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BREAKINGVIEWS-Europe will pay for shifting nuclear mood

Source: Thomson Reuters Foundation - Mon, 21 Mar 2011 10:10 GMT
Author: (c) Copyright Thomson Reuters 2011. Click For Restrictions. http://about.reuters.com/fulllegal.asp
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-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --

By Pierre Brian?on

LONDON, March 21 (Reuters Breakingviews) - When talking of "serious stress tests" these days, EU governments aren't thinking about banks but nuclear power plants. The immediate response to the Fukushima accident was to promise that all reactors in Europe would be tested for their ability to withstand serious physical shocks, of all kinds. Safety procedures are also being reviewed. But these are only the first consequences. A cloud of nuclear mistrust is descending over Europe. It could lead to a costly rethink of the continent's energy mix.

The Japanese accident occurred just as Europe was embarking on a major push to boost nuclear power. Now Germany is "freezing" -- Angela Merkel has shut down seven of the country's 17 nuclear plants. Italy, which closed its last nuclear power reactor in 1990, is "reassessing" its two-year old commitment to invest in the industry again. The UK is "reviewing" its plans. And even France, the second-largest nuclear electricity producer in the world, says it will "study" the situation. The brake is on.

Though it is hard to quantify the costs of the nuclear rethink, they may be substantial. At the corporate level, nuclear electricity producers, together with miners and equipment makers that supply the industry, have seen their market values suffer. The S&P index of nuclear industry has lost 11 percent since the quake. Another sizeable cost will come from Germany's closure decision, which could end up amounting to more than 500 million euros, mostly as energy production is lost.

If governments shrink existing programmes, losses for the industry's suppliers will run into billions -- a reactor today is priced between ${esc.dollar}5 billion and ${esc.dollar}7.5 billion. For electricity producers, the costs of operating existing plants will increase as additional safety measures are put in place. If hydrocarbon is used more widely the direct and indirect costs -- including pollution -- will rise. And if green renewables are to play a greater role, their greater cost must be factored in.

True, costs for some will translate into revenue for others. Demand for gas is expected to rise sharply, so companies like France's GDF Suez <GSZ.PA> or Germany's RWE <RWEG.DE> may benefit. But transparency about risk and security will have to be taken a notch higher. Only democracies can build the trust that makes nuclear palatable -- but only in democracies is public opinion strong enough to derail the building of new plants.

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CONTEXT NEWS

-- German chancellor Angela Merkel on March 14 imposed a three-month moratorium on the extension of lifetimes for the country's 17 nuclear power stations, reversing the policy she had decided on last year.

-- Merkel also decided to close down the seven nuclear plants that had been built before 1980, pending a three-month review. "We can't simply continue as normal. The events in Japan teach us that something that by all scientific benchmarks was considered impossible can actually occur", she said.

-- Japan graphics: http://r.reuters.com/fyh58r

-- For previous columns by the author, Reuters customers can click on [BRIANCON/]

(Editing by Robert Cole and David Evans)

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