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Outlook 2019: Moment of truth nears for Europe's first EPR nuclear reactors

London — Years late and massively over-budget, Europe's first EPR nuclear reactors are finally about to load fuel and energize.

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This is the final act in the region's longest-running generation construction saga, with delivery of first power from EPRs in Finland and France due before end-2019.

Ten years late and 2.5 times over its original Eur3.2 billion budget, TVO's 1.6 GW Olkiluoto-3 project in Finland could produce up to 4 TWh next year ahead of full operation in early 2020 - assuming the latest delay announced in November is the last.

Meanwhile a mere eight years late and, at Eur10.5 billion, three times over budget, EDF's 1.6 GW Flamanville 3 project in Normandy, northern France is due to deliver first power in summer 2019 if it can clear regulatory concern over welds. Even when complete, there is a cloud hanging over this project because of anomalies found in its reactor pressure vessel head and bottom. Regulator ASN has said the closure head must not be used beyond 2024.

For Finland, commissioning of O-3 will go a long way to erasing the country's multi-year supply deficit, freeing up Norwegian and Swedish hydro resource. For France, operational scrutiny will be intense as EDF seeks to prove the design and build a case for further units.

THERMAL RETREAT

These baseload additions buck the longer term trend towards growing volatility in generation, as renewables displace conventional thermal.

Additions of 9 GW next year across west Europe are skewed towards onshore and offshore wind, while closures of 12 GW are almost exclusively of coal, nuclear or gas plant, according to data from S&P Global Platts Analytics.

For the year just passed, over 15 GW of thermal generation closed across Europe, offset by just 3 GW of gas plant additions. Meanwhile 24 GW of wind and solar were added, according to Entso-e.

The year on year removal of thermal generation now means that Finland, Hungary, Northern-Central Italy, Southern-Central Italy and Lithuania rely on imports throughout winter.

Under harsh winter conditions others become reliant on imports, including Austria, Belgium, Slovakia and Slovenia.

This is ahead of a slew of more determined energy transition actions by European governments, phasing out big chunks of coal and nuclear plant in the early to mid-2020s.

Looking ahead, Platts Analytics sees 65 GW of net coal and nuclear closures over next seven years, nearly double the level of closures seen over the last seven years.

The coal closures are front-loaded in the period, with heavy losses across Germany, the UK and Spain before end-2020, ahead of total phase-outs in France (2022, 3 GW to go), the UK (2025, nearly 7 GW to go post-2020) and the Netherlands (2030, NB confirmation of the Urgenda ruling this year could front-load closures of around 1 GW).

Nuclear reductions start to hit home with 10 GW of German capacity closed by 2022, followed by removal of 6 GW of Belgian capacity by 2025, and the loss of 4.3 GW in the UK between 2024-2026.

Beyond this, France has rowed back on Hollande-era legislation to cut nuclear's share in the mix to 50% by 2025, with 2035 the new target date. With the closure of Fessenheim being de-linked from commissioning of Flamanville 3, the government is increasingly risk-averse given its pledge to close coal in the near term, a decision system operator RTE remains wary of.

Earlier in the political process and harder to call is Germany's coal/lignite plan. For some months sector analysts have focused on 2038 as a potential final phase out date, with production effectively needing to halve if the country is to meet 2030 climate targets.

Assuming the government's 65% RES target is achieved by 2030, Germany may then be able to get away with retaining its more modern fleet of post-2000 power stations (9 GW hard coal, 7GW lignite), if backed post-2030 by reserves similar to the current lignite reserve, under which older units are removed from the market, then closed after four years.

LAST HURRAH FOR NEW COAL

Conventional thermal plant additions across Europe are getting as rare as hen's teeth, with Poland the only truly active market.

For coal, and ignoring the anomaly of Datteln in Germany, the only remaining new plant construction is in Central and East Europe, with big coal units close to completion at Opole (2x 900 MW) and Jaworzno II (910 MW) in Poland.

The fate of the 1 GW Ostroleka C coal project, meanwhile, is about to be decided as its Polish investor group (Enea, Energa) await the outcome of the country's 2023 capacity auction, due to be held in December. Enea's CEO, Miroslaw Kowalik, characterized the Zloty 218/kW/yr clearing price in a first auction for 2021 delivery as "very promising". Ostroleka C could well be Europe's last coal-fired project to get away.

Major capacity additions 2019 (MW)
Belgium Finland France Germany Norway Switzerland UK Total*
Biomass 60 16 20 171
Natural Gas 730 50 780
Refuse 19 127.3 146.3
Uranium 1600 1650 3250
Water 8 19.6 900 936.45
Wind 50.4 847 603.5 1500.9
Offshore wind 679 1229 588 2496
Grand Total 679 1710.4 1674 1978 866.6 920 1368.8 9280.65
* including smaller country adds
Source: S&P Global Platts Analytics

Retirements, mothballings 2019 (MW)
Denmark Germany Spain Sweden Switzerland UK Total*
Coal 782 2896 365.2 1961 6154.2
Natural Gas 311 520 250 1791
Oil 785 160 945
Refuse 11.8 11.8
Uranium 1458 917 752 3127
Water 6 6.4
Grand Total 1567 4836.8 885.2 923 752 2211 12035.4
Other: Finland 150 MW (coal); Netherlands 430 MW (gas); Norway 280 MW (gas)
Source: S&P Global Platts Analytics

--Henry Edwardes-Evans, henry.edwardes-evans@spglobal.com