Czech CEZ to Try Again for a New Nuclear Tender

  • czech powerA plan to replace aging nuclear reactors at Dukovany and add to the units at Temelin is being revived as the current units at both sites get older and as the government works towards both energy self-sufficiency and a mid-century set of targets for reducing CO2 emissions.
  • Nuclear energy is expected to become the main source of electricity production with its share rising from 35% to between 46% and 58% in 2040 (WNA)
  • The government remains conflicted over issues related to the source of investment, the financial model to be used, including government guarantees, and how it will choose the lead reactor vendor and EPC.
  • Anti-nuclear initiatives within the European Union by its neighbor Austria may drive the government to cancel a bid process and choose a government-to-government deal with Rosatom. Also, there is pressure within the European Union  to stop the operation of existing nuclear reactors when they are 40 years old.

In the past few months the government in the Czech Republic has signaled that it wants to try again to issue a tender for new nuclear reactors at Dukovany and later down the road at Temelin. The reason is the four 440 MW Russian VVERs at Dukovany entered revenue service in the mid-1980s. By comparison the two units 1000 MW VVER at Temelin were completed in 2000 and 2003 respectively.

It’s no secret that CEZ, the state-owned nuclear electric utility, made hash out of its tender released in 2009 and cancelled five years later in 2014. Along the way the government threw out a bid by Areva claiming the French firm had not filed the correct paperwork which was disputed by the French government.

In the new round, in addition to Rosatom, potential bidders could include Korea Hydro, China General Nuclear, Westinghouse, Areva/EDF, and a collaboration of Areva and Mitsubishi. In assessing the prospects for getting the business, the Russians have a pole position due to being willing to offer significant financing and guarantees of reliable fuel services. Their pitch may be aided by the pro-Russian tilt of Czech President Milos Zeman.

If CEZ, which will now have a nuclear only business unit, chooses to issue a commercial tender, the prospects for South Korea improve because it can point to its success with the construction of four 1400 MW units in the UAE.  Plus, it has an experienced workforce it can call upon to bring lessons learned from that effort to the CEZ project.

A lead weight on South Korea’s prospects is that the current government is pursuing a domestic policy of stopping new construction, thwarted for the time being, and shutting older reactors. It’s hard to promote export of your country’s technology if the leadership on the home front is pulling the rug out from under your best efforts.

Less likely to do well in the competition are Westinghouse and Areva.  Westinghouse is still working emerge from bankruptcy. The noise from South Carolina where the V.C. Summer project collapsed due to mismanagement by Westinghouse as both the EPC and lead vendor, along with its suppliers, will be heard in Prague.  Areva has similar problems with significant cost overruns and schedule delays at its EPR projects in Finland and in France, but both of these projects are likely to eventually be completed with the reactors entering revenue service.

China is the the wild card with export deals in progress to build its new 1000 MW Hualong One PWR in the U.K. and Argentina and a CANDU project in Romania.  In the U.K. the Hualong One has entered the Generic Design Assessment (GDA) process which will take four-to-five years.

China is building demonstration Hualong One reactors at Fuqing and Fangchenggang so there will be reference plants where potential customers can come kick the tires. The fact that the design is under construction at two sites in China should help with the GDA process.

Chinese state owned nuclear firms have a commitment from the U.K. government to build the Hualong One at the Bradwell nuclear site in return for a one-third equity stake in the Hinkley Point reactor project now under construction (Twin Areva/EDF 1650 MW EPRs).

There is no officially announced timeline for release of a tender timeline by CEZ nor even a government decision about whether to have one.  Best guess is the one or both decisions will take place this year subject to the outcome of interference by the European Union.

EU Mulls CEZ Decision to Offer Tender on New Nuclear Reactors

In order to release a tender the Czech government must win approval from the European Union in Brussels. The politics of the case are similar to the one in which Hungary won approval in 2016 for two Russian VVERs to be built at the $12 billion Paks II site. Austria and Germany filed protests which were overruled.

At the heart of the EU controversy are questions about the status of guaranteed rates for nuclear power plants that will serve to attract non-state investors. There isn’t a utility anywhere that will take the risk of investing billions of dollars for a revenue stream that won’t start for five-to-seven years in a merchant, e.g., unregulated, market.

Some would argue that the EU’s pressure tactics on regulated market rates for nuclear plants is designed to prevent them from being built in the first place. Some political leaders in EU nations are so far over on the “green” side of the political spectrum that if successful would force their countries to buy more natural gas, most likely from Russia, to keep their grids stable for all those solar and wind power sites.

Austria is likely to take another run at forcing the EU to take action against the Czech project which could force CEZ and the government to cancel a plan for a tender and go for a straight government-to-government deal with Russia.

Either outcome would play into Russia’s strategy of using exports of nuclear technology as a vehicle for extending that nation’s sphere of influence in European energy markets.

Negotiations on the issue with the EU are ongoing but Czech officials have been quoted by Radio Prague as saying the dialog is “difficult” at this time.

Czech Nuclear Safety Chief Warns of EU Pressure to Close Reactors

Radio Prague reports that the head of the State Office for Nuclear Safety, Dana Drábová, gave a blunt warning at a high profile energy conference held in Prague earlier this month.

“There is immense pressure developing that the operating life of nuclear reactors will be limited to 40 years.”

Czech Nuclear Power via WNA

Table & Data from World Nuclear Association

That means that our political representatives – whoever they might be – sometime around 2023 will face a battle over a further 10 year extension for Dukovany. The current State Energy Framework counts on the lifetime of the Dukovany reactors ending sometime between 2030 and 2040.”

While Drábová did not say explicitly where the pressure is coming from at the conference she did offer her views when interviewed on Czech Radio:

“There are member states which are showing a desire to go down this road. These are of course the 14 countries which are not using nuclear power and some of which regard it as something ugly. In this case we might see, let’s say, a willingness to get rid of these nuclear plants in Europe as fast as possible.”

Drábová said there are already examples in Europe where nuclear reactors have been forced to close because of what were basically political reasons. She gave the example of two reactors at Slovakia’s Jaslovské Bohunice plant which were forced to close as a condition for the country joining the European Union.

Drábová also pointed out another problem: without new nuclear reactors and some of the older ones operating, Czech plans to curb greenhouse gas emissions in line with European Union climate change plans will also be thwarted.

Czechs are counting on nuclear power plants in the long term providing around half of the country’s electricity, up from around a third now, as many of the country’s older coal-fired plants are also phased out.

Austria Files Lawsuit Against EU for Approval of PAKS II Project

(WNN) Austria has filed a lawsuit against the European Commission for its approval of Hungarian state subsidies for the construction of two new reactors at the Paks II nuclear power plant.

Austrian Sustainability Minister Elisabeth Köstinger announced on January 22nd that Austria intended to file a lawsuit against the EC. The case will now be considered by the European Court of Justice within the next few months.

Hungary received approval to start construction of new nuclear power units at Paks in 2017 following the Commission’s approval last March of commitments the country had made to” limit distortions in competition.”

The Commission found that Hungary’s financial support for the Paks II project involves state aid, which is prohibited by the EU, but it also said it could approve this support under EU state aid rules on the basis of these commitments to transparency in the bid process.

Media reports indicate that the project is essentially a government-to-government effort with Rosatom supplying the reactors, serving as the EPC, and providing the bulk of the financing for construction.

The Paks plant has four Russian VVER 440 MW PWRs built between 1982 and 1987. Russia will supply two new units at Paks – VVER-1200 reactors – as well as a Russian state loan of up to €10.0 billion ($11.2 billion) to finance 80% of the project.

Poland to Decide in 2018 on Whether to Build a Nuclear Power Station

(Reuters) The wire service reports that the Poland’s Energy Minister Krzysztof Tchorzewski said the government will decide later this year whether to build its first nuclear power plant to lower carbon emissions as part of a plan to reduce dependence on coal in the long term.

Poland, which uses coal to generate most of its electricity, plans to lower the share of coal in its energy production by mid-century.

Poland’s state-run PGE, Poland’s biggest power producer, is expected to be responsible for the nuclear project.  Approval was expected to be taken last year, but the financing of the nuclear power plant remains a problem.

The energy ministry is also looking at possibilities to deploy high temperature gas-cooled reactors (HTGR) in the future in addition to conventional light water reactors.

Poland’s PGE open to other partners in nuclear power plan

(Reuters)  Poland’s biggest power producer PGE is ready to cooperate with more partners in a plan to build the country’s first nuclear power plant, the company told the wire service.

Poland produces most of its electricity from coal.  Global pressures to shift away from the polluting fuel are forcing it to review plans for power generation.

State-run PGE has been leading the long-delayed nuclear power project. However it has limited financial resources for the plans. There have been multiple delays in setting a start date for work on the nuclear project due to problems lining up investors.

The Energy Ministry said it would welcome other partners to help fund the project that could cost 50 billion to 60 billion zlotys ($15 billion to $18 billion).

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