Vattenfall seeks to return reactors to profitability

08 January 2016

Swedish utility Vattenfall has said that low electricity prices combined with the country's nuclear output tax mean that its power reactors are operating at a loss. It warns of serious consequences to Sweden's electricity supply should it be forced to shut down its remaining reactors early. 

"The fact that electricity prices have been low for a while and are continuing to fall, combined, of course, with the tax on nuclear power of 7 öre (0.8 US cents) per kilowatt-hour, means that we're currently not making any money," Torbjörn Wahlborg, head of generation at Vattenfall and chairman of the board of Ringhals AB, said on 21 December. "Our generation costs are around 30 öre (3.5 US cents) per kWh, including output tax. The electricity price, on the other hand, is around 20 öre (2.3 US cents) per kWh." Vattenfall published Wahlborg's comments on its website.

Vattenfall - owner of a 70.4% stake in the Ringhals plant - announced in late April 2015 that it intended to bring forward the closure of units 1 and 2 of the plant to 2018-2020 instead of 2025 as previously planned, due to declining profitability and increased costs. In October it confirmed that Ringhals 2 is to be decommissioned in 2019 and Ringhals 1 in 2020.

At that time the company said plans remain to operate Ringhals 3 and 4 - both larger pressurized water reactors - and its three boiling water reactors at Forsmark for at least 60 years, until the beginning of the 2040s. All these units started up in the early 1980s.

Also in October, OKG announced that Oskarshamn unit 1 would close between 2017 and 2019, while unit 2 would not be restarted and would instead be decommissioned.

"Things are really difficult at the moment, even for the newer reactors," said Wahlborg. "At the same time, we're faced with a situation where everyone agrees that the 1980s reactors will be needed over the next few years. That includes the energy minister, the industry manager, Sweden's nation grid operator Svenska Kraftnät, and everyone else who knows about these things."

Investment decisions

Wahlborg noted that "significant and expensive" investments are needed at Vattenfall's remaining reactors for their continued operation.

"Many large components, such as turbines, generators and transformers, need replacing," he said. "What's particularly worrying is that we need to make major investments in independent core cooling, for example, which is a requirement that's been imposed on us by the Swedish Radiation Safety Authority."

He added, "So far, a good many of our investments have been made in the hope that electricity prices will start to rise. But clearly there are fewer and fewer signs that this will actually happen. We don't expect to see higher market prices for electricity over the next five or 10 years."

In an article in Swedish newspaper Dagens Industri yesterday, Wahlborg said that this year Vattenfall must make decisions on investments totalling some SEK 4 billion ($470 million) in order to keep its reactors operating. "Right now I do not see that it is economically feasible to make the investment", he said.

Tax removal

According to Wahlborg, the nuclear generation tax - introduced at a time when power companies were making money - must be scrapped if nuclear power in Sweden is to become profitable again. "In my view, more and more decision makers realise that this is what we have to do if we want our reactors to continue in operation. But the leap from this to actually removing the tax is a big one."

He noted, "The odd thing is that we know that these reactors are needed. Equally, the fewer reactors you have in a system, the more vulnerable the system becomes if one or more production units are out of operation."

In the Dagens Industri article, Wahlborg said "the current situation is unsustainable" and the closure of additional reactors would "be devastating to the electricity supply". He called on the government to "listen to reason and act now".

The premature closure of further reactors "would be an enormous destruction of capital", he said. The "already depressed" group would face new losses of "several tens of billions of krona" and the reactors would become worthless.

He added, "Furthermore, Sweden's electricity supply undoubtedly would become seriously threatened."

In the same edition of Dagens Industri, Mikael Odenberg, director general of grid operator Svenska Kraftnät, said, "Today we could not do without nuclear power. That would lead to both extremely high electricity prices and, at worst, power shortages and electricity customers being disconnected."

Researched and written
by World Nuclear News