Plugged In: the energy news podcast
Coming from the heart of the Montel newsroom, Editor-in-Chief, Snjolfur Richard Sverrisson and his team of journalists explore the news headlines in the energy sector, bringing you in depth analysis of the industry’s leading stories each week.
Richard speaks to experts, analysts, regulators, and senior business leaders to the examine not just the what, but the why behind the decisions directing the markets and shaping the global transition to a green economy.
New episodes are available every Friday.
Plugged In: the energy news podcast
Decarbonising with mini-reactors
This week’s episode takes a look at the Baltic market and plans to decarbonise the region by rolling out small modular reactors.
Listen to a discussion on how small-scale nuclear could be commercially viable at much lower cost than current projects in France, Finland and the UK.
For expert views and analysis of the impact of the coronavirus on energy market, please visit our daily extra at covid19.montelnews.com.
Host:
- Richard Sverrisson, Editor-in-Chief Europe, Montel.
Guest:
- Kalev Kallemets, CEO of Fermi Energia.
Hello listeners and welcome to the Montel Weekly podcast, bring you energy matters in an informal setting. In today's episode, we won't be looking at the Coronavirus outbreak. We won't be talking COVID-19. For that, you can follow the latest developments across commodities across markets on our Montel Daily Podcast Special. This week we're taking a Glance Eastwood and looking at Estonia and the Baltic market. This is a country well known for its digital literacy, but many exciting things are also happening in the country's energy space. We have noticed quite a few listeners from Estonia tuning into the Montel Weekly podcast. So warm, welcome to you, and also it's a great pleasure to have Kalev Kallemets, CEO of Fermi Energia, a talent-based company on the. Montel Weekly podcast, A warm welcome to you, Kalev. Thank you.
Kalev Kallemets, CEO of Fermi Energia:Good day from Estonia.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Kalev. I thought first of all, maybe you could say a few words about Fermi and, and what you are currently active in.
Kalev Kallemets, CEO of Fermi Energia:Yeah. All right. Fermi was a nuclear engineer who or a scientist who was the first to. Chain reaction in Chicago in 1942 that, or namesake. But the company was established last year to very closely study the option of deployment of small modular reactors in Estonia to have carbon neutrality with every weather.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Enrico, isn't it? The, the nuclear physicist? Indeed. I actually went to school with his grandson, Daniel Fermi. But that's not the topic of today. So let's talk a little bit about the small modular reactors color. Are these a viable alternative to oil shale power plants in Estonia?
Kalev Kallemets, CEO of Fermi Energia:Not now. They are in the licensing and development in Canada and the United States. SMRs have been a subject of interest for some time, but really now they're in licensing in development in a level that is much more serious as, looking forward and indeed the case is in Estonia that the majority of power generation is from oil shale also was in 19. 4.5 hours, but it is the heaviest CO2 carbon emission technology, even higher than lignite. Meaning that if the CO2 prices are above 2025, the it will be significantly punished by those prices.
Richard Sverrisson, Editor-in-Chief Europe, Montel:So not profitable at all with carbon as it was maybe a few weeks ago, not what it is now, but Kiff. Can you tell me a little bit about, so when you talked about the licensings for small modular reactors or SMRs, how far are we away from sort of commercial realization and in which countries you mentioned USA and Canada. Would these be at the forefront of the deployment of this technology? Absolutely.
Kalev Kallemets, CEO of Fermi Energia:Both Canada and United States are very seriously. At the government level, investing into development of those technologies and also in the licensing of those technologies. The utilities in Canada and the states have many nuclear reactors in development or in operation. And several utilities are considering SMR deployments, most notably Ontario Power Generation, the largest Canadian utility, but also other provinces are waking up to. And build up dispatchable capacities that are carbon neutral. And and the same is the less so in, in the states because they have extremely cheap and natural gas. But the f is that there are two some. Are getting too old and they have to consider what are the options. And clearly large reactors are extremely expensive and very dangerous to build. Therefore, for any individual business.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Are we talking five, 10 years away from commercial operation?
Kalev Kallemets, CEO of Fermi Energia:Yeah. Well, the outlook is that, um, the licensing should be complete, for example, for new scale by end of this year. Okay. And then they would go to the site licensing and go to the construction. Expectedly 20 23, 20 24, and the first of all kind would be ready by 20 26, 27. And several developers both Lightwater systems, but also fourth generation molten salt reactor developers expect by 27 to their reactors to be operational. So that and this is also our business in Ton, is that if they get ready, then we. Estonia to seriously apply for Estonian construction license in Estonia for those units.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Maybe they'll be online before Flamanville or Ulto three maybe.
Kalev Kallemets, CEO of Fermi Energia:I'm sure Flam Ulto will be ready next year. Regarding Will. I haven't been there. I don't know so, so well, but but indeed the large units are extremely complicated in their nature
Richard Sverrisson, Editor-in-Chief Europe, Montel:because of the size. Absolutely. Yeah. So there's been a lot of cost over on overrun some delays there. So, so in, in, in that sense, the SMRs could be the, provide a, a different kind of model for the markets that need them. But I'm, but I'm just wondering kind of, so we're talking Estonia. Canada and the us but are there other areas in other countries in Europe that are looking at this technology? I know potentially in the UK or in the Nordics.
Kalev Kallemets, CEO of Fermi Energia:Yeah. Well, UK definitely is one of the regions or one of the countries in Western Europe that is most open to new nuclear. They have Rolls Royce that is government funded, that develops SMR. I have to say I don't think that the Rolls-Royce has similar capability as companies who have experience with building and developing civil power actors. But let's see they've faced definitely a lot of competition in there. There are. Multiple, multiple developers out there and, and I have to say not all of them will be
Richard Sverrisson, Editor-in-Chief Europe, Montel:successful. Sure. I mean, if we go a little bit into the technology itself, technology itself, what's the maximum capacity? Are we talking, are we talking, you know, anything between 106 hundred megawatts and, and how many could you roll out in a country at the same time?
Kalev Kallemets, CEO of Fermi Energia:Yeah, very good question. Internationally, it's recognized that up to 300 megawatts is a small recor from 20 to 300 below 20 you are to micro reacts. And there are plenty of micro reacts also in development, which are very suitable for off-grid locations in Canadian or American North where they burning diesel fuel for power generation. Which is quite expensive and dirty. Yes. 30 do, and we, but in Estonia, we're looking at the, let's say 200, 300 megawatt size for the C grid scale, baseload power generation looking 20. Can you
Richard Sverrisson, Editor-in-Chief Europe, Montel:tell us something about the cost? What would be the production costs here? The marginal cost of production?
Kalev Kallemets, CEO of Fermi Energia:That's very relevant question. The developers are specifically aiming those 3, 200, 300 megawatt units to be costing less than a billion dollars, and they have to be competitive with natural gas in American market, meaning their aim is at $35. Megawatt hour and they have to meet that range in order to be competitive with natural gas and un unless they are, they don't have a market in North America. I mean, European market is a kind of bonus to, to American market. So they have to be competitive over there.
Richard Sverrisson, Editor-in-Chief Europe, Montel:That's far below the price. For example, the strike price at which Hinkley point C was where the deal was struck there. So I mean, that's very competitive now in given our current wholesale prices.
Kalev Kallemets, CEO of Fermi Energia:Absolutely. And Hinkley point, the amazing factor is that half of the levelized cost, price and or strike price, there is interest cost. And because the construction time is scheduled for 7, 7, 8 years and you have huge amount of. Building up this construction that you have. Take a of course, have construction. Per unit capital down is billion. That's a total different ballpark.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Absolutely. We'll turn to a little bit to renewables a bit later, but as we see the European Union is moving to decarbonize its energy system by 2050 or reach at least reach net zero by 2050. How would small modular reactors fit in a world of renewable energy? Can they coincide, can they load follow how? How does it work? Caleb?
Kalev Kallemets, CEO of Fermi Energia:Yes. What I'm not looking is compet competition with renewables. Renewables have to increase. There is no question. They have to double, they have to triple. But even so, the challenge of switching down coal and gas at the same time, but keeping an also in mind that we, there's a huge capacity of older reactors being shut down. In uk, even in Sweden, obviously nuclear phase out in Germany, some older units getting shut down in Belgium, in France, in Switzerland, also in Spain. It's all combined. We're talking more than 200, 300 Tet hours of generation, dispatchable generation. Of those shutdowns that have to be displaced over the next 10 years, that's a tremendous market and we don't have to fight with the renewables. Okay. You can coexist. Absolutely.
Richard Sverrisson, Editor-in-Chief Europe, Montel:It's potentially very interesting. You've mentioned the carbon content of oil shell, but also for those countries and markets that are dependent on moving away from coal. For example, several countries in Eastern Europe, Poland, Slovakia, or Hungary. And then this is the small modular reactors would be a very good alternative, do you think?
Kalev Kallemets, CEO of Fermi Energia:Absolutely. They're much better alternative and the large units, they're much better alternative than burning gas where you are still emitting a lot of CO2. And if the CO2 price has to go by 2050 to a level where carbon capture and storage has to be viable, then we are talking 80. Euros ton. And at that level then the only, the CO2 cost per carbon of carbon cost of gas burning is 40 euros per mega. So I mean, small would easily outcompete any natural gas per per generation.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Can you tell us a little bit about the corporation you have now with Sweden's Vattenfall? How, how far have you come here and are other companies looking at what you're doing with small modular reactors, Caleb?
Kalev Kallemets, CEO of Fermi Energia:Indeed, we signed early this year in January. MOUs with three companies. Yes, Vattenfall was one of them. We are studying the construction time of MR. With tractable, we are studying the siting in Estonia with, we studied the licensing model, which is based on the safety assessment. Done by Canadian or American regulator. So meaning that in Estonia we would not do independent, full fledged safety assessment, which would be extremely time consuming. And I would say that is not done in airplanes or drug manufacturing. And we are having a whole suite of other studies that we're performing this year. So those three are the most important partnerships that we have.
Richard Sverrisson, Editor-in-Chief Europe, Montel:And these are all well-established nuclear operators, you know, Vattenfall and for in the Nordics and, and Tractor be in, in Belgium. So they Yes. They're specialists in this field, would you say?
Kalev Kallemets, CEO of Fermi Energia:Yes. And what we have learned is that also. It is not very easy to start nuclear New build project right now in either in Sweden or in Belgium or proposition or business case that we're developing. And given that Portex will disconnect from Russian grid system, it seems that the market condition in politics is one of the, potentially one of the best. Deployment of SMR
Richard Sverrisson, Editor-in-Chief Europe, Montel:if we stick with the TIC market. How are you know Estonia, Latvia, and Lithuania gonna move to decarbonize their electricity production? Kind of
Kalev Kallemets, CEO of Fermi Energia:before that? The, the first challenge is actually keeping the lights on. Okay. Because as I said, end of 2025, Estonia Lithuania will desynchronized from Northwestern Russian grid system to. Continental European system, meaning the connections to Russia and Belarus will be disconnected. And the last year we imported about nine Tet hours from those countries. This will discontinue at that day, meaning we have to increase significantly imports from. Swedish Price, region four. And from Finland, we'll see whether they have a sufficient capacity to export.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Well, that's it. I mean, that's my next question because as we see, you know, maybe a shortfall in capacity in Finland, Sweden's decommissioning its nuclear plants, you know, is there enough capacity at times when supply in the region is squeezed? I mean, can the Nordics supply the Baltics as well?
Kalev Kallemets, CEO of Fermi Energia:Yes it's very good question. I don't see, there is a mathematical calculation behind right now because if there isn't windy time in the Portex sea area, then it'll be challenging there. All the most expensive power generation sources have to be utilized. The demand or that there has to be this euphemism of demand management of switching down consumers.
Richard Sverrisson, Editor-in-Chief Europe, Montel:But the other alternative is then is to expand or grow the capacity within the Baltic region. I see SD and a gear are looking to expand in offshore into the Baltic. Is this an option or a feasible option?
Kalev Kallemets, CEO of Fermi Energia:Yeah, certainly, certainly. I mean, wind generation has to increase, but. Weather forecast every evening in the news is you notice that the depression areas, they don't cover single countries. They cover mostly Northern Europe, meaning that if there is a wind in Denmark, there's wind in politics, there is wind in Germany. So that's why we have negative prices.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Absolutely.
Kalev Kallemets, CEO of Fermi Energia:And also. High like it is probably tomorrow. Then you, the prices are high and you have to switch on carbon intensive power generation and the prices will go higher.
Richard Sverrisson, Editor-in-Chief Europe, Montel:If we stick to the topic there of negative prices, Caleb, I mean, you've been a bit of a critic here. I mean, is this to do with over sub subsidizing renewables, do you think, or I mean. Surely it's also a good idea to have a signal that provides the market with a view that there is oversupply, which is what negative prices do.
Kalev Kallemets, CEO of Fermi Energia:Yes, you are correct there. The, the, this price signal has to, should, should happen. But what is, I think what we are trying to achieve in Europe at the same time is that the reduction of the CO2. Maybe the TSOs or the regulators, they should differentiate who has at those periods access to the market. If there is a overcapacity in the market, maybe the generators who are carbon intensive should be limited out of the market and then maintain some normalcy in the market so that low carbon producers don't get punished. That's a thing that has to be considered.
Richard Sverrisson, Editor-in-Chief Europe, Montel:So you think it's the role of the TSO to come in here and limit the sort of high carbon intensity power generation and let generally the largely carbon free produces produce at will?
Kalev Kallemets, CEO of Fermi Energia:Well, that is obviously consideration that should be should be given if in European policies to as much as possible. Carbon emissions and have low carbon emitters at the market. And, you know, as much as possible with market pricing and not with subsidies.
Richard Sverrisson, Editor-in-Chief Europe, Montel:I mean, I think generally there is a move to end subsidies across Europe. And I think even, you know, new build solar, a lot of wind can exist without subsidies.
Kalev Kallemets, CEO of Fermi Energia:Yes. And obviously if there would be no subsidies, I don't think we would see very much a negative pricing.
Richard Sverrisson, Editor-in-Chief Europe, Montel:So maybe. It's a sort of long-term game here that it's gonna happen, but you'd maybe, you'd like to have it happen sooner rather than later.
Kalev Kallemets, CEO of Fermi Energia:Certainly because otherwise there is a very significant period where there will be significant economic damage to low carbon producers. How about. SMRs, the small more reactors, can they exist without subsidies? Of course. Of course. All the power generation in Finland and nuclear power plants that are planned for levelized cost of 50 euros per megawatt hour, they for next 60 years they are built without any subsidies.
Richard Sverrisson, Editor-in-Chief Europe, Montel:They have a different system in FIN and don't they? They have the LAR system, which is slightly different from maybe what we sort of seen in the UK and France in a way of financing nuclear.
Kalev Kallemets, CEO of Fermi Energia:Yeah, sure. It's not project financing. And this has to be a avoid avoided, I think at every cost. And I think it's very clever and very meaningful, this Ular system. And we try to emulate this as, as well because it's fundamentally mutuality. Which owners or the consumers of power build themselves a power generation capacity is even more engaged relationship for the power consumer than the power purchasing agreements. It's power purchasing agreements
Richard Sverrisson, Editor-in-Chief Europe, Montel:squared, I would say. Okay. Okay. So more advanced or version of PPAs than you would say? Absolutely. More sophisticated. Yes. More sophisticated model. Yeah. And actually a hundred years old. Absolutely. Well. Kaev, thank you very much for joining the the Monte Weekly podcast. A fascinating discussion on small modular reactors. I'm sure, you know, we'll hear more of this in the future and we'll come back to this, but for now, thank you very much, kaev. Thank you. That's about all from the Monte Weekly podcast this week. Thank you Kyle ever again. Remember to keep up to date with all our stories on Montel News and follow us on Twitter, LinkedIn, and subscribe on Apple Podcasts and Spotify. Goodbye.
