Nuclear Summer: Czechs To Evaluate Two Offers To Build Up To 4 Reactor – Analysis


CEZ, which owns and operates the country’s nuclear assets, suggested an accelerated process will follow to evaluate the offers from France and South Korea by July.

By Tim Gosling

A decade ago, the Czech Republic identified expansion of its nuclear fleet as the main plank in its energy future. However, it has persistently stumbled when seeking to step towards its atomic future – until now, it seems.

On April 30, France’s EDF and South Korea’s KHNP submitted binding bids to build a new reactor at the ageing Dukovany power plant, as well as up to three more large units.

The offers in the tender, which if fulfilled in full would constitute by far the largest ever investment in this country of 10 million people, would see two new reactors built at Dukovany and another pair at Czechia’s second nuclear plant, Temelin.

Welcoming the completion of the initial phase of the tender, officials from state-controlled energy giant CEZ, which owns and operates the country’s nuclear assets, suggested an accelerated process will follow to evaluate the offers by July.

“The effort is to do it well, but in such a way that the government can make a decision at once and in the middle of the year,” said Petr Zavodsky, chairman of CEZ’s nuclear construction division.

Long-delayed race

This need for speed is likely born of the long-delayed effort to expand the nuclear fleet. The project has been doing the rounds for so many years that numerous suitors have fallen by the wayside.

Russia’s state nuclear holding company Rosatom was the frontrunner to win an initial tender issued by Prague in 2014 to build a reactor at Temelin. However, that race was soon scrapped because no one could decide how to pay for it.

Then three years ago, the Czech government passed legislation blocking Russia from any involvement in major infrastructure projects due to national security concerns.

Chinese officials, deployed in Prague over the years to push Beijing’s nuclear and telecommunications credentials, were also sent on their way with similar words ringing in their ears.

Washington hung on for a little longer, but the US-based Westinghouse, previously hot favourite for the current tender, fell out of the running in January, with Czech officials saying its initial offer had not met the conditions.

This left CEZ with just the two offers to review before it makes its recommendation to the government, which has said it hopes to sign a contract with the winning bidder by April 2025, and to see the first unit go into operation by 2038.

Martin Jirusek from Brno’s Masaryk University, who specialises in energy geopolitics, calls the filing of the binding bids “a major step towards finally building a new unit at Dukovany”.

Absolutely essential

Czechia’s six operating nuclear reactors, which have a capacity of around 4,000 megawatts (MW), generate around 35 per cent of the country’s electricity, but that should rise above 50 per cent under the government’s long-term energy strategy.

The importance of implementing that strategy has only grown since it first emerged in 2015. Originally prompted by the upcoming closure of ageing conventional power plants as well as the decommissioning of Dukovany’s four 500 MW reactors from 2035, rising environmental and energy security concerns have since added to the urgency.

Prague remains unenthusiastic about further developing renewable energy sources, and has increasingly pushed to be allowed to put nuclear at the forefront of its transition efforts as EU climate targets have tightened over recent years.

Meanwhile, the fallout from Russia’s invasion of Ukraine, including the energy crunch and cost-of-living crisis, has put energy security front and centre of government policy, especially for those countries towards the eastern edge of the EU which were so heavily dependent on Russian oil and gas before 2022.

“This is a strategic investment which is absolutely essential,” Prime Minister Petr Fiala said earlier this year. “Nuclear power will ensure enough electricity at reasonable prices and it will enable the country to meet international climate goals. It is the only way forward.”

Squaring the circle

Perhaps not coincidently, on the same day as the filing of the final tender bids the European Commission announced that it had approved the Czech government’s financing plan for the construction of the first new reactor at Dukovany.

The reason for the long delay in the effort to build new nuclear units can ultimately be found in the tension between CEZ’s commercial interests and the state’s energy security priorities.

The energy giant’s private shareholders, who hold almost 14 per cent of the company, have fought hard against plunging into the pricey and risky endeavour of investing in new nuclear power. It is widely accepted that a new reactor at Dukovany will cost much more than the original estimate of 160 billion koruna (6 billion euros).

The state has, meanwhile, been seeking a route to take on the costs itself that would not be blocked by EU rules.

Similar to the effect it had on the Czech government’s drive, the standoff with Russia also appears to have helped soften Brussels’ concerns regarding nuclear, alongside lobbying efforts by a group of EU member states, mostly from the east but with France in the vanguard.

After an extended debate, the EU handed nuclear power a classification as a sustainable investment in late 2022, opening the way for eased investment conditions and the green light just given to Prague.

“It’s a new era,” Jirusek declares. “Prague’s crossing of this hurdle illustrates that the EU now recognises that building new nuclear is impossible in Europe without state aid.”

The plan to supply a state loan and a contract for difference (CfD) to the Dukovany project, which will guarantee CEZ a certain price for the electricity produced, was submitted to Brussels two years ago.

The approved state aid package should be enough to allow CEZ to finally go ahead, analysts suggest, but only with the original project to build a single unit at Dukovany.

“Since the terms of the tender have changed and more than one unit is subject to the tender, the government will have to ask for approval of the model of the construction financing again,” note analysts at J&T Bank.

This uncertainty over the funding of the remaining units that Prague hopes to build appears to offer the French bidder an advantage, and EDF is now widely assumed to be the frontrunner.

As an EU heavyweight, Paris was vital to the successful push against German and Austrian objections to persuade Brussels to accept nuclear as a contributor to the energy transition.

That fight is unlikely to fade away, with Czechia’s neighbours remaining strongly opposed to nuclear power.

Prague’s continued need for French backing in Brussels is a point that President Emmanuel Macron doubtless reminded Fiala as he has pushed EDF’s case with the Czech government.

No guarantees

Yet even with the heft of Paris onside, Prague faces numerous uncertainties regarding its ambition to build a whole new nuclear fleet.

On the one hand, there’s no guarantee that the EU’s openness to nuclear technology will continue indefinitely.

Jirusek suspects that “the green light of the funding for the first unit at Dukovany doesn’t necessarily suggest that state aid approval for other projects will be forthcoming.”

And even if it does, the fervour of Fiala’s government to balance the state’s wobbly finances could temper its nuclear enthusiasm or even the ability to fund the trillions of koruna that it would likely take to build all four units.

Fiala’s response to the cost-of-living crisis was to launch a tough austerity programme that has provoked widespread anger, especially among the most vulnerable sections of society. That has led to a collapse in support for the five-party coalition, which now trails the centrist and far-right populist opposition by some margin.

CEZ’s minority shareholders could also resist a bigger roll out of the nuclear strategy that would inevitably suck up so much financial and management resources.

Not long ago, Fiala was touting a plan to force out these minority shareholders by introducing legislation that would allow the government to split the company. The scheme was dropped after it became clear that it would be unconstitutional, leaving the tension between CEZ’s profit motives and the state’s national interests simmering.

Daniel Benes, CEO of CEZ, has previously warned that the funding model just approved for the first reactor can’t simply be replicated for further units, but that the company will need increased state support if it is required to sink more capital into the strategy.

Technological questions will also crop up as the nuclear strategy unfolds over the coming decades.

Czechia lags its EU peers in the development of renewable energy, but a serious build-up is thought to be on the way. The development of solar power capacity has accelerated significantly over the past couple of years after lying dormant for a decade or more. And the country’s wind power potential is also being reassessed.

However, any renewables momentum wouldn’t detract from nuclear, which is still viewed by analysts as the backbone of the energy system to complement more intermittent renewable energy supply. But it will require financing and focus from CEZ.

At the same time, the state and the company also plan to start building still-in-development small modular reactors (SMRs). Should the concept, based on units of around 300 MW, prove viable, it could pose questions over the plans for large reactors, which are costlier, more complex and slower to build.

Going underground

Another challenge is the necessity of building a nuclear fuel dump.

EU regulations now insist that a deep radioactive waste repository (DWR) must be built by 2050 in order for new nuclear energy projects to qualify as sustainable investments.

Prague has been working on this gargantuan task, which comes riddled with social and political pitfalls, for over two decades with barely any progress to show for it.

In contrast to the plan to build new nuclear units, the construction of a DWR is much more contentious among the Czech public, with survey’s suggesting three-quarters of people think they should be allowed to reject any such facility in their municipality.

According to CEZ, public support for nuclear power sits above 70 per cent, “which is uniquely high in Europe”.

This suggests that despite all the difficulties, there’s little political risk hanging over the nuclear programme. Every one of the seven political parties that sit in parliament support building more reactors.

The reasons behind this remarkable level of support have long been pondered. A strong industrial lobby, decades of centralised power, and various scandals over renewables subsidies are all mooted.

The more cynical suggest that the huge funds new nuclear projects send washing through the system are a major driving force.

Either way, the filing of the binding bids and EU state aid approval suggest that Czechia is likely to finally start realising its nuclear dreams.

“It seems likely now that the first unit will be built. It will replace the two older units at Dukovany, and avert the risk of needing to decommission that site,” says Jirusek.

However, there are already doubts over how long the dream may last.“Beyond that first unit, it’s very hard to tell,” the analyst continues. “It’s far-fetched to imagine for now that the others will all go ahead. There are so many moving parts that would need to fall into place.”

Balkan Insight

The Balkan Insight (formerly the Balkin Investigative Reporting Network, BIRN) is a close group of editors and trainers that enables journalists in the region to produce in-depth analytical and investigative journalism on complex political, economic and social themes. BIRN emerged from the Balkan programme of the Institute for War & Peace Reporting, IWPR, in 2005. The original IWPR Balkans team was mandated to localise that programme and make it sustainable, in light of changing realities in the region and the maturity of the IWPR intervention. Since then, its work in publishing, media training and public debate activities has become synonymous with quality, reliability and impartiality. A fully-independent and local network, it is now developing as an efficient and self-sustainable regional institution to enhance the capacity for journalism that pushes for public debate on European-oriented political and economic reform.

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