CIVIL NUCLEAR WORKING GROUP OF THE TRADE PROMOTION COORDINATING COMMITTEE (TPCC) REQUESTS INFORMATION SUPPORT ON COUNTRIES' PLANS TO EXPAND NUCLEAR ENERGY: SWITZERLAND

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UNCLAS BERN 000650

STATE FOR MARC HUMPHREY

COMMERCE FOR SARAH LOPP

FROM FCS AND POL/ECON

E.O. 12958: N/A

TAGS: ENRG,TRGY,ETRD,BEXP,BTIO,SZ

SUBJ: CIVIL NUCLEAR WORKING GROUP OF THE TRADE PROMOTION

COORDINATING COMMITTEE (TPCC) REQUESTS INFORMATION SUPPORT ON

COUNTRIES' PLANS TO EXPAND NUCLEAR ENERGY: SWITZERLAND

REFS: (A) STATE 127468 (B) UNVIE 576

1. This cable is Embassy Bern's response to ref a regarding

Switzerland's plans to expand nuclear energy and our responses to

the questions in para 8 of ref a as an initial overview of

Switzerland's Civil Nuclear Power program. FCS Bern has already

reported on this topic in the past through the Commerce Market

Research Library and post will continue to report on this topic in

2009 as further information becomes available.

2. Summary:

Switzerland has plans to expand its Civil Nuclear Power Program,

both in terms of reactor construction and spent fuel management

(uranium mining is not in the picture at all and as far as we know

Switzerland does not export fuel supplies).

These plans are based on the Federal Council's revised policy of

2005 to continue to rely on its five existing nuclear reactors and

to replace them over time as needed. The underlying motivation is to

ensure independent capability to meet anticipated power shortages

and energy security. The federal government's role is however

limited largely to approving new plants and ensuring disposal of

nuclear waste; it has little or no role in financing and operating,

as these functions are carried out by so-called private companies,

which to some extent are owned and certainly influenced by the state

(cantonal) governments but nonetheless operate like most commercial

entities. The Swiss nuclear regulatory authority ask, which has been

part of the Swiss Department of energy but will become independent

in 2009, has broad inspection and enforcement powers. Switzerland's

domestic nuclear liability law is being updated under a revised law

of June 2008 and brought into line with international conventions

(notably the Paris convention). The Swiss Manufacturing base is

heavily involved in nuclear-related products or services (but not

mining or reprocessing for export, rather in high-tech components

and services),and there is a balance between locally sourced

components and services and those from outside Switzerland,

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especially Germany and the united states. Switzerland should not

experience any problems in terms of the nuclear-trained workforce,

although again it often relies on foreign suppliers. Anticipated

nuclear tenders for new plants are still years away, as they are

subject to governmental approval and probably popular referendum as

well, but tenders are issued by the commercial entities that own and

operate Swiss nuclear facilities, not by the government at federal

or state (cantonal) level. As U.U. suppliers already have a footing

here, it can be presumed that they were successful in the

procurement or tender process. There are numerous sectoral

opportunities for U.S. industry across a broad spectrum of best

prospects. The primary companies domestic and foreign in the

industry are listed below. There are foreign competitors but we are

not aware of any formal or potential agreements at this time, except

in the research area. As a neutral country and staunch supporter of

non-proliferation, Switzerland has no particular political

considerations in terms of cooperating with competing nuclear

supplier states. End summary.

3. The following items a-l respond to questions 1-11 in para 8 of

reftel a:

A. Does Switzerland Plan to Expand its Civil Nuclear Power Program?

Yes, Switzerland's energy policy as revised in 2005 BY THE FEDERAL

COUNCIL calls for new and replacement nuclear power stations.

Switzerland has five operating reactors at four sites (Beznau I and

II, Muehleberg, Leibstadt and Goesgen). With ageing nuclear power

plants which have to be phased out over the next 10-20 years, the

government decided new nuclear power plants (which provide clean,

CO-2 free energy) are needed to prevent a power shortfall after

2020. Of the power produced in Switzerland, 40 percent is generated

from the five nuclear power plants, and the other 60 percent is

mainly generated from hydropower with a small (approximately 5

percent) but growing contribution from renewable energy sources. No

fossil fuels (oil, coal, natural gas) are used in Swiss ELECTRICITY

production. Electricity production represents roughly one-third of

Swiss energy production, which is reliant on imported fossil fuels

to a high degree.

In June 2008, Atel (http://www.atel.eu/en/group/) submitted an

application to the Federal Office of Energy

(http://www.bfe.admin.ch/index.html?lang=en) for a general license

to build a new nuclear power station in Niederamt,

Solothurn(district of Goesgen/Olten). In December 2008, the Axpo

Group (http://www.axpo.ch/internet/axpo/en/home.htm l) and BKW

(http://www.bkw.ch/en/home/inhalte.html?chang eLang=en) established a

joint company to develop plans for two new nuclear power plants to

replace Beznau I/Beznau II and Muehleberg and submitted two

framework applications to sFOE for the licenses.

Hence, permits for three nuclear power plants may (or may not as

SFOE told us) be sufficient to offset post-2020 power shortages.

Atel may join forces with Axpo and BKW and, in any case, the Federal

Council and Parliament must ultimately approve THEM. HENCE, permits

for three nuclear power plants are now under review, although ANY

NEW plants may be challenged as Swiss direct democracy entails

almost certainly a popular referendum as early as 2012 or 2013. A

recent survey revealed that a narrow majority of Swiss people polled

are in favor of nuclear energy for the production of electricity.

For the first time, the survey revealed that in spite of big efforts

to conserve energy, 46% of the public views the construction of

additional nuclear power sites as essential, while 44% of the public

deem additional nuclear power plants superfluous. If a referendum

were held today, the survey concluded that 47% would vote in favor

of the erection of new sites, while 43% would vote against such

plans. This is a major shift from a survey conducted one year ago,

wherein 44% of all the people polled were in favor, and 50% were

against the construction of a new nuclear power plant.

Detailed reports of October and December 2008 on the new plants by

the Commercial Service/US Embassy Bern are available on the Commerce

Market Research Library

http://www.buyusainfo.net

The national Cooperative for the Storage of Radioactive Waste

(NAGRA) was established in 1972. It was entrusted with the mandate

of identifying a safe long-term solution for the disposal of all

radioactive waste produced in Switzerland -- a mandate that has not

yet been fulfilled. At present, radioactive waste is being stored

safely in special containers in well-secured halls at an interim

storage site in Wuerenlingen, and at the nuclear plants themselves.

Switzerland's Nuclear Waste Management Concept calls for two

repositories: one for low and intermediate level waste and another

for high level waste. Alpha toxic waste may be stored in either of

the sites. However, this radioactive material needs to be safely

stored for up to a million years, and for this purpose, storage

above ground is not a suitable long-term solution. Today, fully

developed concepts exist for the permanent storage of radioactive

waste in geological formations, but so far it has not been possible

to find a site for a deep geological repository.

With the new legislation that entered into effect in February 2005

(Nuclear Energy Act and Nuclear Energy Ordinance),the Federal

government adopted a new approach: the search for a suitable site

is now to be carried out within the scope of the sectoral planning

procedure. The objective of the Deep Geological Repository Sectoral

Plan is to ensure that, as major projects of national importance;

deep geological repositories can be decided upon and constructed on

the basis of an independent, transparent and fair procedure. This

process is managed by the Swiss Federal Office of Energy (SFOE).

B. Switzerland's Underlying Motivations

Switzerland's underlying motivations include anticipated power

shortages due to the eventual decommissioning of the five existing

nuclear power plants, the fact that Switzerland is committed to

non-fossil fuel energy sources with reliance on nuclear in addition

to hydroelectric as clean, non-CO-2 emitting energy sources, and the

expiration of the import contracts with France (which relate to

energy security). Switzerland's energy posture is based on

independence from foreign sources of electricity, especially when

compared to most of Europe's reliance on Russian and other foreign

sources of fossil fuels.

C. Government's Role in Financing, etc.

The Swiss central (federal) government's role in the financing of

the civil nuclear sector is certainly limited, especially in

comparison with that of other market economy countries, including

the United States. (SFOE noted that Federal funding is limited to

research on waste disposal, safety, etc.) Under the Swiss confederal

system, the cantons have historically played and continue to play a

very large role in energy development (both hydroelectric and

nuclear),and Canton Bern is in fact the majority owner of BKW. The

Cantons generally have ownership and influence on the "private"

utility companies that own and operate the nuclear facilities. These

companies in turn have close relationships with larger European

energy holding companies (e.g., BKW is 21 percent owned by the

Munich energy holding E.ON Energie AG).

D. Switzerland's Nuclear Regulatory Authority

The Federal Nuclear Safety Inspectorate (HSK),which had been

affiliated to the SFOE, is now becoming legally independent as of

January 1, 2009. It inspects and evaluates nuclear safety and

radiation protection at the Swiss nuclear power plants

(http://www.hsk.ch/english/start.php).

Acting as the regulatory body of the Swiss Federation, the

Inspectorate assesses and monitors nuclear facilities in

Switzerland. They include its five nuclear power plants, the

plant-based interim storage facilities, the Central Interim Storage

Facility at W|renlingen together with the nuclear facilities at the

Paul Scherrer Institute (PSI) and the two Universities of Basel and

Lausanne, as well as the Institutes of Technology in Lausanne and

Zurich. The Inspectorate assesses the nuclear safety of these

facilities and using a mixture of inspections, regulatory meetings,

examinations and analyses as well as reports from individual plant

licensees, it obtains the required overview of nuclear safety. The

Inspectorate ensures that facilities observe the regulations and

that operations comply with the legislative framework. In addition,

its regulatory remit includes the transport of radioactive materials

and preparations for a deep geological repository for radioactive

waste. The Inspectorate maintains its own emergency organization,

which is an integral part of the national emergency structure and

would be activated if there were a serious incident in a Swiss

nuclear facility.

HSK has 106 employees and expects that number to go up by roughly

10-20 percent in the near future. It currently has 4 open positions

advertised on its website.

E. Switzerland's Nuclear Liability Law Updating

The Swiss Parliament approved the new Federal Nuclear Energy

Liability Act on June 13, 2008, which is based upon the revised

international nuclear liability regime, called the Paris Convention

and the Brussels Supplementary Convention, and provides a compulsory

liability coverage of Euro 1.2 billion (USD 1.6 billion).

Switzerland's revised Federal Nuclear Energy Liability Act can only

be enacted by the Federal Council once the revised Paris Convention

has been ratified. The amendments to the Paris Convention need to

be ratified by two-thirds of the contracting parties e.g. ten

countries, and by all contracting parties for the Brussels

Amendments, e.g. twelve countries. It is anticipated that

Switzerland will ratify both amendments within the first six months

of 2009, but final ratification by the required number of countries

is expected to take 1-2 years.

The Swiss Federal Office of Energy (SFOE) will concurrently work out

the necessary details pertaining to the Nuclear Energy Ordinance.

The Federal Nuclear Energy Liability Act and the Nuclear Energy

Ordinance are slated to go into force in 2010 or thereabouts. The

existing Federal Nuclear Energy Liability Act, entered into effect

on January 1, 1984, applies with a compulsory liability coverage of

Sfr. 1 billion (USD 850 million) until implementation of the revised

Federal Nuclear Energy Liability Act.

F. Swiss Manufacturing Base versus imports

Yes, the Swiss manufacturing base, which is oriented already to

high-precision, high value-added and advanced technology in general,

is particularly well-suited to supplying its own energy companies

products and services both in the nuclear and the hydroelectric

fields. However, as reported by Commercial Service Bern, U.S.

companies like General Electric are very active in supplying and

maintaining Swiss power plants, both nuclear and conventional hydro,

especially in turbine technology, and German and other foreign

companies are also competitive in many subsectors.

It is very likely that many of the components or contracting

services for new plants could be sourced locally, but imports would

certainly be involved. We have not yet developed detailed product

and service information by HS code or other categories nor

determined the relative weight of imported versus domestic sources,

which would vary widely by subsector. Various trade statistics are

readily available; domestic production figures less so.

The market research reports referred to above indicate that the

"best prospects" for U.S. exports can be described as follows:

All of the nuclear power plants in operation today in Switzerland

are based on light water reactor (LWR) technolgy, which includes

both boiling water reactors and pressurized water reactors. General

Electric has made significant inroads on the Swiss market with its

boiling water reactors. GE is in charge of maintenance and overhaul

services at nuclear power plants using GE technology, also providing

(spare) parts, components, and software technology in support of the

upkeep of the plants. Operators of nuclear power plants frequently

turn to U.S. suppliers for projects that require highly skilled

labor and have entire teams on site to carry out these specialized

projects. U.S. technology to encompass generators, reactors, cooling

pumps, parts and components as well as software is highly regarded

among Swiss operators of nuclear power plants. These are the product

sectors that are deemed to have an above-average growth potential.

G. Nuclear-trained Workforce

Switzerland's approach to training is similar to that of Germany,

with a strong emphasis on technical training, on apprenticeships,

etc. In general, the orientation of the labor force is highly

planned during the educational period, and the provision of

engineering specialists, technicians, and construction for the

nuclear workforce would be no exception. The maintenance and

expansion of civil nuclear power, given that Switzerland already has

5 maturing facilities should not pose any significant requirement

for a foreign workforce. As already noted, Switzerland relies on

General Electric and other foreign suppliers for several

requirements in its nuclear and non-nuclear power facilities.

Specifics on programs in place or being developed have not yet been

fully researched, but as indicated above in the material on the HSK

the Universities of Basel and Lausanne (as well as the Institutes of

Technology in Lausanne and Zurich) are involved in nuclear

training.

H. Nuclear-related Tenders/Procurements

CS Switzerland is not aware of any nuclear-related tenders at the

present time. As a general rule, nuclear power plant operators

exercise discretion in inviting bids, and selective, discretionary

tenders are quite common. In general, quality and technical

criteria are more important than price in bid decisions. Foreign

firms may be required to provide a Swiss bank guarantee if they have

no local office or representation. Notices of tenders are published

in the official trade journal Handelsamtsblatt. While there is no

requirement to have a local agent to bid, it is advantageous when

equipment needs training, service or parts. CS Switzerland

endeavors to list tenders on its website and has a direct link to

the CS EU website with a comprehensive listing of tenders.

I. nuclear opportunities for u.s. industry

U.S. suppliers have solidified their position in the Swiss market

over the years. Operators of nuclear power plants frequently turn

to U.S. suppliers for projects that require highly skilled labor and

have entire teams on site to carry out these specialized projects.

U.S. technology to encompass generators, reactors, cooling pumps,

valves, parts and components as well as software technology is

highly regarded among these nuclear power plant operators.

Opportunities for U.S. suppliers lie in the areas of plant design,

equipment for the commercial nuclear electric power industry,

reactor sales, waste management, engineering services, fuel

management services, radioactive waste conditioning/disposal as well

as emergency training. These are the areas that are deemed to have

above-average growth potential. The overall Swiss nuclear power

plant market is highly competitive with an abundance of suppliers

and strong price competition. Procurement decisions are based upon

price and performance. Operational and technical aspects,

maintenance and life-cycle costs and risk are also taken onto

account when contracts are awarded to both domestic and foreign

suppliers.

J. Primary Companies Domestic and Foreign

The U.S. suppliers Westinghouse and GE as well as German supplier

Siemens have made major inroads in the Swiss market, garnering a

substantial share of the overall civil nuclear sector. The

country's first commercial units were Beznau-1 - a Westinghouse

pressurized water reactor ordered by NOK (Nordostschweizerische

Kraftwerke AG),and M|hleberg - a General Electric boiling water

reactor ordered by BKW (Bernische Kraftwerke AG). Following these

three units, a consortium of utilities - Kernkraftwerk Gsgen (KKG),

ordered a large PWR from Siemens KWU for Gsgen and another utility

consortium (KKL) ordered a similar-sized General Electric BWR for

Leibstadt. These companies provide maintenance and overhaul

services, also supplying spare parts, components, and software

technology in support of the upkeep of the plants.

Furthermore, the world-renowned leader in power and automation

technologies ABB is a major player on the Swiss energy market,

providing nuclear waste facilities, LWR fuel, BWR rods, fuel

management services, etc. Colenco Power provides services that

include contractual advice, procurement of nuclear systems,

radioactive waste conditioning/disposal and emergency training. ICT

Inter Control Technology AG is a major player in Switzerland

involved in the installations and equipment for the examination of

spent fuel elements and fuel rods, remote handling systems, and

nuclear robots. Pedi AG provides protection systems for people

involved in the production, supervision, maintenance and emergencies

and remote handling tools.

K. Are there other nuclear supplier countries engaging Switzerland

on its civil nuclear power program?

There is an agreement between Switzerland and the European Atomic

Energy Community (Euratom),which provides for Switzerland's

involvement in EU-sanctioned research programs in the peaceful uses

of nuclear energy. However, there are no agreements whereby Swiss

enterprises are involved in any activities in foreign civil nuclear

power programs.

L. political considerations

It is difficult to assess "political considerations" absent a

concrete context involving one or more particular countries, and

without regard to whether we are viewing Switzerland as a receiver

of nuclear materials and equipment or as a sender. It should be

noted that Switzerland has maintained both strong neutrality and

anti-proliferation stances in its international relations, and also

has laws against the export of items that can be used in warfare.

In general, Switzerland combines its domestic energy policy with

international aspects via its representation in international

organizations, including the International Energy Agency, the

International Atomic Energy Agency, as well as multilateral and

bilateral negotiations on energy policy, non-proliferation of

nuclear weapons, and monitoring nuclear exports.

Switzerland is involved with several bilateral committees dealing

with the safety of nuclear installations, including bilateral

committees with France and Germany. Relating to the U.S. alone,

Switzerland maintains the following agreements: US atomic energy

commission and the Swiss Division of Science and Research to

exchange information in the field of fast reactor physics; US

Department of Energy and the Swiss Federal Institute for Reactor

Research in the area of carbide fuel development; Swiss Federal

Council and the U.S. Government on the peaceful uses of nuclear

energy; Swiss Federal Office of Energy and the US Nuclear Regulatory

Commission on severe accident research, probabilistic risk

assessment research, safety research on deregulation, and related

aging research; Swiss Federal Office of Energy and the US NRC for

the exchange of technical information and cooperation in nuclear

safety matters; and most recently, Swiss Federal Nuclear Safety

Inspectorate and the US NRC for the exchange of technical

information and cooperation in nuclear safety matters.

4. Note: SCO Donald Businger and Senior Commercial Specialist

Sandor Galambos of FCS Bern met on December 12, 2008 with the Swiss

Federal Office of Energy (SFOE) Deputy Director Werner Buehlmann and

Energy Supply Specialist Christian Schaffner to collect input for

this cable.

(FCS: DBUSINGER/SGALAMBOS; ECON: LFRERIKSEN/RDELALANDE)

CARTER

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CIVIL NUCLEAR WORKING GROUP OF THE TRADE PROMOTION COORDINATING COMMITTEE (TPCC) REQUESTS INFORMATION SUPPORT ON COUNTRIES' PLANS TO EXPAND NUCLEAR ENERGY: SWITZERLAND

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