NUCLEAR POWER COMPANIES DEMAND FREE CARBON CREDITS

Energy Business Review, 30 May 2006
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By EBR Staff Writer

EDF Energy chief Vincent de Rivaz has stated that financial backing for new nuclear build would require nuclear power to be classified as a non-carbon-emitting form of generation within the European emissions trading scheme (ETS). However this would then amount to a subsidy of nuclear by fossil-fuelled power plants.

Currently nuclear power is not an active element within the EU ETS due to its negligible emissions of greenhouse gases while operating. Instead, the operators of nuclear fleets benefit in indirect ways from the scheme through higher prices for power, a reduction in the competitiveness of competing thermal generators and the absence of legal restrictions on their annual output.

However, what Mr de Rivaz has argued is that nuclear power's formal inclusion in the scheme would provide it with additional financial security as it may then be issued with certificates giving the right to emit. These credits would not be needed by nuclear plants and could be sold on to other ETS emitters, creating an additional revenue stream for nuclear as well as enhancing its financial security for investors and creditors, although the lack of certainty past 2012 may well be cause for concern.

It is not immediately clear whether the ETS should be changed to accommodate nuclear, or if these credits would be better parceled out purely at a national level by adjusting each state's national allocation plan (NAP). Each state within the EU has allocations set aside for installations that are expected to be built before the planned end of the first phase of the ETS. If some of these credits were given to the builders of new nuclear plant, it would avoid having to take credits already allotted to existing coal and gas power stations away.

While moves like this would enhance the attractiveness and likelihood of new nuclear build, this move would be opposed by almost all of the companies that either do not want to, or are unable to, participate in the building of new nuclear plant. Operators of thermal stations will correctly point out that the money that they will have to pay to purchase these credits will amount to a subsidy for nuclear and renewable generators are likely to claim that they should also be entitled to free credits.

Governments have the unenviable task of balancing commercial, environmental and security of supply issues against each other to decide upon an optimum fuel mix. With additional thermal generation currently "business-as-usual" in many countries and thermal plants receiving emission credits for free, many commentators argue that the incentives need to be changed to encourage diversity.

Yet changing the incentives amounts to moving the goalposts for energy companies as well as the instant revaluation of their asset base, a move that would surely spark further disputes about conflicting interests in the marketplace.