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Russia End-Winner of Anti-Nuclear Wave

Posted on Jun. 20, 2011

Russia End-Winner of Anti-Nuclear Wave

Italy last week pretty much killed any chance of nuclear power ever being developed there, only days after the German and Swiss parliaments moved to phase out their nuclear plants. And that’s on top of several other governments that had already announced delays to learn from the Fukushima disaster, including the U.K.

In Italy’s case, the 94 percent vote against nuclear power simply nailed the coffin. But as the only industrialized economy without nuclear power, very few expected a change of heart anyway faced with such popular opposition. “Italy will probably have to say goodbye to the issue of nuclear power stations,” Prime Minister Silvio Berlusconi said even ahead of official results of a referendum held Sunday and Monday.

In Germany’s case, about 20 GW of installed capacity, supplying 23 percent of electricity, will be phased out by 2022. Switzerland will lose its five nuclear reactors with a combined capacity of 3.2 GW generating about 40 percent of electricity between 2019 and 2034.

And in all three cases country leaders point to renewable power as the prime choice to replace or add power. And surely in the Swiss and German cases replacing such big shares of the power mix will inevitably create a mesh of opportunities for any alternative, including coal and ironically nuclear power from France or Czech Republic.

But the end winner of the antinuclear drive is Russia and its unparalleled gas reserves and infrastructure.

Japan’s destructive earthquake and tsunami in March put governments around the globe under intense anti-nuclear political pressure. Most decided to stick to their plans, some delayed them, but a few moved to forever end nuclear.

Chancellor Angela Merkel asked Parliament to swiftly approve her government’s energy legislation for an “energy transformation.” Energy efficiency, renewable sources, a revamped grid, and natural gas will make up for lost nuclear power. Switzerland’s lower house of parliament approved the nuclear phase out and the upper house and government are expected to rubber stamp the widely popular decision.

Despite renewable plans though, analyst and experts agree the anti-nuclear drive will be replaced largely by abundant and cheap natural gas to decrease climate change gas emissions and to increase security of supply.

The International Energy Agency predicted last month the beginning of the “golden age of gas” driven, among other reasons, by “lower growth of nuclear power.” “Many governments have reviewed” their plans after Fukushima, and as a result fewer plants will get their operation life extended and fewer new ones will be built, the IEA said.

Rising gas demand is fast trimming the glut accumulated over the crisis, and prices are bound to keep increasing. But Europe has little option but to turn to Russia, especially in the aftermath of the Arab Spring.

“We need more gas,” said Europe’s energy commissioner Gunther Oettinger in May. “After Berlin’s decision, gas will be a driver of growth.” Europe’s gas demand, which before Fukushima was expected to increase 4.8 percent by 2020, now will do so by 9.5 percent, the IEA estimated in its revised forecast.

Libya and Algeria are the other potential big suppliers and concern over their reliability and also that of the Middle East make them all the more uncertain. On top of that, Russia is working faster to get the financing to build South Stream to feed southern Europe, ahead of the long-promised Nabucco pipeline to connect to Caspian gas that has all but stalled.

Europe’s biggest single gas supplier has long been Russia with 120 billion cubic meters in 2010, around a quarter of its demand. And starting next year, gas will be pumped directly into Germany bypassing Ukraine through the Nord Stream underwater pipeline with a 55 billion cubic meters annual capacity, equivalent to around 10 percent of Europe’s total gas demand.

“There are few alternatives to buy gas for Europeans,” said Massimo Di-Odoardo, senior analyst global gas in the energy consultancy Wood Mackenzie. “Russia is very well placed considering Nord Stream comes online just when it’s needed.”

Some are also concerned Germany’s decision might tilt the geopolitical balance in favor of Russian resurgence in its old sphere of influence.

“The United States is attempting to extricate itself from Afghanistan and Iraq, and by the middle of the decade may be ready to assert itself in Central Europe. If this occurs, and Berlin’s dependency on Russian natural gas is at that point still increasing, its response to these strategic moves in its neighborhood could put Germany at odds with NATO allies,” wrote Stratfor, a geopolitical intelligence risk consultancy based in Austin, Texas.

They are not alone. Officials across Eastern and Central Europe have criticized the German decision for geopolitical reasons, alleging Berlin will now be more economically tied to Moscow.

But Germany is already Europe’s second biggest gas consumer at 87 bcm per year and depends on Russia for just under 40 percent of its gas demand. Additional gas shipments to make up for nuclear will not significantly alter the strong dependence already in place, analysts said.

“Old member states are comfortable with Russia and don’t see this as political threat. Whatever Europe thought of Russia, they learned Ukraine is too difficult to deal with as a transit state, even if new member states don’t like it,” said Jonathan Stern, director of gas research in the Oxford Institute for Energy Studies.

But the IEA and even G-8 partners have also criticized the German decision because it wasn’t discussed at the European level and although energy policies are still a sovereign decision, it affects all member countries in terms of climate change goals and even in terms of peak demand.

Merkel has been doing quite a bit of U-turning lately. Last September she extended the life of nuclear plants for eight to 14 years. After the Fukushima accident, she temporarily shut down seven reactors with a 7 GW combined capacity and kept an eighth that was already off the grid shut.

The government’s roadmap calls for the remaining nine reactors with a combined capacity of about 12 GW to be shut down progressively, one in 2015, 2017, and 2019, another three in 2021, and the last three in 2022. Parliament approval is expected before the beginning of the summer break in July.

The government expects efficiency measures, especially in buildings, will help cut power demand 10 percent by 2020, or about the equivalent to the nuclear plants already disconnect from the grid. But efficiency has been in Germany’s roadmap for years without significant impact.

Renewable supply would be doubled from 17 percent to 35 percent of electricity in 2020, which would require a massive parallel investment in the grid and transmission lines to capitalize on the extra capacity.

But last week Merkel conceded fossil fuel will be necessary this decade to transition into more renewable, raising criticism from her supporters and opposition alike.

“If we want to exit nuclear energy and enter renewable energy, for the transition time we need fossil power plants. At least 10, more likely 20 GW [of fossil capacity] need to be built in the coming 10 years,” she was quoted as saying.

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