In 2010, the same year Andreas Regnell was appointed Head of Strategy at Vattenfall, most people thought the recession in Europe had come to an end. Swedish industry had started to recover, the country was Europe's new tiger economy and the low electricity prices of 2009 were now unusually high. Now, five years later, in spite of an upturn in the economy, the electricity price is far lower. There are no signs of prices increasing in the foreseeable future, and electricity generators are talking of major cuts.
How are things for Vattenfall?
"If you wait a moment, I'll show you," says Andreas Regnell, taking out his mobile phone. He swipes his screen and shows what's on it. It says: 25.67 öre/kWh.
"That's the spot price on Nord Pool. We're currently being paid less for the electricity we supply than it costs to run for instance the Forsmark and Ringhals nuclear power plants. And that's with three reactors currently out of commission in Sweden. Prices should be high. So, the answer to your question is that things are bad, really bad right now."
What's your view on Vattenfall's economic situation?
"Because the situation we currently find ourselves in results from a radical change in the market, I usually start by explaining why the electricity price is as low as it is today. In the 1990s, Europe's politicians decided that we should reduce emissions and transform the way we generate energy. This led to the EU's 20/20/20 targets. In order to speed up the process, the politicians linked the targets to a system which subsidises new renewable power generation, even though the power plants that were to be abandoned hadn't reached the end of their lives. In Germany, for example, they subsidised a major expansion of solar energy and wind power. But because very few old power plants were shut down, this led to excess capacity on the market. At the same time, demand for electricity decreased, due to low growth and improvements in energy efficiency. And the development of shale gas has led to a sharp fall in the price of coal."
"So, excess capacity, low demand and a low coal price have resulted in an extremely low electricity price over an unusually long period of time. And now, if Vattenfall is to survive as a large-scale generator of electricity in the long term, we must take action."
Have the subsidies upset the balance on the market?
"Yes, and in Germany, for example, they have paid a high price. German electricity consumers pay three times as much as we do in Sweden. But, at the same time, we must be self-critical. What's happened isn't "wrong". Voters voted in the politicians who made these decisions - in a succession of elections. Society wants more renewable electricity. And people don't want coal power."
Does public opinion influence the future of nuclear power?
"Nuclear power is in a totally different situation to coal power. Lots of Swedes wonder whether building new nuclear power is a good idea but very few of them want to shut down the existing reactors."
"The reason we have to make cuts in nuclear power is not because Vattenfall doesn't believe in nuclear power, it's because the electricity price is so low. In my view, we should keep the existing power plants running as planned to give Sweden the opportunity to convert in good time to an energy system that the Swedish people want – and which we will hopefully start to define in Sweden's new energy commission."
Is closing unprofitable reactors still an option?
"If we thought the price would remain at 25 öre per kilowatt-hour for the next ten years, we'd be forced to close reactors. But we don't think it will. To complicate matters, shutting down nuclear power plants is expensive. As long as we have a licence to operate we have to have staff and carry out maintenance. But there is a limit. We can't continue to invest in plants if we can't make them profitable even in the long term."
How long can the price stay this low?
"It's hard to say. In 2020, the Germans will close their last nuclear power plant and a fair number of old coal-fired power stations are due to be phased out at roughly the same time. We expect the price in Germany to increase at that time, which will also impact on the price in Sweden. R1, R2, O1 and possibly O2 are due to be shut down in Sweden in around 2025, in other words in ten years' time. That will also affect the price."
But the subsidies and the expansion of renewable generation will continue.
"Yes, but when the proportion of weather-dependent energy increases, the need for regulatable power also increases, which makes nuclear power and hydro power more valuable."
So, what do we do now?
"We have to reduce our costs. The days when nuclear power was so profitable that it didn't matter how many billions a project cost are long gone. We have to utilise every idea that saves money without compromising on safety. And we also have to work out how we can get more money for our product."
"Originally, the idea was that nuclear power would be the baseload power source. But the more weather-dependent electricity generation we have, the greater the demand for balancing power. Maybe it could be worth reducing output so we can increase generation when there's not much wind or when the sun's not shining"
Is there any particular area where you think costs could be reduced?
"No, and it's certainly not us here in Solna who are experts on how for instance Forsmark and Ringhals can cut costs. But I do agree with the Managing Director of Forsmark and Ringhals Eva Halldén that we're doing things in an unnecessarily complicated way. We approach everything as if we're dealing with reactor safety even when we're not. And we miss out on economies of scale when, for example, we don't coordinate projects between Forsmark and Ringhals."