The gauntlet of Garoña

The firm Nuclenor (property of the power companies Iberdrola and Endesa) has decided to close the nuclear plant at Garoña, against the government’s express desire. This move clearly shows the inconsistency of Spanish energy policy, which seems incapable of answering the proprietary companies’ implicit challenge to the taxes contained in the reform package put forward by the Industry and Energy Ministry. To understand the full importance of the gauntlet thrown down by the closure of Garoña, it should be remembered that while in opposition, the Popular Party (PP) made an issue of the reopening of this plant; that after winning last year’s elections it set a deadline in September of this year for Nuclenor to request a prolongation of the plant’s functioning, which the company ignored; and that on Sunday the owner took a new step within its own strategy by beginning to disconnect the plant.

Whichever way you look at it, Nuclenor’s decision is a challenge to Minister José Manuel Soria’s energy reform which, among other decisions, imposed a tax of 2,190 euros on every kilogram of uranium spent by a nuclear plant. The case of Garoña reflects, on the one hand, the government’s incapacity, as a regulator, to impose its will on the regulated companies; and on the other, the underlying irrationality of the energy policy that Spanish governments have so far followed. In terms of power supply, Garoña has barely any importance; its production is not decisive and even less so in a period of an economic slump.

Nuclenor’s decision does not make economic, financial or industrial sense. Garoña is an installation that has long since been amortized (in service since 1971), and the tax burdens imposed by the government might perfectly well be transferred to the final per-kilowatt price. Precisely this transfer to the user-paid prices is what makes the energy reform yet another step toward charging the energy system’s deficit to the pocket of the citizen, eliminating any illusion of an equitable sharing between users and companies.

Need for nuclear

For these reasons, the closure of Garoña has no strictly economic arguments in its favor; the announced array of cost increases (taxes and the Fukushima effect) in relation with the profits expected from Garoña comes up against the doubtful credibility of the accounts offered by the companies. We are looking at a political challenge on the part of the companies, who are demanding a rectification of the energy reform, and probably the concession of other regulatory advantages to Garoña and the rest of Spain’s aging nuclear plants.

The challenge may have grave consequences in the medium term if the government cannot manage to impose its will. Spain’s energy supply cannot do without strictly controlled nuclear production. It is a matter not so much of building new nuclear plants — whose cost cannot be borne by companies at the best of times, let alone in a phase of economic depression and falling demand — as of keeping already built and amortized reactors working.