Swedish Atomic Tax Backed by EU Court as Output Costs Rise

  • Nuclear levy costing power companies $548 million a year
  • Atomic plant closures partly blamed on how tax calculated

Europe’s highest court ruled that a Swedish nuclear energy tax the power industry says is sounding the death knell for some reactors complies with European Union laws.

The EU Court of Justice deemed Sweden’s levy on the available power of reactors rather than the actual amount of electricity they provide doesn’t violate the bloc’s energy tax directive. After Sweden increased the tax by 17 percent in August, it now costs the nuclear industry about 4.6 billion kronor ($548 million) a year, according to lobby group Swedenergy.

Nuclear has been the most reliable electricity source in the Nordic region for more than 40 years, supplying energy-intensive paper plants, mines, smelters and refineries with cheaper power than competitors on the continent. The tax represents about a quarter of the total cost for nuclear production, according to Frank Kroenert, a senior consultant at Sweco AB, a consultant to the industry.

“The decision was expected,” he said. “It’s business as usual, though still under pressure. Reactors are still operating at the margin with the cost they have.”

EON SE’s Oskarshamn nuclear station in Sweden first contested the tax office’s levy in 2009 in the Swedish courts, which then sought the EU’s preliminary ruling. In June, the same EU court backed Germany’s tax on nuclear fuel after complaints from utilities RWE AG and EON.

“Of course we are disappointed,” said Jakob Holmstroem, head of press at EON’s Swedish unit. “It was important to have the issue tried by a court and we stand firm by our position that the nuclear tax is a penalty tax that distorts competition.”

The EU ruling will be sent back to the Swedish court, which will make its final decision after hearing from EON and the tax office again. 

“EU law has precedence over Swedish law,” said Anna Stroemblad, the clerk handling the case at a special administrative court in Sundsvall, Sweden. 

Slumping Prices

Nordic power prices have fallen 60 percent since 2008, making some reactors unprofitable just as a renewable power boom deepens a regional glut.

“The EU court seems to consider that Swedish tax is in line with EU directives,” Torbjoern Wahlborg, head of generation at Vattenfall AB, which plans to close two Swedish reactors at Ringhals, said by e-mail.

Shareholders in OKG AB, the operator of Oskarshamn, are meeting Oct. 14 to decide whether or not to start decommissioning the two oldest reactors at the site, according to a regulatory filing on Wednesday. EON owns 55 percent of OKG, while Finnish utility Fortum Oyj has most of the remaining stake.

Production costs at Oskarshamn last year were 48 percent higher than the average Nordic day-ahead price of 29.61 euros per megawatt. The forward market on Nasdaq Commodities exchange in Oslo expects Nordic power prices to remain below 30 euros for almost 10 years, with a contract for 2024 last traded at 29.15 euros per megawatt-hour.

“It’s a tax burden for a business on its knees,” Goeran Hult, head of nuclear power at Fortum in Sweden, said by phone Thursday.

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