Many controversial discussions are currently underway about the new EU taxonomy, particularly within the context of the inclusion of nuclear power as a sustainable form of energy. The question for me, however, is whether the majority of these discussions are avoiding the actual topic: taxonomy is intended to improve our understanding of green technologies and therefore promote private investment – but what if the capital markets are not and will never be interested in investing in nuclear energy?
Globally and somewhat consistently, we are currently seeing that the majority of investment in the energy industry is in the renewable energies, wind and solar power, bioenergy and geothermal sectors. In 2019, for example, renewable energies accounted for almost 80% of newly installed capacity worldwide. Investors like renewable energies because they can accurately assess the risks and consider these to be manageable, because lead times are not excessively long, costs are currently well below all the conventional forms of energy and projects have a manageable level of funding. Last but not least, investors like them because they can clearly describe their investment in these forms of energy as ‘green’. That’s not up for debate.
Where does nuclear power currently stand, however? Firstly, these projects usually cost many billions, although the latest projects are regularly three to five times more expensive than this. Secondly, construction times are doubling and tripling to between ten and 15 years, as can be seen in France and Finland. And last but not least, the technology is extremely challenging and plagued by minor issues and other serial defects. As reported in last week’s FAZ, consideration is currently being given to whether the nuclear power plant manufacturer, Framatom, which is in serious difficulty, should receive a capital injection or, if necessary, be immediately and completely nationalised. At this point, it’s better not to mention the wholly unresolved (and largely unfunded) waste disposal issue, or the fact that these power plants are uninsurable, meaning that countries – i.e. taxpayers - are entirely liable.
Therefore, my assessment of the situation is that the capital markets will consider very carefully whether they want to invest in this technology as soon as concrete investments are available. Who voluntarily invests in new projects that cost tens of billions, won’t be finished for 15 years and are uninsurable - to then produce electricity that costs much more than renewable energy? I think that this issue will resolve itself, regardless of taxonomy.