Abolished Nuclear Tax Is Relief for Unprofitable Nuclear Operators in Sweden

Sweden, which has been contemplating the role of its 10 nuclear reactors in its future power mix, said in June it will phase out a tax on nuclear power over the next two years and replace aging plants with new ones.

The agreement by the Social Democrats, the Moderate Party, the Green Party, the Centre Party, and the Christian Democrats in parliament takes account of Sweden’s much-publicized goal to get 100% of its power from renewables by 2040, but it also underscores that the goal is not a termination date for the country’s nuclear generation. Significantly, the agreement also reduces a real estate tax on hydropower.

The measure is a boon for nuclear operators like state-owned Vattenfall, Germany’s E.ON, and Finland’s Fortum, which have struggled to keep their three nuclear plants profitable: the 3.2-GW Forsmark plant, owned jointly by Vattenfall, E.ON, and Mellansvensk Kraftgrupp; the 1.7-GW Oskarshamn plant, owned by OKG, a venture between E.ON and Fortum; and the 3.9-GW Ringhals plant, owned by Vattenfall and E.ON.

Sweden got 34% of its power needs from nuclear in 2015, but the sector’s future was thrown into doubt after the government in December 2014 decided to nearly double fees paid by utilities into the country’s nuclear waste fund over the 2015–2017 period. According to Vattenfall, the variable production tax on nuclear power was introduced at 0.2 öre /kWh in 1984, and in 2000, when it was replaced by a tax on installed capacity, it had jumped to 2.7 öre /kWh. Today, the tax is about 7 öre/kWh (0.08¢/kWh). E.ON and Vattenfall fought the tax through the courts, but the European Court of Justice ruled in October 2015 that Sweden could continue to tax nuclear power.

Adding to the burden are hefty financial worries from low wholesale power prices and safety mandates for costly new investments. Unless the tax on installed nuclear capacity was scrapped, the power companies warned, they would be forced to shutter more reactors early.

Market woes have so far set four reactors in Sweden for permanent closure by 2020: Oskarshamn 1 and 2 (the former by June 2017, while the latter never resumed operations after it was shut down for maintenance in 2013), and Ringhals 1 and 2 (which will be decommissioned between 2019 and 2020).

Vattenfall CEO Magnus Hall lauded parliament’s June announcement for giving the sector the predictability it needs to continue long-term operation of its aging reactors. Yet he warned, “Even with the abolishment of the capacity tax, profitability will be a challenge. Low electricity prices put all energy producers under pressure and we will continue to focus on reducing production costs.”

However, in light of the nuclear tax decision, the company decided to abide by a 2014 safety mandate and install independent core cooling for all three reactors at the Forsmark plant (Figure 1) to allow them to continue operating beyond 2020.

SONY DSC

1. Clarity to proceed. Swedish utility Vattenfall in mid-June announced that it would proceed, if its minority partners approve, with investments to install independent core cooling at the three boiling water reactors at Forsmark. The company said that parliament’s recent announcement to scrap a nuclear tax on installed capacity was a big factor in its decision to continue with the costly installations, even as low wholesale power prices continue to plague its nuclear business. Courtesy: Vattenfall

These systems will direct water into the reactor core if other cooling systems fail to function. Vattenfall plans to decide whether or not it will install independent core cooling at Ringhals Units 3 and 4 in early 2017.

Sonal Patel, associate editor