Sweden Energy Agreement Keeps Nuclear in Mix

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By Marcus Hoy

June 14 — A Swedish cross-party agreement allows as many as 10 existing nuclear reactors to be replaced and scraps a controversial output tax on nuclear power.

The agreement, announced June 10, affirms government principles laid out in 2008, which allow for the replacement of obsolete nuclear reactors. But it marked a significant step for Sweden's Red-Green coalition government, which had previously not committed to the industry's future, observers told Bloomberg BNA.

“In order to achieve rapid decarbonization of energy systems, nuclear clearly has a role to play internationally,” Maria Suner Fleming, director of energy and climate policies at the Confederation of Swedish Enterprise, told Bloomberg BNA in a June 13 statement. “Few power sources have the possibility to add as much carbon-neutral power as nuclear. It also has the advantage of being a stable source of electricity, which is important.”

A goal of deriving 100 percent of the nation's electricity from “renewable sources” by 2040 does not exclude nuclear energy or imply the closure of nuclear reactors, the government said in a policy document.

Under the agreement, which took immediate effect, the output tax will be reduced in 2017 and abolished by the end of 2019. As many as 10 of the nation's 14 nuclear reactors will be replaced after 2020, though Sweden's four oldest reactors, Ringhals 1 and 2 and Oskarshamn 1 and 2, will not be replaced.

Under the plan, operators' financial liability in the event of accidents will be increased, and nuclear power will be expected to be fully free of government subsidies.

Expanded Hydropower

The agreement also calls for expanding Sweden's hydropower network, primarily through upgrades to existing plants.

The current hydropower real estate tax, which stands at around 8.5 ore ($0.01) a kilowatt-hour, will be gradually reduced over a four-year period starting in 2017 to take it to the same level as competing power generation facilities. Solar, wind and other renewable power sources will receive government support up to 2030.

The agreement was supported by the government, which comprises the left-leaning Social Democrats and the anti-nuclear Green Party, as well as three opposition parties.

While praising the agreement's goals, the Green Party said in a June 10 statement that it believed nuclear power would “continue to suffer viability problems.”

Thermal Output Tax

On Aug. 1, 2015, Sweden raised the nuclear thermal output tax from 12,648 kronor ($1,500) to 14,770 kronor per installed megawatt, which led producers to claim the government was seeking to shutter the industry through economic sanctions. Energy producer Vattenfall said at the time that it would likely abandon its nuclear power facilities if the tax was not rethought.

Gunilla Hjalmarson, press secretary for the energy ministry, denied that the June 10 agreement represented a U-turn.

“Sweden's energy policy is following the direction that the previous government embarked upon,” she told Bloomberg BNA June 13. “What is new is that investments in renewable electricity generation will be increased to levels that have not been seen in the past, meaning the Swedish electricity system will be completely renewable by 2040.”

But new financial incentives for renewable energy producers could lead to overcapacity in Sweden's energy market, Suner Fleming said.

“Quite substantial volumes of new renewable power will be subsidized up to 2030,” Suner Fleming said. “This new power will not be created by demand, which means there will be an energy surplus that will put an enormous strain on the function of the market. It's hard to see how this is going to work without market reform. Our position is that subsidies should be phased out by 2020.”

International Significance

Mattias Lantz, a researcher at the nuclear industry-funded think tank Analysgruppen, said: “The government's ambition to name a specific year for ending nuclear power has now been abandoned. Whether it was 2020 or 2040, such a statement would have sent out a message that it had no future. Such a message could have affected decisions in other European countries such as Belgium and Switzerland, where the shuttering of the nuclear industry is a real possibility.”

Lantz said that “in the short term” the agreement is “much better for the nuclear industry than could have been expected. The nuclear tax had to go. Otherwise, without any realistic alternative to hand, the remaining reactors would have closed down by the end of 2020.”

But Lantz said government subsidies for renewables could lead to overcapacity in the energy market. “How this will affect electricity prices will depend on what happens in other countries,” he said. “As long as our neighboring countries do not seriously start phasing out coal, it will be very difficult to export electricity from Sweden and make a profit.

“Our electricity system is responsible for 5 percent of Sweden's emissions,” he said. “If we are serious about our emissions goals, we need to decarbonize the transport system and other sectors such as the steel industry.”

Along with Vattenfall, Sweden's other nuclear operator is Fortnum. Birgitta Resvik, Swedish vice president of public affairs at Fortum, told Bloomberg BNA that the agreement would help stimulate competition in the electricity production market.

“Hydropower and nuclear power will now be taxed more or less like other sources, which will make it possible to carry out needed investments and also to develop hydro production,” she said. “There is no year stated to end nuclear production. However, the signals are that renewables will be the main sources in the future. Hydropower is seen as the backbone of a future renewable system in Sweden.”

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Greg Henderson at ghenderson@bna.com

For More Information

The policy document on nuclear power is available, in Swedish, at http://src.bna.com/fRV .