They came within days of each other.  The announcements to close four of Sweden’s nuclear reactors was a message that got the environmental movement cheering and the unions growling.  But while the Minister for Energy, Ibrahim Baylan (S), said the closures came as no surprise, he refused to agree that the government’s nuclear tax hike played a decisive role in the decision-making of the energy giants.

Four of Sweden’s ten reactors are being decommissioned early as a result of falling electricity prices and the Swedish government’s imposition of a nuclear capacity tax.  The decisions have been strongly criticised by the unions while environmentalists rejoice.  In mid October, Vattenfall and E.ON confirmed that two of the reactors at the Ringhals power plant would close by 2020, ending uncertainty over the future of units which produce 7 per cent of Sweden's power.  The Ringhals announcement came a day after E.ON and Fortum said they would close two of the Oskarshamn reactors by 2019.  The decision was made after E.ON overruled minority owner Fortum, which wanted to keep the reactors running.  The decision confirmed the Oskarshamn-1 unit would be shut and decommissioned once the Swedish authorities grant a permit, whereas Oskarshamn-2, which began to generate electricity in 1974, would never restart after halting two years ago for maintenance.

Vattenfall, E.ON and Fortum are together facing losses of more than SEK 32 billion from the early closure. The utilities are not the only ones to suffer.  A number of analysts suggest the closure will erode the government’s budget.  The Confederation of Swedish Enterprise (Svenskt Näringsliv) has calculated that the early closure will in fact cost the Ministry for Finance SEK 1.5 billion annually in lost revenue.  The Minister for Energy, Ibrahim Baylan (S), noted that the decision was expected: “For me this is a very clear signal that the nuclear fleet is getting old. The closures are "a result of us having a lot of power generation today," Mr Baylan said.  "This is an issue regarding a structural change of the energy sector that we are now beginning to see the start of."

While analysts said that in the longer term the decision could spell higher long-term Nordic power prices, the World Nuclear Association responded they are concerned about the message such closures convey in terms of the world's efforts to decarbonise, as the COP21 conference in Paris draws closer. “It’s a great shame that these units have to close. A nti-nuclear policies, and especially nuclear-specific taxes, are putting untenable pressure on plant owners in several European countries, such as Sweden.  As a result we are now seeing the loss of low-carbon, reliable and otherwise cost-effective energy producing assets.  This gives completely the wrong message in the lead up to the Paris climate talks,” said David Hess of the World Nuclear Association.

ECJ: Nuclear tax a national issue

Vattenfall has come under pressure to close its’ older reactors in Sweden after the Löfven government came to power in 2014, and raised taxes on nuclear power.  After Sweden increased the nuclear tax by 17 per cent in August it now costs the nuclear industry about SEK 4.6 billion a year, according to lobby group Swedenergy, representing about a quarter of the total cost for nuclear production.[4]  In the case of OKG, which operates the Oskarshamn nuclear power plant, the tax has cost an additional SEK 1 billion this year alone and is one of the main reasons as to why four nuclear reactors will close early.  Furthermore, Nordic power prices have fallen 60 per cent since 2008 amid Europe's renewable energy boom and a slide in demand.  At the same time, the cost of producing power increased because of safety upgrades and nuclear power tax.

In late September, the European Court of Justice (ECJ) ruled that Sweden’s nuclear tax complied with EU policy.  The tax was challenged by OKG in 2009 on concerns that the nuclear power industry is unfairly taxed twice – once for production and once when it is delivered to consumers.  The EJC deemed Sweden’s levy on the available power of reactors rather than the actual amount of electricity they provide does not fall within the scope of two European Council Directives, and is therefore a national, rather than a European Commission matter. According to the European Commission, energy taxation can play an important role in achieving wider EU goals and help achieve Europe's objective of becoming a competitive, low-carbon and energy efficient economy. The ECJ ruling was the final nail in the coffin for the four reactors at Oskarshamn and Ringhals.  The EU ruling will be sent back to the Swedish court, which will make its final decision after hearing from E.ON and the tax office again.  But according to Anna Strömblad, the clerk handling the case at a special administrative court (Kammarrätten) in Sundsvall, EU law has precedence over Swedish law.

Comment

The closure of the nuclear plants is of course a formidable success for the Green Party.  The party wants all power and heating to come from renewable sources by 2030.  During the 2014 election campaign, the Greens ran on a promise to shut down several nuclear power plants within the next four years.  The Social Democrats on the other hand, have long said they want to phase out nuclear power "with respect to employment and welfare" and replace it with electricity from renewable sources.  However, the party states that the electricity produced should have "competitive prices".

When, in 2009, the Alliance government agreed to build new nuclear reactors to replace the ageing existing ones, the market situation was different.  Today, electricity prices have halved and profitability of nuclear power dramatically impaired.  In 2009, three of the Alliance parties - the Moderates, Liberals- and the Christian Democrats - believed that the market would be so beneficial that the replacement reactors could be realised on a commercial basis, while the Centre Party made the interpretation that there would be no new reactors built - since the investments would not be commercially interesting if there were neither government guarantees or subsidies in place.

The current Minister for Energy, Ibrahim Baylan (S), hopes that that the Energy Commission - which he chairs and where all the parliamentary parties are represented - can negotiate a future energy policy.  Mr Baylan believes a bipartisan policy on energy is possible and that the old political deadlock will not put obstacles in the way of a sustainable energy policy.  However, given the widely different views on nuclear power held by the governing parties, the Energy Minister can look forward to the most thrilling energy policy debates to be held within the walls of Rosenbad rather than the Riksdag.

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