MorganEnergy

The table of contents for the July issue of EEnergy Informer has been posted over at the Menlo Energy Economics blog.

The so-called 3rd Energy Package that the European Commission is rolling out this year looks at creating Europe-wide markets in both electricity and gas. How these markets should work is still very much open to debate, especially in gas because actual sources of the fuel are by no means evenly distributed around the continent.

Frontier Economics has been commissioned by GDF SUEZ to consider how such a market might work. Their report, describing a “target model” for the European gas market, is available online (PDF). The scope of the problem is made clear in the executive summary:

It is unrealistic to assume that all gas sources will be able to compete to serve all customers in Europe, as this would require a gas transport network with huge capacity. For example, while gas supplies to GB might be able to compete with gas supplies to Ireland, it would cost much more to ensure that supplies from North Africa could compete throughout the continent with supplies from Norway.

The report highlights several other areas where creating a fully competitive market is unlikely to be feasible, and a pragmatic approach that uses competition as a means to an end, not an end in itself, is recommended.

The weirdly political nature of energy industry news coverage was made clear again yesterday in reaction to a speech by President Sarkozy of France. That the French are investing €1bn in nuclear power should come as no surprise to anyone who has followed their energy policy over the years. M. Sarkozy is quoted by The Guardian as saying, “There is no alternative to nuclear energy today.”

Except that there obviously is, because in the same speech M. Sarkozy announced a €1.3bn investment in renewables. Somewhere, I am sure, there will someone reporting with horror that the French are spending more money on renewables than on nuclear, but the vast majority of newspapers appear to have concentrated on the nuclear story.

In the wake of the Fukushima disaster in Japan, most people have been predicting the demise of the nuclear power industry. Recent events appear to have proved that true, with German Chancellor Angela Merkel choosing to shut 7 of her country’s older plants, and promising an exit from nuclear generation by 2022. Switzerland’s cabinet has voted to follow suit. This article by John Daly on oilprice.com, titled “Nuclear Twilight in Europe”, is typical of the sort of media reaction we have seen.

Not every European leader agrees with the German line. In Italy Silvio Berlusconi was keen to press ahead with new nuclear build. Given his ability to win elections despite being mired in all sorts of scandals, you might have thought that the Italian Prime Minister would be unconcerned at being forced to fight a referendum on the subject, but Berlusconi was so afraid of the result that he put all his energy (and considerable media clout) into trying to keep the turnout below the 50% needed for the result to be legally binding. It didn’t work and, as The Guardian reported, well over 90% of the people who did vote were against nuclear power.

Some countries in Europe have always been more well-disposed towards nuclear. Sweden has 10 operating nuclear plants that supply over 40% of the country’s electricity. Following the Three Mile Island disaster a referendum voted to close all of the existing plants by 2010, but most of them are still operating and the Swedish parliament has voted to allow new nuclear build. That, of course, was before Fukushima. Also Vattenfall has had a particularly difficult time of late with the nuclear plants it operates in Germany, particularly Krümmel and Brunsbüttel. A recent International Atomic Energy Agency report listed Vattenfall as the worst nuclear operator in Europe.

Finland is one of the few countries in the world currently building a new nuclear power station. The Finnish people, however, are not happy, and haven’t been since well before Fukushima. The Olkiluoto 3 reactor is currently scheduled to come online 4 years late, and massively over budget.

The existence of nuclear power in an interconnected market means that even countries that are firmly opposed to nuclear make use of it. At today’s Economist UK Energy Summit, Director-General Philip Lowe noted that Austria gets 6% of its electricity from nuclear, despite public opinion being very much against it.

The one country in Europe that has always been a flag bearer for nuclear, however, is France. That support has continued, despite the problems in Japan. In the wake of the Fukushima disaster the European Union decided to undertake a program of stress tests on all nuclear power stations within its borders. No country was likely to vote against that, but pro-nuclear countries have been working behind the scenes to make sure that the tests were not as stringent as they might be. This lobbying has been led by France, the Czech Republic, and particularly by the UK.

Today the UK government released a list of 8 sites at which new nuclear build is planned to be authorized. In order to forestall public objections, all 8 plants will be built on brownfield sites adjacent to existing nuclear reactors. The plans still have to be voted on by parliament, but given that they were put in motion by the preceding Labour government, it will take a fairly substantial u-turn for the vote to fail. And if the UK government manages to get nuclear plants built despite the inevitable public opposition, other European governments might once again reconsider their options.

Well, that has been a rather busy two years, and blogging rather fell by the wayside. Things are a little calmer now. Also Lynne Kiesling at Knowledge Problem has been lamenting the lack of women economists in the blogosphere. So I’m going to try to get this thing back on a regular schedule.

One of the things I have been doing over the past couple of years is maintaining a website for my friend and colleague, Perry Sioshansi. You can find it here. The articles there are all from his magazine, EEnergy Informer.

I’ll be based mainly in Europe for the foreseeable future, so most of what I write will be about European issues. There will be no prizes for guessing what the main topic of conversation is here.