuclear power as part of its clean-energy transformation. In the United States, Southern Co. has again pushed back the timeline for its Vogtle nuclear plant in South Carolina, the first new reactor under construction there in 30 years. Hungary last year ditched plans to build new reactors in light of cheaper alternatives. Finland is now more than a decade behind schedule on its big reactor project. South Africa, roiled by blackouts, is looking to nuclear power, but just pushed back its first reactors until the middle of the next decade.
But the intra-European fight over the fate of Britain’s nuclear plan has broader implications, as well. The European Union is still trying to promote cheaper and more market-driven forms of energy in a bid to revitalize its sluggish economy. But sometimes the market doesn’t deliver the other things that Europe wants, such as progress on climate change and energy security. Indeed, Brussels finally agreed to allow British nuclear subsidies after a nearly yearlong review because low-carbon nuclear power is the best way to build large-scale, low-carbon electricity sources.
Austria’s frontal challenge, Heffron said, could actually encourage the EU to double down on it its green dreams even at the expense of market liberalization. That would further complicate Brussels’ plans to craft a one-size-fits-all energy policy that meets three disparate goals.
“It could end up with Europe saying, hang on a second, the environment and climate change and energy security concerns are actually as important, and potentially more important, than the economic arguments,” he said.
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