Cablegate: More Delays for Finland's New Nuclear Reactor

R 081520Z DEC 09
FM AMEMBASSY HELSINKI
TO SECSTATE WASHDC 5315

UNCLAS HELSINKI 000464

E.O. 12958: N/A
TAGS: TRGY ENRG FI
SUBJECT: MORE DELAYS FOR FINLAND'S NEW NUCLEAR REACTOR

REF: HELSINKI 450

1. SUMMARY: As the Government of Finland (GOF) deals with
repeated delays in the construction of the fifth nuclear
power plant, it also debates the future of nuclear power in
Finland. The completion of Finland's fifth nuclear reactor
has been delayed to Summer or Autumn 2012. Ministry of
Employment and Economy (TEM) officials blame for the delay
reactor supplier Areva's late submissions of appropriate
documentation and insufficient welding techniques; those
delays have reportedly resulted in cost overruns doubling the
costs from EUR3 billion to EUR5.3 billion. Despite these
construction problems, both the GOF and public opinion
towards new nuclear plants remains steady. Nuclear energy
remains an important source of carbon-free baseload energy,
and the TEM will likely approve at least one of the three
applications pending for Finland's sixth nuclear reactor.
Parliament, as well, looks poised to approve at least one new
reactor despite divisions among coalition members. As
Finland struggles to meet its ambitious emission targets,
nuclear energy will remain an increasingly attractive option.
END SUMMARY.

FINLAND'S FIFTH NUCLEAR REACTOR SUFFERS REPEATED PROBLEMS
--------------------------------------------- ------------

2. The completion of Finland's fifth nuclear reactor,
Olikiluoto 3 (OLK 3), has been delayed once again due to
Finnish Nuclear Regulatory Agency's (STUK) fresh concerns
over insufficient welding techniques by Areva - the French
company supplying the reactor - and an overall back-up in the
work schedule from prior delays. Areva's revised start-up
date for the new nuclear plant is Summer 2012, almost 3 years
beyond the original 2009 date. In a meeting with Econoff,
TEM Deputy Director General for the Energy Department, Riku
Huttunen, was more pessimistic, not expecting the plant to
come on-line until Autumn 2012.

3. Huttunen emphasized that ongoing construction delays have
more to due with Areva's late submission of planning
documents to appropriate Finnish authorities, than with any
serious flaw in the European Pressurized Reactor (EPR) model.
He downplayed press reports about tensions between Areva
and Finnish utility Teollisuuden Voima Oy (TVO), noting that
construction continues while the companies work out their
differences. Huttunen added that the GOF believes Areva is
unfairly shifting the blame to Finland. Finland went public
with these concerns on November 2 when Finnish, UK and French
regulators issued a joint statement questioning Areva's EPR
control and instrumentation.

4. Delays have nearly doubled OLK 3's costs from EUR3 billion
to an estimated EUR5.3 billion, and TVO and Areva (along with
Areva's German partner Siemens) are in continued arbitration
over who pays for the cost overruns. Areva originally claimed
TVO was responsible for EUR1 billion in additional costs. On
April 2009, TVO filed a counterclaim via the International
Chamber of Commerce for EUR1.4 billion.

SUPPORT FOR NEW REACTORS REMAINS SIGNIFICANT
--------------------------------------------

5. Despite the delays, Huttunen insists that both GOF and
public opinion regarding nuclear reactor construction in
general has not changed. A October Gallup poll showed 31% of
Finns favor new nuclear reactors, down slightly from 38% in
September. Huttunen pointed out that local officials, with
the backing of their constituents, still lobby to bring
nuclear reactor construction - and the subsequent employment
and revenue - to their municipalities.

6. Problems with OLK3 have not scuttled proposed plans for
construction of a sixth reactor: TVO and Finnish companies
Fennovoima and Fortum all have construction applications
pending with TEM. Media reports state that within the next
several months TEM Minister Mauri Pekkarinen likely will
grant a Decision-in-Principle to at least one of the
companies. On November 25, Prime Minister Vanhanen publicly
stated that while his government might approve one additional
plant, it would not approve three.

PARLIAMENT DIVIDED OVER NUMBER OF NEW REACTORS
--------------------------------------------- -

7. Parliament, as well, looks poised to approve at least one
new reactor despite divisions within the governing four-party
coalition. The Centre party wants to approve only one
application, while the National Coalition Party (NCP)
supports granting all three. According to NCP leader and
Finance Minister Jyrki Katainen, two of the new reactors
would replace two of Fortum's existing plants, producing in
principle only one additional reactor in Finland. The Green
Party has opposed any increase in nuclear energy production,
but also has stated it would not break with the coalition
government over nuclear issues, as they have done in the

past.

8. One nuclear issue on which Parliament appears unified is
the continued ban on exporting excess nuclear-generated
electricity to its neighbors. Huttunen confirmed that there
is little GOF support for producing excess nuclear energy and
subsequent waste for the benefit of its neighbors, most
notably Russia (even though the Nordic electricity market
already allows this in practice at limited levels).

"NUCLEAR OPTIONS" CONSIDERED IN CLIMATE PLANS
---------------------------------------------

9. On November 20, the Government unveiled its long-term
climate and energy policy report, which it plans to present
at the Copenhagen Climate Summit (REFTEL). The report
examines four possible paths Finland could take to achieve an
80 percent reduction in emissions by 2050. The pathways take
into account factors such as economic growth, transportation
needs, energy consumption and use of nuclear power. The
different scenarios range from the Eco-Efficiency model in
which Finland uses 100 percent renewable energy to the
Industrial Society model which relies heavily on nuclear
energy (envisioning a tripling of Finland's capacity). The
GOF hopes the report will generate discussion on how Finland
should prepare for climate challenges, as well as create the
policy conditions necessary to encourage clean technology
investments. The government solicited public input regarding
the pathways, and asserts that the preferred option was one
of the middle-of-the-road paths that foresees nuclear power
increasing slightly to one-fifth of Finland's production.

10. COMMENT: The GOF's current climate strategy - drafted
before the current recession hit - foresees a significant
reduction in GDP as Finland acts to meet its EU-mandated
emissions targets. GOF officials expect that clean tech and
renewable energy both will lift Finland out of the recession
and help it meet its emissions targets. Maintaining status
quo on nuclear energy (roughly one-fifth of energy
production) could prove difficult, e.g., given that the
recession has hit the paper industry hard and consequently
sharply reduced Finland's biomass supplies. As Finland looks
to 2020 and beyond to 2050, among the main political parties
there is a broad consensus to act ambitiously. Where the
consensus might breakdown, particularly during the upcoming
parliamentary election campaign, is what energy configuration
will best meet those goals. END COMMENT.
ORECK

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