Debt Crises and Fukushima Meltdown Still Shake European Power Industry

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The European sovereign debt crises and the Fukushima Dai'ichi nuclear accident of 2011 greatly increased the cost and complexity of keeping the lights on across Europe. But this task is becoming even more difficult thanks to the sudden abandoning of nuclear power by key European countries and the looming mandated reductions in greenhouse gas emissions across the European Union (EU), according to Nicola Lynch, president of Industrial Info Resources Europe (Galway, Ireland).

This article is the first of a three-part series on the strategic trends driving project activity in the European Power industry. These trends will be further detailed in Industrial Info's forthcoming 2012 European Power Outlook.

"The European Power market is extremely turbulent now, nearly unmanageably so," Lynch continued. "Coordinating the industry's planning and construction activities across 27 national borders was complex enough before the continent's economies slowed or fell into recession. The ongoing budget and debt crises plaguing several countries have thrown energy companies and government planners into turmoil, because there is less money to build the generators and infrastructure that are needed."

Despite the political and economic turbulence swirling around the continent, European nations still plan to spend significant sums for capital and maintenance projects in the Power industry in 2012 and the coming years. Industrial Info's 2012 Global Industrial Outlook is tracking 871 Power projects in Europe that are scheduled to kick off this year, valued at $139 billion. Longer term, Industrial Info is tracking more than 2,300 European Power projects valued at about $567 billion that are scheduled to kick off between 2012 and yearend 2014.

But more than 230 projects scheduled to kick off over the 2012-14 timeframe, valued at about $115 billion, have been deferred or cancelled. The number and value of active projects likely will remain highly dynamic over the next few years, and Industrial Info will be monitoring these carefully in case they become active again.

Click on image at right for a snapshot of planned European Power Industry project spending and project deferrals/cancellations for the 2012-14 period.

"There is a heavy cloud of uncertainty that hangs over Europe's energy sector, affecting all types of planned power plant investments," Lynch continued. "Hundreds of billions of euros have been used to bail out banks and prop up governmental financial institutions, draining funds away from capital investment in this and other sectors. Unemployment across Europe stands at an average of 10%. The German economy, long the continent's strongest economy, is starting to wobble. About half a dozen nations are in a recession."

This economic uncertainty has led to an increase in Power project deferrals and cancellations by public and private power companies, often due to an inability to secure financing or permitting, Lynch said. Significant recent Power project cancellations or deferrals include:

• The Belene grassroot nuclear power station, a 2,000-megawatt (MW), $8.3 billion project scheduled to be built in Bulgaria, has been cancelled.


• Unit 3 of the Penly Nuclear Power Station, a $4.5 billion, 1,650-MW project scheduled to be built in Normandy, France, has been placed on hold.


• A $1.9 billion carbon capture and sequestration (CCS) project scheduled to be built at Unit F of the Janschwalde coal-fired power plant in Brandenburg, Germany, has been cancelled.


• The Antwerp Power Plant, a $1.5 billion, 1,100-MW grassroot coal-fired power project in Antwerp, Netherlands, has been cancelled.

"As a direct result of last year's partial meltdown at Japan's Fukushima Dai'ichi nuclear power station, Germany, Switzerland and Italy all reversed their plans to build new nuclear generation," Lynch noted. "The impact of those decisions is expected to dramatically alter the European energy landscape for a decade."

Prior to Fukushima, many European countries were expected to increase their use of nuclear power to meet ambitious greenhouse gas-reduction goals set by the European Commission. Last May, the German government reversed its previous decision to extend the lives of older nuclear power plants and instead abandoned nuclear power altogether. All 17 operating nuclear reactors in that nation will be shut by 2022.

Although the dollar value of recently postponed or cancelled European power projects is nearly equal to the gross domestic product (GDP) of Hungary, Lynch said it was more important to focus on the hundreds of billions of dollars of European power projects that remain active:

• Several nations, including the U.K., Russia, and Poland, remain steady in their commitment to building nuclear plants. The U.K. will move forward with plans to build a new fleet of nuclear plants between 2016 and 2025. Eight sites have been cleared by the government, and preparatory work in under way at the Hinkley Point C site to build the country's first nuclear plant in 20 years. The U.K. is facing a major energy crisis as 25% of its older power stations will be taken offline by the end of the decade.


• About $30 billion of European nuclear projects remain under construction today, according to Industrial Info's data. Moreover, 27 nuclear projects valued at $35.5 billion are scheduled to kick off in 2012. An additional 23 projects valued at $26.3 billion are scheduled to begin construction next year, and a further 11 projects valued at $26.4 billion are scheduled to start turning dirt in 2014.


• Despite EU limits on greenhouse gas emissions, construction of large coal-fired power projects are slated to kick off in the coming years in Poland, the U.K., Germany, Romania and Belarus, among other nations.

Lynch said today's high level of uncertainty surrounding the European Power Industry increases the value of participating in a major upcoming convention and trade show--Power-Gen Europe, which will be held June 12-14 in Cologne, Germany. Industrial Info Europe will be exhibiting at Booth 6E96. Industrial Info's booth will be staffed by power-industry experts like Lynch and members of her team who would be happy to demonstrate the online tools and customized analytic services participants can use to improve their business prospects in the European power sector.

"When uncertainty is high, industry events like Power-Gen Europe provide opportunities for companies that sell equipment or services to the European power market to lower their risk profile and recalibrate their sales and business strategies," Lynch said. "The networking and the conference sessions provide attendees with valuable market intelligence to help them better understand the risks and rewards of pursuing business opportunities in the European Power sector," she said.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.