Japan’s Nuclear Fallout Throws Doubt on Entire Industry’s Future

By Max Colchester and Liam Maloney
Wall Street Journal
March 30, 2011

Italian engineer Rossella Rotella has spent three years helping build a towering nuclear reactor near this northern French town, part of a project to give Italy the skills to forge its own nuclear future.

Next month, Ms. Rotella returns to Italy. It isn’t clear when she will be able to put her knowledge to use. “I trained to work on new nuclear projects in Italy,” says the 32-year-old, who works for Italian utility Enel SpA. But following the nuclear crisis in Japan, “what happens next, well sadly it’s not for me to say.”

Last week, the Italian government bowed to popular concerns and froze plans to relaunch nuclear projects in the country for a year. The government may scrap the projects completely if it isn’t satisfied with the results of new European Union safety tests on European nuclear plants.

The situation in Italy underscores a wider problem for the nuclear industry in the wake of Japan’s nuclear crisis: convincing governments and populations that nuclear energy is still safe.

“It’s not necessarily science and technology that dictates the success of nuclear,” says Colette Lewiner, an energy expert at consulting group Capgemini. “It’s public opinion and political decisions.”

In recent years, France’s Areva SA and Électricité de France SA, known as EDF, have led a global push by energy companies to preach the power of nuclear and to battle its unsafe image. Nearly 80% of France’s electricity comes from nuclear energy, and the country has long been a standard-bearer for nuclear power, pitching its technology to countries including China, South Africa and India. In 2010, EDF made just under half its €65.1 billion ($91.7 billion) revenue outside France.

In the past weeks, several governments have ordered reports on the safety of their nuclear-power plants. Most important for France, China’s government has suspended approvals to build new nuclear projects and ordered a rigorous safety review of all its existing plants. China is one of the French nuclear industry’s biggest growth drivers: EDF has invested in a joint venture to build two new reactors in the country, with nuclear-engineering firm Areva providing reactors.

“The most advanced nuclear projects led by the company in the U.K. and China will come to fruition,” an EDF spokeswoman said. “In other countries such as Italy or the U.S., it is too early to draw conclusions on what will happen in the long term.”

Areva also has signed a provisional agreement with the Indian government and Nuclear Power Corp. of India Ltd. to build as many as six reactors in that country. India, too, has recently said it is revising operating rules. An Areva spokeswoman declined to comment on the progress of its China and India ventures.

There also could be delays in Europe, where EDF and Areva have signed, among other agreements, deals to build as many as four reactors in Britain. The first U.K. plant is scheduled to come on line in 2018, but nuclear-energy experts say a planned government safety review could cause delays, as new regulations may have to be implemented.

In the U.S., where EDF is considering building an extra reactor at its Calvert Cliffs project in Maryland, higher financing costs following the crisis in Japan could stall the project, analysts say. An EDF spokeswoman said it was too early to draw conclusions about the U.S. situation.

EDF’s Flamanville power plant, where there are two working reactors and a third is being built, is a shop window for France’s nuclear prowess. Some 10,000 people, from schoolchildren to foreign dignitaries, are guided around the reactor’s construction site every year, learning about the plant’s safety features and the virtues of carbon-free electricity.

“There will be a place for debate once things in Japan are over,” says Antoine Ménager, the construction site manager at Flamanville’s unfinished third reactor. “In the meantime, all we can do is open our doors and try to explain to people what’s going on.”

In 2007, Enel bought a 12.5% stake in the third reactor, and as part of the deal, 58 Enel engineers were sent to France to help build it. Two years later EDF and Enel signed a joint venture to scope out potential sites for four nuclear plants in Italy, in a deal valued at as much as €16 billion.

Italy’s plan was to resurrect its nuclear-energy ambitions, which had been thwarted by the Chernobyl disaster in 1986. Italian electricity prices are about 30% higher than the European average; proponents say nuclear power would lower prices considerably.

Italy is densely populated and has a history of violent earthquakes, however, and that meant the process of reintegrating nuclear energy was always going to go very slowly, says Pierre-Louis Brenac, an energy consultant at SIA Conseil in France.

In June, Italy will hold a referendum on whether to go ahead with its nuclear plans. Enel is awaiting details from the government to analyze what implications the new moratorium could have for the company’s nuclear plans in Italy, an Enel spokeswoman said. She said it wasn’t clear whether the moratorium would prohibit Italy’s nuclear-safety authority from studying how to eventually rebuild the country’s nuclear capacity.

Enel engineers posted in France are continuing their work, according to Paolo Luconi, the head of Enel’s team at the plant in Flamanville.

“Japan could have repercussions in Europe but it’s too early to say,” says Mr. Luconi. “We certainly haven’t stopped our project.”

Even if the nuclear rollout in Italy is delayed, Enel’s engineers will have gained valuable experience, he says. Mr. Luconi himself spent time working on nuclear projects in France in the 1970s. After Italy halted its domestic nuclear operations, Mr. Luconi says he put his skills to good use. “I worked in a gas power plant,” he says.

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