Is nuclear key for the energy transition?

The new year chimes had barely finished ringing when Germany and Austria hit out at European Union plans to label nuclear and natural gas as ‘green’.

On 31st December, the EU started consulting its 26 member states about the draft of its Taxonomy Complementary Delegated Act. The EU Taxonomy is planned to guide private investors towards the activities that the EU needs to meet carbon neutrality in 30 years, including wind and solar. It is meant to define what ‘green’ means.

But there was little new year cheer in evidence on 1st January when Germany and Austria criticised the inclusion of nuclear and national gas.

Taxonomy troubles

The German government said it could not back the draft act, in which it is said that both technologies could help to decarbonise the EU’s economy. The Spanish government has since added its opposition to the plan.

The draft says nuclear can be called “sustainable” if the host country ensures it does “no significant” environmental damage, including safe disposal of nuclear waste; and natural gas can be a bridge between fossil fuels and renewables.

This matters for wind investors as the EU Taxonomy would make it easier for nuclear and natural gas to gain private finance, and shape Europe’s energy plans for years.

The plan has caused anger in Germany’s new coalition government as the country has spent the last decade closing nuclear power plants after the 2011 Fukushima Daichii disaster in Japan. Germany switched off three of its last six nuclear plants on 31st December 2021 and is due to close the final three by the end of 2022.

The decision to axe nuclear was made with good intentions. Nuclear could be very dangerous and cause problems with disposing of radioactive waste. This phaseout has helped support the expansion of wind and solar in Germany.

However, the move has been controversial as it also led to a rise in German carbon emissions as fossil fuels, including coal, were needed to fill the gap left by nuclear. It means that Germany is now set to rely on natural gas to some extent until 2045.

Germany's opposition to nuclear has put it on a collision course with France, where nuclear makes up 70% of the electricity mix, though this is due to halve in the next 15 years. The French government said it wants to grow wind and solar, but that nuclear helps to keep down carbon emissions. It wants nuclear in the EU Taxonomy.

No easy answers

The EU Taxonomy is important because it sets the rules for technologies that will be prioritised for investment in the coming years. If natural gas and nuclear are considered ‘green’ then they would be able to draw investment that would otherwise go towards technologies such as wind, solar and energy storage.

This may also delay the rollout of much-needed electricity capacity in the EU as nuclear projects are rarely build on time and on budget. With Europe likely to spend the next couple of years in energy crisis mode, this is important.

But where do we stand?

For a start, our belief is that wind and solar should be the priorities in the EU Taxonomy, as they are, and this should be underpinned by batteries and other forms of energy storage to smooth out fluctuating production. That should go without saying.

Second, we see no place for natural gas in the EU Taxonomy. Yes, it may help support a wider move to wind and solar, but that isn’t a good reason to give it a ‘green’ label to a technology that means we need to burn finite fuels.

And third, nuclear. This is the trickiest of all.

Nuclear projects are usually plagued by huge costs and long delays, as well as the risk of catastrophic disasters. Nuclear is also a bad partner for wind and solar, as it cannot be easily ramped up and down in response to fluctuating production. But net zero looks easier with nuclear in the mix. That’s why it is likely to remain in the EU Taxonomy despite these complaints.

If it isn’t, though, it’s a huge opportunity for the wind sector to grasp.