Powerful arguments for going nuclear

Date: 21/05/1998

By Chris Johnstone

THE stark message from the chairman of southern Germany's biggest energy company is that the future of European power production is nuclear.

That is, of course, unless anyone else, including the European Commission, wants to pay the high cost of fostering more expensive alternatives.

"The Commission wants renewable power to provide 12% of Europe's energy needs by 2010, but it has not yet explained who will pay for that," says Otto Majewski, chairman of the management board of Bayernwerk.

Bayernwerk's four nuclear power stations already provide around 50% of its generation capacity, with hydro-electric, coal and bought-in imported power accounting for the rest. If the company were to opt for new production capacity, there is little doubt it would be nuclear. "We are very sure that nuclear power plants are competitive," says Majewski.

The key point, he believes, is that price will be the determining factor when electricity liberalisation takes effect and, given that most of the best sites for hydro-electric power have already been used, nuclear energy is one of the cheapest options.

Bayernwerk has a foot in both camps: nuclear and renewable. Its 49% stake in Siemens Solar GmbH, the world's largest producer of photo-voltaic modules, gives it a clear view of the development of solar energy.

"The market for solar is developing only very slowly," says Majewski, adding that it is still dependent on subsidies. "The joint venture made big losses for the first two years. Last year was the first year we were in the black."

Europe is not likely to be the main market for solar power. "In the long term the market is the sun-belt of the world," he says. "In Africa, Asia, and South America, there is a potential market of 2 billion households. It is most suitable where there is no developed grid."

Majewski foresees little change in Bayernwerk's power production profile over the coming decade. At the moment, there is production overcapacity in Europe and Bayernwerk has no desire to make things worse.

"In Germany and western Europe, we have saturated markets and economic growth at only around 1% per annum," he says. "We have overcapacity of around 35,000 megawatts - about 20-25 power plants - and we have no need for new investment there."

One of the key questions for the electricity sector is whether the liberalised market and overcapacity, which is likely to last for between five and ten years, will force prices down.

Efficient producers with spare capacity, such as Electricité de France (EDF), will refrain from dumping cheap electricity on the European market, says Majewski. Nothing as crude or anti-competitive as an accord between big power firms will take place, he promises.

Even though too much power is chasing too few consumers, Bayernwerk is still hopeful about the future of its sector. The company is keeping a close eye on moves by Siemens and Framatome to develop a new generation of nuclear power plants, known as the European pressurised water reactor (EPR).

"The price per kilowatt is likely to be 2,600 marks [1,300 ecu] for the new plant compared with 4,100 marks [2,100 ecu] for plant constructed 20 years ago," says Majewski.

Bayernwerk will decide whether to go ahead with a small, pilot EPR plant in the middle of next year. The first full-scale plant could be functioning by 2010.

Getting the go-ahead for new nuclear plants will be much easier in France than Germany. "At the moment, it takes a very long time to get a permit to build in Germany," complains Majewski.

"One of the big questions is whether society is ready to accept the theoretical risk of nuclear power."

He believes Europe has no real choice if it is to be competitive, maintain secure energy supplies and cut carbon dioxide emissions. "The time of the gas plant is already almost over," he says. "The gas price will rise and, by 2020, we could have in the gas market a smaller version of OPEC (the Organisation of Petroleum Exporting Countries) with Russia and Algeria as the main players."

Bayernwerk is looking to expand in central and eastern Europe, even though its experience in the region has been mixed. The company bought into two thirds of Hungary's power production capacity when it received a government guarantee of an 8% annual return on its investment but, after the deal was done, the Hungarians had second thoughts and chose not to deliver. Bayernwerk is now looking at opportunities in the Czech Republic, Slovenia and Slovakia.

Author is chairman of the German energy company Bayemwerk.