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East Europe nuclear plans face many obstacles - analysis

East European countries have jumped on the global nuclear renaissance bandwagon, but numerous hurdles facing atomic power mean projects could be delayed and some even abandoned, analysts say.

Slovakia, Romania and Hungary plan to build new reactors or extend the life of existing ones, driven by growing energy needs at home and European Union targets to reduce greenhouse gas emissions. For others like Bulgaria, nuclear power is seen as a way to become major electricity exporters again after being forced to shut down communist era reactors as a condition to join the EU.

Lithuania on the other hand, hopes that a new plant which it plans together with Poland, Latvia and Estonia, will reduce energy dependence on Russia. Unlike in western European countries, nuclear power provokes little public opposition in Eastern Europe. But projects still face construction problems common to the industry worldwide and added uncertainty over political change at home. “We can expect some nuclear reactors to be built but not the numbers that are predicted,” Frank Barnaby, consultant at the Oxford Research Group, said. High capital costs, difficulties in convincing banks to loan the money needed to build them, and uncertainty about future political support are just some of the hurdles that could scupper nuclear projects. Meanwhile, the few nuclear engineering firms in the world able to build the plants are already stretched with over 30 reactors under construction globally and about 90 more planned. “Some companies in Germany have cancelled coal plant plans...they knew engineering companies couldn’t deliver. It will be the same with nuclear,” said Stephan Werthschulte, managing partner with consultants Accenture.

Financial woes
Most of the projects in Eastern Europe seek private partners, big western utilities in particular, to share costs and responsibility. But raising funds is still not easy. Sources in the capital Sofia said Bulgaria received little interest in a tender to pick a lead manager to secure financing for its 2,000 megawatt plant of Belene, which the government says would cost €4 billion ($5.89 billion) but some officials put it at over 6 billion. “Banks are hesitant. They want to see a partner who could safely run the reactors at high capacity to ensure that the huge costs could be covered,” said one source familiar with Belene. “If a country like Finland finds it difficult to push ahead with a new plant, what about Bulgaria,” he said. Finland’s fifth nuclear power reactor, seen as a test for Europe’s nuclear future, is two years behind schedule and 50% over budget. Sofia has extended its deadline for picking a strategic investor for 49% of the plant until mid-200 due to political wrangling about how to run Belene, which coupled with funding woes could push the start date well beyond the planned 2013.

Lithuania’s plan to build a new $9 billion 3,200-3,400MW plant to replace an existing one that is to be shut next year have also been delayed over power purchase disputes with Poland. When Bulgaria first decided to build Belene in 2005, the bill was estimated at €2.5 billion. Consultants Wood Mackenzie say capital costs for a new 1,000MW reactor have risen to between $2.5 billion and $3.5 billion (€1.7-2.4 billion). Analysts say increasing construction, uranium and steel costs have all added to the bigger bills. “Our view is that there is only likely to be upward pressure on this number going forward,” said Stan Reid, product manager European Gas and Power Services at Wood Mackenzie.

Uncertainty about future carbon emissions prices, political support and planning permission problems make nuclear projects difficult to sell to financiers, analysts say. Emerging European markets are still going through a lot of political and economic change, adding to uncertainty, they said. “What having a stable regulatory and political framework, which guarantees they (investors) are not going to have risks during the very long period of construction and operation,” said Luis Echavarri, director general of the OECD’s Nuclear Energy Agency.

High carbon prices make nuclear energy more competitive than greenhouse gas polluting coal and gas fired power plants as atomic power emits almost no CO2. The world atomic watchdog, the IAEA, forecasts that nuclear energy’s share in Eastern Europe, including Russia and its former Soviet republics, could rise to about 21% by 2020 and 23% by 2030, from 17.8% in 2006.


Nuclear projects in Central and Southeast Europe

The Balkan country, where nuclear energy supplies about 43% of all power, plans a new 2,000 megawatt (MW) nuclear power plant at the Danube river town of Belene. It has contracted Russia’s Atomstroyexport, along with France’s Areva and Germany’s Siemens, to build the plant in a €4 billion deal. The first reactor is planned to come online in late-2013. Sofia is yet to pick a strategic investor for 49% of the plant among Italy’s Enel, Germany’s E.ON and RWE, Czech CEZ and Belgium’s Electrabel, owned by French utility Suez.

Czech Republic
The Green party has managed to make the Czech government pledge it would not launch any nuclear power plant projects while in office. The country already relies on nuclear for about 30% of its electricity. The two biggest Czech political parties and power firm CEZ are all in favor of building new nuclear power units. The most likely scenario are two sizeable units at the existing Temelin station.

The country has one nuclear generator with 1,860MW of capacity, supplying about 37% of electricity. Their lifetime will begin to run out in 2012. All major political parties have approved a 20-year lifetime extension. The relatively rare political consensus was not dented even by a 2003 accident which left one of the blocs out of service for over a year. In 2006 and 2007, press reports surfaced that big Western European power firms were considering building a new nuclear generator in Hungary but no specific plans had emerged.

The Baltic country, which relies on nuclear for 70% of its electricity, is still in the planning stages of a new 3,200-3,400MW plant estimated to cost $9 billion. Poland and the other two Baltic states, Latvia and Estonia, are negotiating plans to build the new plant, which will replace one that Lithuania is obliged to shut down by the end of next year. The talks, however, have stalled due to Polish demands for a third of the power. The government has had talks with several reactor providers, including Areva and General Electric.

Poland, seeking to lessen its dependence on Russian energy, plans to back Lithuania’s nuclear plant project. Some officials, including Economy Minister Waldemar Pawlak, have said Poland should consider building a nuclear power plant in the future to help reduce its near complete reliance on coal for energy. But no concrete plans have emerged yet and the suggestion was met with skepticism by the environment ministry.

The Balkan country, whose two nuclear reactors at the Cernavoda plant accounted for 13% of all power in 2007, plan two more reactors, each 706 MW, at the same site by 2015 and a second plant later. Candidates to build the two new reactors include Electrabel, Enel, Spain’s Iberdrola, a Romanian unit of Arcelor Mittal and RWE. The investment is estimated at around €2.2 billion. (Reuters)