Energy of the Future?

Energy of the Future?

Mar 15, 2011

Report

Energy of the Future?

Nuclear energy in Central and Eastern Europe

March 15, 2011
Editors: Karel Polanecký, Jan Haverkamp

Click here for Energy of the Future? (60 pages, pdf, 445KB)

Summary

The Czech Republic, Slovakia, Poland, Hungary and Bulgaria have much in common. In the second half of the 20th century they were part of the Socialist Bloc dominated by the Soviet Union and, as members of the Comecon (Council for Mutual Economic Assistance), also a distribution market for Soviet industrial production. In all of these countries – with the exception of Poland – nuclear power plants were built during the 1970s and 1980s using the Soviet technology of the time. Specialists were also trained in the Soviet Union, and upon their return these individuals formed the basis of the nuclear intelligentsia.

In all five countries the electricity sectors were controlled by state monopolies. After the collapse of the socialist system these monopolies were transformed into companies of various kinds, but the governments kept their majority stakes in them. The Czech Republic’s ČEZ, Poland’s PGE, Hungary’s MVM, Bulgaria’s NEK and Slovakia’s Slovenské elektrárne had no difficulty maintaining their dominant positions, which were not even threatened by the market liberalisation which followed EU accession. Competition could not challenge the transformed monopolies due to their exceptional starting position, and proponents of nuclear energy have maintained significant influence at all of these companies.

Only in Slovakia was the successor company to the socialist monopoly privatised. A majority stake in Slovenské elektrárne was sold to the Enel concern in 2006. However, the Slovak government privatised the company on condition that participants in the tender would continue with nuclear projects.

In all the countries, dominant energy companies were able to establish close cooperation with the ministries responsible for developing the sector. These companies do not adapt their plans to governmental conceptual programmes; to the contrary, ministries often create the conditions for projects proposed by company managers. Thus, in the name of energy security, state officials are actively implementing construction of nuclear power plants based on plans which – in most cases – date from the 1980s.

In constructing nuclear power plants, officials of the individual dominant energy companies see an opportunity to maintain their privileged position on national markets. Coal-fired power plants will face increased costs in the coming years due to the need to purchase emissions allowances, and coal extraction in the region is declining. Not one of these companies has attempted to base a significant portion of its business on decentralised production using renewable energy sources. Building nuclear power plants is the last theoretical possibility for the former monopolies to maintain their predominance over the competition and control of the market.

Nuclear plants over energy plans

In none of the five countries investigated was the decision to build a nuclear power plant made based on an energy plan evaluating the expediency of various alternatives, including non-nuclear ones. In Poland, the government decided to construct a nuclear power plant even though the energy plan did not recommend it. In Bulgaria, the state energy plan is supplanted by an overview of projects proposed by large investors. In Hungary, parliament approved a change to the energy plan which conditioned the construction of new reactors on shutting down old ones, but without requesting that various alternatives be presented and without evaluating the economic aspects of such a plan. The Slovak government adopted a strategic plan to develop the energy sector without a broader expert debate or an assessment of alternatives; rather, it approved the only proposal based on further nuclear development. While in the past the Czech government has included a comparison of various scenarios in the preparation of its energy plan, an elaborated non-nuclear alternative based on energy efficiency and renewable sources was not taken into consideration in its most recent such plan.

The nuclear zeal of political elites

In all the countries of Central and Eastern Europe we find high-level politicians vigorously promoting the development of nuclear energy. The countries differ only in their respective nuclear industries’ motivations and the ways in which they win over their proponents. In the Czech Republic it is no surprise to anyone that important ministerial posts are filled by individuals whose past is connected with ČEZ. An influential energy adviser to Slovakia’s PM headed a company which profits from the construction of nuclear power plants. Bulgaria’s president and ministers in various governments do not conceal their personal contacts with representatives of the Russian nuclear industry. In Hungary, MVM managed to win the favour of both key political parties, and parliament approved the construction of new units at the Paks Nuclear Power Plant according to a submission from this company without any economic estimates or costing information. The region lacks a strong political party advocating a non-nuclear alternative for developing the energy sector, although public opinion polls indicate that there is presently no public demand for such a programme.

Strong words will not pay for a reactor

The strong political support which nuclear energy enjoys in post-socialist Central Europe does not guarantee, however, that planned reactors will be built. High investment costs lead to unwillingness among investors – even strong state-owned companies – to take on all the economic risk. In the 1990s, Central European states still indemnified the construction of nuclear power plants – government guarantees were provided on the loans which financed construction of the first units at Temelín and Mochovce. Since EU accession, however, this approach is no longer possible as it would constitute a violation of the rules for economic competition.

On the EU electricity market, rules must be respected which prohibit the state giving an advantage to individual producers. Governments cannot provide any benefits to energy companies (state-owned or private) or selected technologies which could inhibit competition. Accordingly, not even partially stateowned companies can count on subsidies or government loan guarantees for building reactors.

Nevertheless, the examples of the completion of the Mochovce plant in Slovakia and the suspended Belene project in Bulgaria demonstrate that governments are still attempting to provide indirect support to nuclear power plants even on the European market. Reducing payments into the fund for the disposal of spent fuel or increasing the equity of a state-owned company (with the goal of improving access to loans), however, cannot fundamentally influence projects’ balance sheets. The construction of new nuclear units in Central and Eastern European countries will depend on whether suppliers submit an offer that is economically advantageous for ČEZ, MVM or PGE. In view of the results of nuclear tenders in various parts of the world and the continuously rising costs of the two European plants under construction, this is not at all certain.

Click here for Energy of the Future? (60 pages, pdf, 445KB)

 

 
 
 
 

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