The never ending Bulgarian nuclear power plant project is ready for a new restart.
by Ilin Stanev, editor and Brussels correspondent for Capital Newspaper in Bulgaria
“None of the 90 tested combinations have a positive net present value … the project is not financially viable”: the conclusion of the Bulgarian Academy of Sciences (BAS) can’t be any clearer.
BAS was hired by state-owned Bulgarian Energy Holding to assess the economic viability of the Belene Nuclear Power Plant project. In normal circumstances, the client would have changed his plans and would have moved on. Not with the Belene NPP, the project that started almost 40 years ago, was twice frozen for lack of money and now again is being considered for restart.
The Bulgarian Ministry of Energy called a briefing in early December to explain that “under certain conditions” the project could actually be profitable, especially in light of the expected energy deficit in the region by 2030.
The Belene game
The BAS report leaked in October, first to Bulgarian Capital newspaper, but later to the wider public in the Bulgarian analogue of Wikileaks – Balkanleaks. It is part of a 1000 page study of the energy market in Bulgaria and South East Europe that assesses the project’s viability as a private venture. This is an important clarification, because the report is part of an intricate game.
BAS study aims first to demonstrate that an enormous energy deficit is expected in Bulgaria and the region in the next ten years and it cannot be met with the slow build-up of alternative energy sources. If this is the case and the Belene NPP is of existential need, but impossible as a privately-run project as BAS analysis shows, then a different solution needs to be found. This is the second part of the plan. It needs to convince the Bulgarian public – and the European Commission later – that the state should act as owner and main investor.
Sounds a bit absurd, but exactly this scheme was already applied. The project company which runs the expansion of the Paks NPP in Hungary is 100% owned by the state. More than that, Hungary applied and received approval from the European Commission for state-aid to the multibillion dollar project which is financed almost entirely by a Russian loan and is built by Russia’s Rosatom.
Budapest proved that the project is economically unprofitable for a private investor and can only be built with the participation of the government, which can accept returns below what is normally expected on the market. “Based on the above analysis, the EC concludes that a private investor would not invest under the same terms and conditions,” the European Commission mentioned.
This is probably what the Bulgarian authorities were thinking when they invited BAS to draft a report on the Belene NPP’s viability. The Hungarian example was not mentioned by the Bulgarian government officials, but was pointed out by Rosatom’s representatives and the Russian company’s lobby in Bulgaria.
Rosatom was chosen back in 2005 to supply the equipment and build the Belene NPP. It also offered to provide loans for the construction of the nuclear plant, but the Bulgarian government then refused. It preferred to find a private investor whose participation would have guaranteed that the project is actually profitable. No investor was found and the construction was frozen in 2012.
Ever since the Belene project was restarted fifteen years ago, it has always had a questionable economic value. In 2005 its supporters claimed that without it, in only five years Bulgaria will face an electricity supply shortage. It was argued that the need of the domestic energy-intensive industries and the rapid economic growth – back then it was said that every two percentages of GDP growth lead to a 1.5% increase in electricity consumption – will make a new big power supplier inevitable.
However, ten years later, Bulgaria is still the biggest electricity exporter (proportionate to the GDP) in the EU. In the meantime, big industrial companies went bankrupt and the share in the economy of the energy non-intensive services sector grew exponentially. The country’s GDP has risen by 33% (in real terms), while energy consumption has hardly moved.
As early as 2008, the National Electricity Company acknowledged that the Belene NPP is unviable if the power plant does not export the bulk of its electricity production. However, over the last ten years, the expected energy deficit in the Balkans has not occurred, and there were even moments when Bulgaria imported electricity from the otherwise energy-hungry Turkey.
Now, the need for second restart of the project is motivated with the impending closure of the coal-fired power stations in Bulgaria due to the new tougher EU environmental standards, as well as the widespread introduction of electric cars.
“Capacities such as the Belene NPP are necessary for Bulgaria, especially after the beginning of the last phase of the fight against coal-fired power plants,” former Bulgarian energy minister Roumen Ovcharov commented for Capital newspaper. “Renewable sources can’t substitute for base-load capacities, because their annual utilization is 2000 hours at best, while, as far as I remember, the year has 8760 hours”, Ovcharov adds.
Traycho Traikov, another former Bulgarian energy minister, however notes that the problem is not the lack of energy capacities. “In short, Bulgaria’s problem lies in inefficient energy consumption. Bulgaria needs to find a way to smooth the peak and the bottom of electricity consumption“, he says and adds that the new energy technologies already question the viability of the Belene NPP and in ten years the nuclear power plant might be completely obsolete.
The forecasts for the inevitable demise of coal-fired power plants are not new. They have been used since the beginning of the century to justify the construction of the Belene NPP. For the last 10 years, however, only the Varna TPP was closed (displaced by other coal-fired TPPs) and Bulgaria still has a surplus of electricity. Until now, the government has not presented a plan on the future of coal-fired power plants; quite on the contrary it keeps on trying to exempt them from the new EU environmental regulations. Also, there is no study on the impact of the new energy technologies on the energy system.
Why does the government want is so much?
The Belene NPP project has already consumed 1.5 billion euro since its restart in 2004. The last portion of 600 million euro was forked out as compensation to Rosatom which won arbitrage in 2016 against the National Elelctricty Company, the original investor in Belene NPP, for the equipment manufactured for the Belene project. If the construction is not resumed, the money will be lost.”The worst scenario is not to do anything”, said Energy Minister Temenujka Petkova.
However, the most important reason for the government’s eagerness to restart the Belene NPP is the sheer size of the project. This is an enormous construction project that will employ dozens of Bulgarian companies and its cost could hardly be traced – it is difficult not pour money into it, when spending is justified by ‘nuclear safety’. This is probably the main reason why the Belene NPP is a never-ending saga.
- The project started in early 80’s of the last century. By 1989 Belene NPP was in active construction and part of the equipment was delivered.
- The project was abandoned in 1990 due to the lack of money and was frozen.
- In 2003 the government decided to restart the Belene NPP construction. In 2006 Russia’s Rosatom was chosen as a EPC contractor, but the project was changed and new equipment was ordered
- In 2009 the private partner in the project company – RWE, withdrew. It become clear that Belene NPP is unviable.
- It was frozen in early 2012, again due to lack of money.
- In 2016 Rosatom won an arbitrage against the Bulgarian National Elelctricty Compmany for 600 million euro for equipment that is already ordered but not paid.