Dark Clouds Hang Over Nuclear Town Torpedoed by Green Energy

(Bloomberg) -- In an eerily quiet nuclear reactor hall in southern Sweden, new copper and steel machinery stretching 50 meters and weighing hundreds of tons is just sitting idle.

Bought from France and Germany as part of a $450 million upgrade at the now defunct Oskarshamn-2 facility, the turbines, steam pipes and feed-water pumps were supposed to help supply cheap electricity to the Nordic market for decades to come. Instead, they will probably be sold as scrap metal. The junk pile may grow even bigger as another reactor at the site will produce its last megawatt by the end of June.

The plant is yet another victim of an unprecedented surge in renewable energy that has sent margins at traditional power stations plunging, leaving thousands of old-school energy workers across Europe unemployed. Oskarshamn also houses a third reactor and its fate will be decided later this year by owners Uniper SE and Fortum Oyj, a decision seen as a bellwether for future investment in other Swedish atomic stations.

For the town of Oskarshamn, the utilities' decision later this year on whether to pour another one-billion kronor ($114 million) into the region's biggest reactor to keep it humming until 2045 couldn't be more significant. With job cuts also looming at other local factories from a nuclear subcontractor to truck maker Scania AB, halting power production permanently would be another big knock to the town after the shipyard closed in the 1970s, its largest employer at the time.

“It's a scenario I do not even dare to fully consider,” Peter Wretlund, Oskarshamn's mayor, said in his office overlooking the town's port on the Baltic Sea. “It would have grave consequences for the population.”

While governments in Germany, France and Switzerland are deciding on when to shut down reactors, Sweden will let market conditions be the judge on the life of its remaining six units. Even after a nuclear tax was abolished, conditions remain harsh for operators as they compete with subsidized renewable energy flowing across the European grids.

Local politicians are worried about the town's future. One of the main obstacles for growth is its remote location on the southeast coast, far from any of Sweden's major cities. The closest large international airport is in Copenhagen, another flight or a 4.5-hour train ride away.

“So many highly skilled workers are leaving the city,” Eva-Marie Hansson, a local politician for the opposition Moderate Party, said in an interview. “People here do not have the opportunity to stay and easily commute to other big cities.”

To combat the brain drain, Oskarshamn bid to host a 4 billion-euro ($4.5 billion) large-scale battery factory earlier this year for Northvolt AB. The plan was to build the factory on the nuclear site, with existing security and access to high-voltage grid connections as main selling points.

The project didn't make the short-list, said Wretlund. Northvolt listed good transport links as one of the main criterias for its location.

For now, the nuclear plant's biggest challenge is to cut its operating costs. It plans to cut staff by 32 percent to 600 by 2019 compared with last year.

Uniper had sold half of its 2019 Swedish production in advance at between 19 euros and 23 euros per megawatt-hour in May, a level that also includes the company's hydro power production. That compares with plant costs of 40 euros before tax cuts in 2014, the latest available figure.

Attracting new tenants in the mode of Northvolt seem logical and others have done it before. Google Inc. bought the Summa paper mill in Finland from Stora Enso Oyj in 2009 and converted it to a data center using existing grid connections. The project employed 2,000 people during construction.

“Our assessment is that we can reach long-term profitability,” Johan Svenningsson, Uniper's chief executive officer, said in a phone interview. “But we still need to see that costs can be brought down to the levels we require before making a decision.”

To contact the reporter on this story: Jesper Starn in Stockholm at jstarn@bloomberg.net.

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net, Andrew Reierson