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2. Liberalisation

Nuclear Monitor Issue: 
Special: European Nuclear Threats: Old and New

(November 14, 2003) In 1996 the EU adopted legislation requiring the partly liberalisation of the electricity industry. This was implemented by Member States in 1998 and requires the gradual opening up of the different sections of the electricity industry to competition. In 2003 the Directive, along with similar legislation on the Gas market was adopted and must be transposed into national legislation in all States, both current and accession countries, by July 2004. This will place a number of requirements on the operation of electricity companies, in particular in the following ways:

  • All non-domestic consumers must be able to choose their energy supplier by mid 2004 and domestic consumers by mid 2007,
  • Increased separation that requires 'ownership' unbundling between the operators of the grid and energy suppliers or generators,
  • Greater monitoring of market concentration to be undertaken by the national regulators and the European Commission,
  • A requirement that all electricity bills contain information about the environmental damage caused by the generation mix used by the energy supplier (CO2 and radioactive waste).


2.1 Consequences of market liberalisation

El pez grande se come al chico

The opening of the electricity markets have allowed and resulted in significant mergers and acquisitions between electricity companies in EU countries. In the preceding years most international attention was targeted at Asia, but due to the currency collapse and the liberalisation process in the EU, Europe became the region of the world with the most international trade in electricity companies. Over the past six years the seven dominant companies have spent € 100 billion on European acquisitions.

Many believe that these seven dominant firms will increase their market control in the power sector and will further strengthen their position as these companies, or their strategic partners, dominate the gas sector. Mergers not only threatens the stability of the current market but sets a trend in super mergers between different utilities and underlies the national desire to built up 'national champions' to defend the strategic interests of the nation State.


2.2 Fuel choices

The liberalisation of the EU's electricity market and the rules on construction of new facilities has benefited natural gas to a remarkable degree. Currently over 80% of all new generating capacity are Combined Cycle Gas Turbine or natural gas powered station.

Nueva capacidad generadora planificada para la UE a mediados de 2003{C}

The reason for this 'build only gas' philosophy is three fold:

  • The price of construction a gas fired power stations is cheaper and quicker than the alternatives. A nuclear power plants costs around $2000/kWh; a coal station around $1000/kWh, but a gas station only around $500/kWh. Furthermore, as gas station will take around 3 years to build while a nuclear up to 10 years. Therefore investors have to put up less and receive a return on their investment much quicker.
  • The gas fired power stations tend to be made up of smaller units that are more flexible and can be turned on and off to both follow demand and price. Thus increasing their attractiveness.
  • They produce less CO2/kWh than coal and don't produce nuclear waste, thus are more environmentally attractive.


It is widely expected that Member State's and accession country's use of natural gas will increase significantly in the coming years. This increase will occur both as a result of an increase in demand within the Union and gas being used as a replacement when the older, nuclear and coal, power plants are closed.


2.3 Nuclear

Within the current EU there are no reactors under construction, the last was completed in France in 1999. The only firm proposal for completion is in Finland, where following approval from the Government and Parliament in 2002 the utility concerned, TVO, is proposing to select a reactor design by the end of 2003. Early indications are that TVO will choose the European Pressurised Water Reactor (EPR), which is a Franco-German reactor yet to be built.

In France, 2003 should see the development of a new energy policy. Already the Industry Minister has stated that she believes that this should result in the ordering of EPRs in France, however, this view is not universally shared with many calling for a delay in new reactors due to France's overcapacity of existing generation.

However, other than these two examples no current Member State is considering the construction of new reactors. In accession countries, a proposal for the construction of new reactors is also the exception. According to the International Atomic Energy Agency (IAEA) only Slovakia has reactors under construction, Mochovce 3 and 4 and even here there is some doubt whether active construction is occurring. In future Member States, Romania is constructing the Cernavoda 2 reactor, but is still awaiting approval for financing from the Euratom Loan facility.

Less firm plans for the construction of other reactors in new or future Member States of the EU are reported, including: in Bulgaria, for the completion of the Belene; in Lithuania for a replacement for the Ignalina station; and in Romania for the completion of reactors 3, 4 and 5. However, in all these cases no firm schedule or technical and financial details have been made public.