Nuclear, Natural Gas Included in EU Taxonomy—With Potentially Problematic Conditions

Handing a muted victory to proponents of nuclear and gas, the European Commission (EC) on Feb. 2 adopted a measure that labels some nuclear and gas energy activity as climate-friendly investments. However, it set out strict, potentially limiting technical screening criteria for those activities to qualify, prompting pushback from the nuclear and gas industries.

The EC's newly adopted Complementary Climate Delegated Act (CDA) essentially adds certain nuclear and gas activities to the transitional" package, Article 10(2), of the European Union's (EU's) taxonomy regulation. The goal of EU taxonomy is to prevent greenwashing" and help investors identify economic activities that bolster the EU's environmental and climate objectives. Battles about which energy resources should be included in the EU's taxonomy, however, have recently intensified, given their influence on private capital allocation, as well as to public funding over the next 30 years, to 2050.

The CDA, a complementary" act, is a follow-up to the EU's 2021-adopted Taxonomy Delegated Act. The first part qualified several power-producing sectors in its technical screening criteria but delayed controversial decisions on gas and nuclear to provide more time for technical assessments and public feedback. The CDA now heads to the EU Parliament and Council, which have six months to approve or reject the document. If approved, it will go into force on Jan. 1, 2023, and the EC will review its screening criteria every three years.

While the CDA includes certain nuclear and gas activities, as activities covered by the transitional" activities in the taxonomy regulation, they cannot yet be replaced by technologically and economically feasible low-carbon alternatives, but do contribute to climate change mitigation and with the potential to play a major role in the transition to a climate-neutral economy, in line with EU climate goals and commitments, and subject to strict conditions, without crowding out investment in renewables," the EC explained on Wednesday.

The CDA also introduces specific disclosure requirements for gas and nuclear energy activities, including that large EU-listed non-financial and financial companies disclose the proportion of their activities linked to natural gas and nuclear energy. This should help investors to distinguish between the different activities they are investing in," the EC said.

Strict Limitations for Nuclear

An emerging sticking point, however, is the CDA's strict requirements for activities to qualify for inclusion in the EU taxonomy. While the CDA included nuclear power for its zero-carbon attributes, as recommended by the EU's Joint Research Committee, nuclear generators will be subject to strict safety and environmental conditions, including on waste disposal under the EU's controversial do no significant harm" (DNSH) criterion.

Nuclear activities covered by the CDA, notably, include modifications and upgrades to existing plants, but only until 2040. They also include new third-generation nuclear projects until 2045, as well as advanced technologies with closed fuel cycles (Gen IV projects).

The CDA's technical screening criteria for nuclear energy seeks to go beyond requiring mere compliance with legislation regarding radioactive waste management and disposal," the EC said. The EU regulatory framework already legally requires that member policies keep the generation waste to a minimum," it said. While member states are already required to have operating disposal facilities for low-level waste, the CDA requires that by 2050, they should also already have a detailed plan for a disposal facility for high-level nuclear waste.

Other aspects of the CDA have also left some in the nuclear industry ambivalent about the EC's treatment of the issue. The adoption of the CDA restores some desperately needed scientific credibility to the EU sustainable financing framework and represents a commendable step forward from a Commission that initially appeared to be intent on excluding nuclear energy entirely from the legislation," the World Nuclear Association (WNA) told POWER on Wednesday.

Unfortunately, the Commission has only partially heeded this strong scientific evidence. Nuclear energy has been included in the taxonomy but only on a transitional basis, with expiry dates set for both existing reactors (2040) and new reactors (2045). The adopted CDA also sets criteria for eligibility that could limit the number of nuclear projects that qualify. This includes a requirement for all currently operating and new reactors to use so-called accident tolerant fuel by 2025, as well as arbitrary requirements for operational waste disposal facilities. These requirements go beyond existing national and European nuclear regulation and will be challenging, and in some cases impossible, to implement."

The science is now settled-nuclear energy is sustainable," noted WNA Director General Sama Bilbao y Leon. The Commission has been right to reject political pressure to keep nuclear excluded from the taxonomy. But in seeking a politically acceptable compromise, it has produced some conditions that are not scientifically justified or applied consistently to other energy technologies. This will hinder the EU from achieving its energy and environmental goals," she said. In reality, the existing EU regulations that govern all aspects of nuclear energy generation, including the long-term management of used nuclear fuel and radioactive waste, are more than sufficient to ensure the safe and environmentally sustainable operation of nuclear facilities."

The U.S.-based Nuclear Energy Institute (NEI) echoed these statements. The draft taxonomy issued by the European Commission is an important step forward as Europe seeks a pathway to meet its sustainability and climate goals. It illustrates the consensus opinion that existing and new nuclear generation are critical to global decarbonization efforts," said Maria Korsnick, NEI president and CEO. However, the draft taxonomy fails to create a level playing field in which all carbon-free sources-wind, nuclear, solar and hydropower-can work together to decarbonize economies." Korsnick said significant changes" to the draft are needed to remove unnecessary barriers to existing nuclear generation and the development of new nuclear projects. Nuclear carbon-free generation can and should be the foundation of a just clean energy system of the future," she said.

A 2035 Deadline for Fossil-Based Gas Power

The EC's proposed inclusion of natural gas for its role as a transition fuel in decarbonization has been an especially controversial issue. Gas-related actives include fossil gas-fired power; high-efficiency" co-generation of heat/cooling and power from fossil gaseous fuels; and production of heat or cooling from fossil gaseous fuels in an efficient district heating and cooling system.

On Wednesday, the EC suggested its decision was rooted in modeling scenarios that show natural gas will continue to play an important role in terms of consumption and generation until 2030, after which we expect a decline to 2050." The EC acknowledged, however, that throughout the transition, the function of natural gas-fired electricity generation will change and will increasingly be a facilitator for the spread of renewable electricity and stable supply." In the EC modeling for Paris-aligned pathways, natural gas is projected to represent 22% of gross inland energy consumption in 2030, and 9% in 2050. Any natural gas in 2050 will have to be abated," it said.

However, the CDA lays out clear limitations. To be included, the capacity of the gas-fired power plant cannot exceed the capacity of the coal-fired plant by more than 15%. Fossil gas facilities must also switch fully to renewable or low-carbon gases by Dec. 31, 2035. The technical screening criteria also require that any new gas-based power/heat plant (or refurbished combined heat and power plant or heat/cool plant) will have either below the technology-neutral 100g CO₂/kWh life-cycle emission threshold"-that is, they must use carbon capture and storage technologies-or meets a number of stringent conditions and obtains a construction permit by 2030."

Gas organizations had already pushed back on some stipulations proposed in the CDA draft. Ten organizations in a Jan. 20 statement urged the EC to include gas power plants as backup capacity in addition to coal-to-gas switching. A full switch to renewable or low-carbon gases will depend on their availability-and at the moment is not clear that this will happen in the same timeframe as the implementation of the [CDA]. Therefore, meeting the timeline and percentage share of renewable and low-carbon gases requires a commitment of the EU and Member States to provide the necessary gases in time, as well as periodic reviews and adjustments to the [CDA] to reflect reality," they said. The criteria must also reflect the co-firing of sustainable biogas and bioliquids, frequently produced as a side product and utilized efficiently in industrial cogeneration."

On Wednesday, the EC addressed concerns about its potential impact on the region's resource plans, and ensuing effects on energy prices and energy availability. The Taxonomy is not an instrument of EU energy policy. It is a tool to increase transparency in financial markets for private sector sustainable investments. It does not mandate investments and does not prevent any economic sector from receiving investments," it said. In addition, taxonomy does not favor any one source of energy from a specific region. Investment decisions remain commercial decisions based on many economic and financial factors," it underscored.

Member States remain fully responsible and competent for deciding their own energy mix and for striking the appropriate balance-in terms of energy security, energy price stability, and their commitment to decarbonization and climate neutrality. The Taxonomy is an important element in the sustainable finance toolkit to help fund the Green Deal," it said.

However, the EC argued that supporting a clean energy transition would help the region reduce" its vulnerability to fossil fuel price volatility. In the medium term, our policy response should focus on making the EU more efficient in the use of energy, less dependent on fossil fuels and more resilient to energy price spikes, while providing affordable and clean energy to end-users. The Complementary Delegated Act is part of these efforts and aims to drive the EU towards the required green transition to a decarbonized economy."

-Sonal Patelis a POWER senior associate editor (@sonalcpatel,@POWERmagazine).

The post Nuclear, Natural Gas Included in EU Taxonomy-With Potentially Problematic Conditions appeared first on POWER Magazine.