Spain’s massive electricity blackout puts nuclear energy back in motion
An unprecedented blackout last month in Spain is still under investigation, with its exact cause unknown. That hasn’t stopped serious questions about the trustworthiness of the country’s electricity grid, which is increasingly turning to renewable sources like solar panels and wind turbines. It’s also causing some to take a fresh look at nuclear energy.
“Nuclear power plants are efficient and safe, and they are the least expensive solution to guarantee system stability and energy supply,” Ignacio Sánchez Galán, the president of Spanish energy giant Iberdrola (CBOE: IBE), said just days after the entire country was plunged into darkness on April 28 for nearly a full day in some areas. The company owns stakes in five nuclear facilities in the country, all of which are due to be shut down by 2035 as the government prioritizes renewable energy sources.
While the administration of Prime Minister Pedro Sánchez has been vocal in declaring that renewables didn’t directly cause the blackout, the collapse came just days after the country reported that the clean energy sources had for the first time ever briefly supplied 100% of national demand. He’s been walking a tightrope, trying to deliver answers without straying too far from the government’s green agenda that has reduced wholesale electricity prices by 20% in the last three years, according to the Center for European Policy Analysis (CEPA).
After long touting the benefits of nuclear generation that include no carbon dioxide emissions, Spanish operators like Iberdrola and Endesa (CBOE: ELE) are now highlighting their always-online baseload capacity that differs from the variable peaks and troughs more typical of renewable energy that can occur as the sun shines—or doesn’t—and the wind blows—or doesn’t. They’re hoping they can get government officials in the country to extend the shutdown timeline and keep nuclear energy around for longer. Angry citizens smarting from the fallout that’s still causing some train delays, meanwhile, are getting a physics lesson.
Spinning turbines
In a quickly-cascading blackout, nuclear—and other thermal generation sources such as natural gas-fired plants—can play a key role in restoring stability because of kinetic inertia, or, in simpler words, the energy that gets stored in large rotating turbines even if only for a few seconds. The US Department of Energy’s National Renewable Energy Laboratory flagged the risk of declining grid reliability as inverter-based resources including wind, solar photovoltaics and battery storage replace traditional sources that don’t supply a motion-based backstop.
“The grid is a little bit of a house of cards,” according to Practical Engineering. “It’s not necessarily flimsy, but if the whole thing gets knocked down, you have to rebuild it one card at a time and from the ground up. Restoring power after a major blackout is one of the most high-stakes operations you can imagine.”
At the time of the blackout in Spain, wind and solar power were providing nearly 70% of electricity consumption. Energy minister Sara Aagesen said that renewables were not to blame, with “millions of bits of data” being analyzed in an “extremely complex investigation.” Grid operator Red Electrica (CBOE: REE)—which just last year warned about the risk of power disruptions because of the increasing prominence of renewables—has since increased natural gas-fired generation capacity.
The closer focus on nuclear energy could ripple beyond Europe, and countries that have previously wanted to transition away from the technology because of risks associated with radiation and waste storage seem to be changing their tune. Denmark, for example, is already looking at ditching its 40-year ban on nuclear development, with its energy minister, Lars Aagaard, saying the country is especially interested in studying small modular reactors. Most new nuclear facilities under construction are located in Asia, and the prospect of a renaissance in Europe and the Americas has investors salivating.
Nuclear rally heats up
Constellation Energy (NASDAQ: CEG), which operates the largest fleet of nuclear plants in the US, saw shares gain 51% over the past month, outperforming the S&P 500 index by more than three times. The rally has extended into smaller companies that service the sector. Cameco Corp (NYSE: CCJ)—one of the world’s largest producers of the uranium used to fuel reactors—rose 28%, while Centrus Energy (NYSE: LEU)—which also provides nuclear fuel—surged 51% and Uranium Energy (NYSE: UEC) increased 10%.
Over the same period, GE Vernova (NYSE: GEV), Nuscale Power (NYSE: SMR) and Oklo (NYSE: OKLO) gained 40%, 74% and 83%, respectively.
Despite the excitement, a true resurgence—while possible—would likely take years. Large plants can take decades to design, permit and then build, while the industry surrounding the smaller, modular reactors is still nascent and untested. Any kind of accident, anywhere in the world—such as the Fukushima Daiichi disaster in 2011—could also reignite political scrutiny as quickly as the current optimism has swelled.
Skepticism remains
“Nuclear power is set to reach a new record in 2025 and can improve energy security as electricity demand accelerates – but costs, project overruns and financing must be addressed,” the International Energy Agency wrote earlier this year, adding that annual investment in the sector needs to double to $120 billion by 2030 and saying that governments won’t be able to do it on their own.
The Spanish blackout has handed the atomic lobby a supercharged talking point on grid stability, but the road ahead it envisions is long—and expensive. Providers of cutting-edge nuclear systems may see dollar signs, but the large utilities that run them face capital expenditures that could make shareholders shiver. CEPA, for its part, is skeptical of the idea that nuclear is the key to grid reliability and points to solutions that have been deployed in South Australia that allow that region to operate safely with 70% renewables.
“The Spanish blackout was a failure of management, not of technology,” Enrique Dans, a CEPA fellow and professor at IE University in Madrid, wrote this week. “Nuclear energy is not a solution; what’s needed is reform of our energy grids.”
