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Europe: The rocky road to nuclear power

THE BRIGHT nuclear future envisaged for Europe could be a long journey away, judging by the difficulties experienced in the construction of Finland's European Pressurised-water Reactor (EPR), Olkiluoto 3 project. The power station – the first of the EPR design and the first nuclear facility to be ordered in Europe in recent history – is now more than three years behind schedule, its owner and supplier are seeking over €1.0bn ($1.4bn) of compensation from each other and the supplier partnership is breaking up.

Teollisuuden Voima Oy (TVO), the private-sector company that owns two of Finland's existing four nuclear power stations, ordered the EPR at the end of 2003 and expected it to start generating electricity in April this year. But schedule slippages started early and now stand at 38 months, indicating start-up around mid-year 2012 at the earliest.

The supplier partnership – Areva NP, made up of Frances's Areva (66%) and Germany's Siemens (34%), together with Siemens separately – has issued a claim against TVO for "outstanding down-payments" totalling €1.0bn and other compensation, alleging that TVO caused the delays by being slow in providing documents to Finland's nuclear-safety authority, Stuk. TVO rejected the allegation and has counter-claimed for costs resulting from the delay, according to Siemens demanding €1.4bn from the partnership. At the end of last year, the dispute was referred to the International Chamber of Commerce for arbitration.

Whatever the outcome, there will be consequences for the nuclear business in general. If TVO wins, contractors will be reluctant to take on fixed-price commitments in the future – the Areva NP partnership signed a fixed-price turn-key agreement to build the facility, from design through to final commissioning, for €3.0bn at 2003 values. But if the construction partnership wins, few electricity companies will be happy to carry the price and schedule risks for new projects.

Olkiluoto 3 will be a 1.6 gigawatt (GW) unit, built on the same site as two existing nuclear facilities on Finland's western coast. TVO says the turbines, generators and other main non-nuclear components have been installed and should be completed this year. The delays affect the nuclear part of the facility, where the reactor pressure vessel was only delivered this year.

Despite the troubles with Olkiluoto 3, TVO has already started thinking about a fourth nuclear facility. Last year, it asked parliament to take a decision-in-principle on the construction of a light-water reactor with a generating capacity of 1.0-1.8 GW, also to be at Olkiluoto. Construction could start around 2014, with start-up targeted for 2019. The firm says the existing Olkiluoto units, both Swedish-built boiling-water reactors of 860 megawatts, are performing well, achieving load factors during 2008 of 93.7% for Olkiluoto 1 and 96.9% for Olkiluoto 2.

Meanwhile, the delays and cost issues have led to an acrimonious falling-out between Olkiluoto 3's construction partners. In January, Siemens said it would sell its interest in Areva NP to Areva by January 2012 at the latest, as provided for under the 2001 agreement through which the firms merged their nuclear businesses. Siemens gave as the reason its inability to "exercise entrepreneurial influence" in the joint venture, as a minority partner.

The firm's plans became clearer the following month when its president, Peter Löscher, met Russian prime minister Vladimir Putin to discuss co-operation with Rosatom, Russia's state-owned nuclear power company. A joint venture to develop Rosatom's pressurised-water reactor, which will compete with Areva's EPR, was mentioned. The news prompted Areva to start legal proceedings, seeking an order to prevent Siemens from taking further steps towards a venture with Rosatom and declaring that it had breached its obligations under their agreement.

When announcing that he would end the partnership with Areva, Löscher said: "We want to play an active role in shaping developments." He cited a forecast that by 2030 there will be around 400 new nuclear power plants worldwide, built at a cost of €1.0 trillion. With its powerful position in Germany, Siemens should be well-placed to win orders for that country's new nuclear fleet – and it will use its position to strike an attractive deal with its choice of nuclear-technology providers.

The troubles at Olkiluoto might have dented Areva's case that the EPR should be the first choice for new nuclear investments in Europe, but the EPR remains the first Generation III+ reactor to have moved into construction and the design is going though approval processes in the UK and the US. Besides Olkiluoto, there is an EPR under construction for start-up in 2012 at Flamanville, France, for Electricité de France, and in late 2007 China Guangdong Nuclear Power Corporation ordered two units for Taishan in Guangdong province. In January, France's government said construction of a second EPR in the country, at an undecided location, would start in 2012.

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