By Ritsuko Ando and Terhi Kinnunen
HELSINKI, Sept 2 (Reuters) - While Germany is phasing out nuclear power, Finland is looking to build more, staying its course in pursuit of cheap electricity despite the Fukushima disaster in Japan.
A Finnish consortium will soon announce the location of a new reactor, underscoring the country's determination to curb its reliance on Russian energy and help its metals and forestry sectors stay competitive.
Fennovoima, led by German utility E.ON's (EONGn.DE) Finnish subsidiary, plans to announce the new site as soon as a court rules on land use claims. The two candidate sites, Pyhajoki and Simo, are both in northern Finland.
Finland's parliament last year decided to allow Fennovoima and Teollisuuden Voima (TVO) to construct new nuclear reactors, which are expected to come on line by around 2020, and raise the number of reactors in Finland to seven.
Economy Affairs Minister Jyri Hakamies, who is also responsible for energy issues, said Finland launched a safety review and stress test results are due at the end of the year, but there had not been much question over whether to proceed.
"There hasn't been a strong debate after Japan that we should change our decision," Hakamies told Reuters. "I think Finns are very rational, pragmatic."
Nuclear energy has not held a popular image in Europe since the 1986 Chernobyl disaster, and less so since the Fukushima disaster in March. Germany has decided to phase out nuclear power, and Italy has shelved plans to build new plants.
Proponents of Finland's nuclear policies say the economy cannot afford to do the same as Germany.
Finland's long, cold winters mean high energy consumption, and its forest businesses and steel makers depend on cheap electricity.
Those sectors remain vital as flagship tech company Nokia no longer looks like the growth driver of a decade ago.
While Finland hopes to increase its use of renewable energy from 31 percent last year to around 60 percent by 2050, nuclear energy -- which accounted for around 28 percent of electricity use -- is seen as a key element of economic growth in the meantime.
While Germany is expected to import more energy from countries like Russia, Finland is trying to curb dependence on Russian energy on fears economic growth in Russia could make imports costlier in the long term.
Businesses have been stepping up their attempts at energy self-sufficiency, with paper makers UPM-Kymmene and Stora Enso owning stakes in TVO and stainless steel company Outokumpu holding shares in Fennovoima.
Originally aiming to generate power for its own mills, UPM is now the country's second-biggest electricity producer after Fortum . Its capacity of about 3,000 megawatts is set to rise with the third and fourth reactors.
Supporters of Finland's nuclear energy policy also say the country's security policies are robust.
"We expect that in the existing plans, the security level is high. And also, on those which are under process, they will be. Security is an important factor but I'm not worried," Hakamies said.
Critics, however, say that confidence reflects a feeling of Finnish exceptionalism, similar to some attitudes in Japan before the March accident and one which Finnish rock band Eppu Normaali satirised with a hit song in the early 1980's:
"Uranium splits and the lamp produces light, but in no other country than Finland is it without a risk."
DELAYS AND WASTE WORRIES
There are also worries that not everything is going as smoothly as planned, with the construction of Olkiluoto 3 plagued by delays and ballooning costs.
The reactor was originally scheduled to begin commercial electricity production at the end of April 2009, but TVO now expects to begin commercial use during the latter half of 2013.
TVO and builder Areva-Siemens (SIEGn.DE) have taken their payment dispute to the International Chamber of Commerce.
Critics also say a major concern is how Finland will handle nuclear waste. Radioactive waste from Europe's reactors must be buried in secure bunkers.
"From an environmental organisations' point of view, nuclear waste is one of the biggest problems," Greenpeace Nordic's energy campaigner Jehki Harkonen said. "There is always a risk of catastrophe."
Posiva, jointly owned by TVO and Fortum, is planning a bunker in the island of Olkiluoto as a final disposal site for nuclear waste.
One sticking point has been whether it will accept Fennovoima's request to add its waste to the bunker. TVO and Fortum have said there will be no room.
"There is a lot of cooperation we can do with Fennovoima. But the room in Olkiluoto cave will be limited, it is a small island and it does not have a lot of room," said TVO spokeswoman Anne Lehtiranta.
A Fennovoima spokeswoman said this week that it was ready to negotiate with Posiva and its owners. (Editing by Jason Neely)