Alternative energy technologies are much more effective than assumed to be just three years ago. Nobody knows what advancements the next three years will bring. To start making predictions as to what the next six years will bring in such a rapidly changing and dynamic sector is irresponsible. Six years ago nobody would have ever guessed that solar energy would become so competitive.
Energy expert and former technical state secretary Balazs Felsmann gave this and other comments to ATV’s Olga Kalman regarding the Hungarian government’s decision to award a HUF 3 trillion no-bid contract to the Russian State Atomic Energy Corporation (Rosatom) to build two 1200 mw reactors at the Paks nuclear power plant.
The risk of financial meltdown
Rosatom’s offer of EUR 6 billion per 1200 megawatt reactor is similar to the one offered the Finns last year for a similar project. The difference, according to Felsmann, is that the Finns have structured the deal in such a way so that the nuclear reactor will be built by a consortium of private investors that includes Rosatom, which, as the 34 per cent owner, shares financial responsibility should the cost of building the reactor exceed initial estimates.
In Hungary the state owned electric company MVM is to remain the 100 per cent owner of the Paks nuclear power plant.
How much will the “deal of the decade” end up costing?
Felsmann believes the total cost of building the reactor will vastly exceed the EUR 10-12 million figure touted by the government. He cites two examples: that of another Finnish nuclear power plant originally projected to cost EUR 3.2 billion which ended up costing EUR 8.5 billion after construction was delayed six years, and that of the nuclear reactor Rosatom is building in Turkey the cost of which looks to exceed by USD 5 billion the original estimate of USD 20 billion.
According to Felsmann the costs contained in the agreement represent only the cost of the technology and “there will certainly be additional expenses associated with the project that will accumulate over time and add to the overall expenditures”.
The Fukushima effect
The disaster at the Fukushima nuclear power plant in Japan has resulted in a near doubling of the cost of building new reactors, according to Felsmann. “Nuclear safety measures do not decrease over time because the industry is always experiencing new problems. Newer engineering challenges are ever present and significantly impact the cost of building nuclear reactors.”
Felsmann said it presently costs EUR 5-6000 per kilowatt to build a nuclear reactor.
How cheap is cheap?
In response to state secretary Janos Lazar’s claim that the investment is necessary to enable Paks to continue supplying Hungary with cheap electricity, Felsmann raises the example of the nuclear plant Rosatom is building in Turkey which it is to own and operate. The Turkish government has agreed to guarantee a price of HUF 27 per kWh for the first 70% of the reactor’s energy output. At another nuclear power plant being built in the UK, the French atomic energy company has asked the British to guarantee a price of HUF 33 kWh.
By contrast, the cost of generating electricity at Paks is presently HUF 12 per kWh or 40 per cent of the projected cost of the nuclear power plant Rosatom is building in Turkey. The obvious conclusion is that the energy generated by the new reactors is likely to be two and one half times more in today’s prices.
Whereas in the case of the Turkish reactor Rosatom must calculate with energy market related risks, in the case of Paks the Russians are acting as investors who are providing financing for the construction of the nuclear power plants to be build by the Russian State Atomic Energy Corporation and are not involved in the sale of the electricity it generates.
The Russian Atomic Energy Corporation is in the business of selling technology, like a refrigerator manufacturer tries to sell a refrigerator, or an automobile manufacturer a car. The reason why the Russians don’t care about market risks is because they’re only providing financing for the purchase of their technology used to produced the energy at Paks.
Why the rush?
Felsmann says there is no compelling technological or economic reason why the nuclear reactors should be built at this time. The fact that Paks’ four 500 mw reactors must be decommissioned between 2032 and 2037 means the government need not start exploring alternatives until the early 2020s. ”The government should use the next six to seven years to see what kind of advancements are taking place in alternative technologies”. Felsmann says that the cost of electricity in Britain is currently HUF 33 per kWh which is more than what Germany is offering through their solar energy production. ”Progress in this area is dynamically changing. Even German wind production is significantly cheaper”.
There are continuous advancements being made in energy technology. A variety of advancements are taking place that we didn’t expect to see previously. Alternative energy technologies are much more effective than assumed only three years ago. Nobody knows what advancements the next three years will bring. To start making predictions as to what the next six years will bring in such a rapidly changing and dynamic sector is irresponsible. Six years ago nobody would have ever guessed that solar energy would become so competitive.
Felsmann declines to offer his professional opinion as to whether the construction of two additional nuclear reactors at Paks will require the construction of dams to ensure sufficient water levels that will be used in cooling the plant but noted that there are numerous technology alternatives to building dams, such as constructing cooling towers.
Is Hungary’s national sovereignty really at stake?
When asked whether the risks associated with the hastily made decision are justified in terms of protecting Hungary’s national sovereignty, Felsmann pointed out that the fact that Hungary will depend exclusively on the Russians to carry out key tasks associated with operating nuclear reactors constitutes a forfeiture of its energy sovereignty just as the decision to borrow EUR 10 billion from another country at a cost to Hungarian taxpayers of “some HUF 300 billion annually” constitutes a forfeiture of financial sovereignty.
Others have put the cost at HUF 200 billion annually, but a lot depends on whether the forint retains its value against the currency of the loan, the Euro.
He points out that as European energy systems become increasingly interconnected, Hungary’s sovereignty over its own energy is bound to diminish, but does not understand why that is a problem. He points out that Italy does not feel threatened by the fact that it imports 85 per cent of its energy.
Felsmann does not understand what the government means when it says that carrying out one project or another diminishes or strengthens Hungary’s national sovereignty, pointing out that the EU’s energy markets are physically interconnected and legally integrated.
Does every nuclear cloud have a silver lining?
Felsmann was hard pressed to think of a single reason why the Hungarian government should insist on awarding the contract at this time.
For a long time I’ve been saying that a decision doesn’t have to be made on this matter until the early 2020′s. That’s why I don’t really know what to make of the government’s reasoning for making this decision a decade sooner.… It’s totally within the realm of possibility that a scientific study was performed similar to the model carried out by the Regional Energy Research Center at our university. The results of this study calculated 750 possible scenarios for this project, and showed that 150 of the 750 scenarios indicated a possible positive result. It’s conceivable that based on these results they conjured a list of possible results supporting the idea that the project could be a success.
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