EU Taxonomy leaves low-carbon nuclear 'in limbo', admits climate adviser

03 August 2020

It is understandable that the nuclear power industry feels it has been left "in limbo" by the European Commission's taxonomy on sustainable finance, even though its low-carbon credentials are clear, an adviser to the Technical Expert Group (TEG) that developed the guidance said last week. Sean Kidney, CEO of the Climate Bonds Initiative, participated in the 28 July webinar-based discussion of a newly published Policy Brief by the OECD-Nuclear Energy Agency (NEA), Unlocking financing for nuclear energy infrastructure in the COVID-19 economic recovery.

Sean Kidney, CEO of the Climate Bonds Initiative (Image: WNN)

The TEG was "technology agnostic" when it produced the emissions threshold for qualifying sources of electricity, which is consistent with achieving the Paris Agreement target of 1.5 degrees, Kidney said. The threshold is 100 grams of CO2 equivalent per kilowatt hour, which will decline over the next three years until net zero is reached, he added.

"Let me be clear that we have said very explicitly in the taxonomy that nuclear is low carbon. However, we have also been tasked with adding an extra filter to our substantive contributions argument, which is called 'Do no Significant Harm'. And with that measure we've been asked to look at whether an investment, a project, an asset or an activity which would meet the substantial contribution criteria to climate mitigation for example, or climate adaptation, might have other consequences which deliver some kind of environmental [impact]. You can’t build a solar farm on a wetland, for example. There is a question mark that we were not able to resolve around the waste disposal of nuclear."

The 'Do no Significant Harm' provisions "may need to be reopened", he said, and "to that extent, taxonomies will be dynamic and will continue to be updated and ideally every five years, at least". The European Commission announced last month it had appointed its Joint Research Centre as the group of experts that will assess nuclear under the sustainable finance taxonomy. However, the JRC will not submit its findings until next year, after the relevant acts have already been finalised.

In response to Kidney's comments, NEA Director General William Magwood said the Paris-based organisation had recently produced a report that presents the facts about nuclear waste management and disposal.

"Nuclear waste is raised as a big issue in the 'Do no Significant Harm' discussion, and the information we released highlights that there really is international scientific consensus regarding the ability of states to dispose of nuclear waste safely … You may find somebody somewhere who says that nuclear waste disposal is impossible, but that person is in a very tiny minority that does not represent the scientific consensus."

States and markets

Magwood suggested that governments, either through regulations, taxonomies or other mechanisms, are becoming too involved in energy markets.

"Many people we interact with believe that we’re moving in a direction where there really is not going to be a real market in energy in the future. It's going to be a government controlled platform for exercising whatever particular governments want to see built, and these decisions are not going to be made on a market basis."

Kidney said that it was debatable whether nuclear energy "had ever operated outside of active government state action to support it" and that "the opportunity for nuclear in the commercial market is very low". He said the NEA's Policy Brief itself "essentially says that there's got to be some kind of strong state action around it".

The energy industry has most successfully developed in times of strong state action, he said. "Electricity generation in the US in the 1950s was grown on the back of capacity remuneration schemes to ensure that we actually could leave the lights on all the time. That's strong state action in highly managed energy markets. Energy markets are often talked about as free markets but they’re not. They’re creative and highly managed markets."

Those thinking about ways to address climate change 10 years ago made the mistake of considering the use of 'market forces', he said. "We're at a stage now where the world has to change very quickly. You will know whether your children have any kind of future by 2030. The stakes are extraordinarily high. The IPCC says that we have to get down emissions by 50% in 10 years globally and that’s not an easy thing. The IEA projects that emissions will have gone down by 8% this year and they have to average - average - 7.6% per annum after 2030 to be able to have even a 50-50 chance of avoiding utterly catastrophic climate change. And 'utterly catastrophic climate change' is something we don't really understand."

He added: "We are learning in this crisis, in the COVID crisis, something about 'whatever it takes'. It's been an illuminating experience for us all on the policy side of when urgency is there what can be done; haphazardly, chaotically, we are running a crazy global experiment in really bad or really good action. Hopefully by the end of this year we will have a clear idea of what are the right measures to take when the next pandemic comes, not to mention the kind of measures to take to re-inflate our economies." State action is going to be "absolutely necessary", he said, highlighting China's commitment to electric vehicles through its new five-year investment plan.

"That's an example of the kind of policy action that will drive the global economy over the next few years, which investors understand is happening. So when people talk about fiddling the energy market, damn right. We have to fiddle the energy market to achieve the outcome with one clear focus in mind - emissions, emissions, emissions. The window for unabated gas has gone." Citing International Energy Agency Executive Director Fatih Birol's comments in the 2018 World Energy Outlook, Kidney added: "We need to dramatically reduce emissions in the existing fossil fuel infrastructure and that will require a lot of state action."

Magwood said there is a "strange dynamic", whereby the private sector is asked to compete, but in markets where "the odds are stacked against them".

"Prices on electricity markets have been at historic lows for a few years now. Here we are in a market where in some countries - I've been told this by power companies - they can't really afford to make investments in future plant, equipment and transmission lines unless they get some kind of support from government because market prices are so low that they can’t afford to do it," he said.

The next decade

Kidney said the most urgent priority of any country is short-term emissions because the next 10 years "are what count". The IEA's recent models "don’t seem to suggest" that new nuclear power plants will be a large part of the future energy mix. "But I sort of don’t care; I just want to close down coal and gas, and super-fast," he said.

Magwood asked him about the IEA's estimate that global emissions had fallen by 7-8% this year on lower energy demand during the pandemic, since the post-COVID economic recovery risked reversing that, and Kidney noted that emissions in Europe had fallen by 5% in 2019.

"So, clearly in advanced economies there's plenty of potential and there are a couple of outlier economies, the US for example. There are some doubts about those figures, notably the calculation of fugitive emissions that looks like emissions from the gas sector are higher than we’ve been estimating as a result of leakage factors in some areas, notably pipeline distribution. But it's clear that we are making progress. It's also clear that in places like India coal is not financially viable. Some institutes have 40% if not more of Indian coal-fired power stations running at a loss at the moment and you're not getting any new build. You have some senior figures in India talking about a relatively quick phase-out of coal because of cheaper alternative forms of energy. So there's a lot happening around the world that gives us reason for hope in the electricity mix. I'm extremely optimistic about a rapid shift to electrical transport, but there are many other areas to work on. We're not doing well on deforestation, which is a major source of emissions globally. We need to be rapidly re-foresting in emerging markets, in the tropical zones specifically."

Scale or innovation

It is positive, he said, that governments are discussing the need for substantive industrial policy to make the transition to low-carbon energy. "This is a harking back to the 1940s and 1950s in Europe, which didn’t grow with free market laissez-faire economies then. It grew with different forms of managed industrial policy. In a sense, we have to do that now and 'do it on steroids'. That will require making hard choices about what we have to abandon. This is the year to appreciate the need to abandon the past and build the future. When you see the International Monetary Fund’s CEO talking about 'building back better', you know this idea is getting mainstream currency."

The current EU Taxonomy investigation is about existing technologies being deployed, he said, but it "doesn’t at all rule out" any future technologies. "I'm incredibly optimistic about some of the new technologies coming through," he said, noting the recent launch of the assembly of the tokamak fusion device for the International Thermonuclear Experimental Reactor at Cadarache in south-eastern France.

"I think R&D needs to continue in that area and governments will need to essentially pursue every available option on the table until such time as we're certain we’ve achieved a low-carbon transition. We can't afford at this stage to say we 'don’t want to do hydro because we have solar'. As much as I'm optimistic about what we can do, everything needs to be pursued in the next 10 years until such time as we're sure."

Magwood said the NEA's analysis of system costs "highlighted that the electricity systems are what people care about, not electricity technologies", and that "these systems have to be balanced in some way to be able to perform".

"One of the things that I’ve been talking about with my staff is to really start thinking about doing analysis that looks over a 365-day period and in different weather conditions, so that we know we have resilient systems as well," he said. "It's no good to have a system that's fantastic and low carbon for 11 months of the year, but then lets everyone freeze to death in the twelfth month. We need to be very conscious of that and I think that when countries start to look at the world that way, they'll look at nuclear and other technologies very differently."

Researched and written by World Nuclear News