What is your position on the outlook for renewable energy generally at the moment?
In our chapter “Why renewable energy ?”, which forms part of the recently published book Renewables: A Practical Handbook, we set out our views on the key drivers for the adoption of renewable energy and investment in clean technologies. These included a rise in the cost of fossil fuels and concerns over security of energy supply. Over the past month or so, we have seen the price of oil climb to just over $125 per barrel. Of course, this price rise is partly driven by the recent uncertainty in Libya and the broader Middle East region.
What has been the impact on the renewable energy market of recent events at the Fukushima Daiichi nuclear plant?
Taken together with the drivers referred to above, most commentators acknowledge that the events in Japan will stimulate investment in renewable energy generation, such as wind and solar. As news spread of the disaster, stock markets around the world were generally depressed, with the exception of renewable energy stocks, which experienced a significant rise.
An important question is whether this renewed interest in the sector is a short-term reaction to the above drivers or a real ‘wake-up call’ leading to long-term investment in the sector. Some concerns have been raised that the above drivers in themselves are not enough. Lack of investor confidence in particular renewable companies, technologies and projects will still exist if key investment concerns such as the following are not addressed:
• regulatory uncertainty (eg, the uncertainty arising from the UK Department of Energy and Climate Change’s feed-in tariff fast-track review and the ongoing discussions around the role of the UK Green Investment Bank);
• uncertainty surrounding exit opportunities and levels of return for investors;
• for certain technologies, the consequences of ‘Nimbyism’ (‘not in my back yard’); and
• any inadequacy in the relevant IP rights, including those instruments necessary to manage, protect, exploit and, if necessary, litigate such rights.
Will investment in renewable energy thus increase in the short term?
Following the events in Fukushima, the Japanese government took all of its nuclear reactors offline. This left Japan with a 20% energy deficit that needed to be satisfied immediately. Of course, this could not be achieved through renewable energy in the short term - and potentially not even in the mid term, given Japan’s relative lack of renewable energy generation capacity. The immediate effect of the events has therefore been that Japan has rushed to meet the deficit through fossil fuels, particularly natural gas. While this is of course understandable in Japan’s case, the danger is that the world steps away from nuclear and falls back on the default short-term and mid-term replacement of fossil fuels, to the detriment of a long-term policy on sustainable renewable energy generation.
What has been the immediate effect on the global nuclear industry?
There is no doubt that the events in Fukushima have cast a shadow over the nuclear industry. Previous nuclear disasters, such as those at Three Mile Island in the United States and Chernobyl in the former Soviet Union, have caused significant delays to the development of the nuclear industry. For example, the United States embargoed the building of new nuclear plants for nearly 25 years following the Three Mile Island crisis and many European countries ceased their nuclear development programmes following events at Chernobyl.
Our colleagues across our network of European offices are telling us that their clients are approaching them to discuss the implications of the Fukushima events. For example, what will be the effect on the discussions currently taking place in Italy on the referendum to recommence nuclear development activities? What will be the effect of the proposals in Germany to place its plants offline? Will Europe adopt the proposals for a comprehensive risk and safety assessment of nuclear plants (the so-called ‘stress tests’)? Public perception is vital to the nuclear industry. Over the past few years, nuclear has gradually become an accepted part of the low carbon economy, but it may now have become politically unacceptable to many.
What are the prospects for a new generation of nuclear power stations in the United Kingdom following the events at Fukushima?
On one analysis, it simply depends on how grown-up the debate is. One repeated argument against a new generation of nuclear power stations was that they were inherently dangerous because they were obvious terrorist targets (ie, there is always a risk that they would be destroyed by terrorist attack). Given the incredibly low risk of a UK nuclear plant being at risk from seismic activity, can it really be argued that the risk of destruction of a UK nuclear power station is again greater because of what happened at Fukushima? At the same time, one should also consider the impact of any greater reliance on fossil fuels and the risks that come with that around the security of supply and the still greater impact on climate change.
Is there a danger of a knee-jerk reaction to dismiss nuclear power generation following the events at Fukushima?
Many commentators have pointed out that when compared to newer European models, the Fukushima Daiichi nuclear plant is an ageing nuclear plant. It is also located in one of the most seismically active regions in the world. The human effects of the disaster are unknown.
Nuclear engineers are looking once again at improving plant designs. They are under pressure to revise regulations and put in place common criteria for nuclear tests across the European Union. The events at Fukushima may also lead to an increase in the amount of research and development funding spent on nuclear safety. It is hoped that this will not be to the detriment of renewable energy research and development: we believe that a balanced response is necessary, in order to ensure that we construct a varied sustainable energy generation mix for the future.
Matt Bonass, Michael Rudd and Richard Lucas are partners in Bird & Bird’s energy and utilities sector group. Mr Bonass and Mr Rudd are co-editors of Renewables: A Practical Handbook. Mr Rudd is head of Bird & Bird’s nuclear practice.