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Czech Republic: Temelin expansion cancelled

Nuclear Monitor Issue: 
#785
24/04/2014
Jim Green - editor Nuclear Monitor
Article

Author: Jim Green − Nuclear Monitor editor

NM785.4386 CEZ, the Czech utility 70% owned by the government, cancelled a tender to expand the Temelin nuclear plant on April 10, citing low wholesale power prices and the government's refusal to provide price guarantees. CEZ hoped to build two 1,200 MW reactors. The previous day, cabinet reiterated its opposition to providing price guarantees for power generated by the new reactors.1

The Czech Republic has six nuclear power reactors at two sites: four VVER-440/V-213 reactors at Dukovany and two VVER-1000 reactors at Temelin. Nuclear power produces about one-third of the country's electricity. Earlier plans for two more VVER reactors at Temelin were put on hold in 1990 but there have been periodic attempts to revive the project since then.

A tender process for two additional Temelin reactors was launched in August 2009. Bids were submitted by Areva; Westinghouse; and a consortium comprising Škoda JS, AtomStroyExport and OKB Gidropress. However, CEZ informed Areva in October 2012 that its bid for its EPR design had been disqualified. Areva challenged the decision in the Czech courts, and also lodged a complaint with the European Commission, which oversees competition rules in the EU. The legal challenge and the EC investigation were still ongoing at the time of the April 10 announcement of the decision to cancel the tender.2 Areva has since withdrawn its appeal lodged with Czech courts.3

CEZ chief executive Daniel Benes said on April 10: "While originally the project was fully economically feasible given the market price of electricity and other factors, today all investments into power plants, which depend for revenues on sales of electricity in the free market, are threatened. In the future it will be necessary to cooperate closely with the state in order to secure further development of nuclear energy." CEZ shares rose 3.1% following the news.1

Petr Bartek from Erste Bank said: "The cancellation of the tender… [is] positive in our view in the current environment of depressed wholesale power prices."4 Jan Ondrich of Candole Partners, a Prague-based economic advisory firm, said: "CEZ should have made the decision to cancel the project a long time ago. It would have saved tens of millions of euros of shareholders' money as well as the time and energy the bidders had to put in. There is overcapacity in Europe and there is no need for large baseload generators."4

Ondrich added that the Czech government would do well to focus on making the Czech grid smarter, better interconnected and more robust: "Then consumers will be able to profit from cheap German wind and solar power rather than to try to subsidize inflexible baseload generators."

Georgi Vukov from Candole Partners wrote in a November 2013 report that the Temelin expansion "would destroy value in a state-owned company, CEZ, and fund the destruction of €4.5 billion [US$6.2b] of taxpayer money." Yukov accurately predicted that the project would be cancelled.5

Critics of the Temelin project have pointed out that the Czech Republic already exports about 20% of its electrical output. Former deputy prime minister Martin Bursik noted in the Aspen Review in December 2013 that the Czech Republic exported more than 17 terrawatt-hours of electricity in 2012, more than the annual production of the Temelin or Dukovany nuclear plants and more than the consumption of all Czech households combined.6

In recent years, growth in demand for electricity in the Czech Republic has stagnated. Moreover, the potential for profitable export of electricity from new reactors has greatly diminished as the wholesale market price for electricity has fallen well below the level necessary to make the Temelin expansion a viable project. Another complication is uncertainty regarding European energy and climate change policies and the future shape of the power market.7

Czech Prime Minister Bohuslav Sobotka said the future development of energy markets "is unpredictable to a maximum extent, and the government can hardly pledge to guarantee electricity prices." He also said: "We have clearly declared that we currently refuse any type of state guarantee. Nobody should be surprised at this considering the experience we have had with support to renewable sources, above all to solar power plants."8

CEZ was the main beneficiary of an overgenerous solar subsidy scheme, dubbed the 'solar siphon', which failed to account for significantly reduced production costs for solar systems. Martin Bursik notes that the 'solar siphon' triggered a wider backlash: "The government's failure has ignited a fierce campaign against all kinds of renewable sources of energy. One legislative amendment followed another, backed by strong words from the so-called independent regulator (the same one that failed to regulate solar energy)."6

Norman Eisen, the US ambassador to Prague, registered one of the few critical responses to the decision to abandon the Temelin tender: "The United States Government is deeply disappointed to learn of the decision to cancel the Temelin tender. ... As close friends and allies, we are also concerned about the signal this may send to U.S. and international investors."9

Czech president Milos Zeman has called for another tender to be launched for the supply of the two new Temelin units. He has said that he would like to see Areva and South Korea participate in a new tender. At the April 9 Cabinet meeting, a decision was taken for the minister of finance and the minister of trade and industry to jointly prepare a plan on the development of nuclear energy in the Czech Republic.8 A feasibility study for a new reactor at Dukovany is in progress, and CEZ has said it is likely to ask for an environmental assessment when it is completed.10

As with every other nuclear power-producing country, no solution to high-level waste management is in sight. Acting on behalf of the Czech government, the Administration of Radioactive Waste Disposal Sites has been looking for a suitable disposal site for years. But residents of seven selected localities have rejected the proposal in a total of 27 local referendums. The estimated cost of building a high-level nuclear waste repository has more than doubled but compulsory levies on nuclear power operators have not been adjusted since the late 1990s.6

References:

1. http://in.reuters.com/article/2014/04/10/cez-temelin-idINL6N0N22BS20140410

2. http://praguemonitor.com/2014/02/18/president-zeman-would-welcome-return...

http://praguemonitor.com/2014/02/06/referential-reactors-absence-blocks-...

www.bne.eu/storyf5532/New_Czech_govt_likely_to_bring_further_delays_for_...

3. http://online.wsj.com/article/PR-CO-20140417-911018.html

4. http://blogs.ft.com/beyond-brics/2014/04/10/czech-republics-cez-finally-...

5. http://candole.com/files/Temelinomics%202.pdf

6. www.aspeninstitute.cz/en/magazine/december-2013/

7. http://blogs.wsj.com/emergingeurope/2014/01/15/czech-nuclear-expansion-f...

8. www.world-nuclear-news.org/NN-CEZ-cancels-Temelin-expansion-tender-10041...

9. http://af.reuters.com/article/energyOilNews/idAFP7N0JR00S20140410 

10. www.world-nuclear.org/info/Country-Profiles/Countries-A-F/Czech-Republic/

More information:

A history of opposition to the Temelin plant is posted on the Nuclear Information and Resource Service website: www.nirs.org/mononline/temelinblockade.htm

A short history of the campaign against Temelin, by Paxus Calta, is posted at:

http://funologist.org/2014/04/11/temelin-3-and-4-are-dead/

From WISE/NIRS Nuclear Monitor #785, 24 April 2014

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