U.S. Deal No Quick Fix for Poland’s Fledgling Nuclear Drive
U.S. Deal No Quick Fix for Poland’s Fledgling Nuclear Ambitions
(Bloomberg) -- Poland faces an uphill struggle to build its first nuclear-power reactor even after inking an $18 billion technology transfer deal with the U.S. this week.
The agreement gives the two countries 1-1/2 years to agree on investments -- potentially with companies such as Westinghouse Electric Co., Southern Co. and Bechtel Group Inc. -- to kick-start Poland’s plan to build six nuclear reactors by 2044 and transform its energy mix away from coal.
A decade after deciding to go atomic, Poland remains the largest European Union nation without nuclear power after Italy. The country needs clarity on financing options and whether the EU will include atomic-energy investments in its drive to become carbon neutral by mid-century. There are also technological and logistical hurdles.
State-run PGE SA, Poland’s biggest utility, was put in charge of the nuclear plans but after years of foot-dragging the government has finally decided to take over the project this month.
“There’s no way to build nuclear power plants without public aid,” Piotr Naimski, the Polish government official in charge of strategic infrastructure, told reporters in Warsaw on Thursday after notifying the agreement.
He added that the information about the $18 billion commitment has “no grounds” in the deal that’s being signed.
“As far as the financing of the agreement goes, we now have 18 months to work that out,” said Naimski, declining to comment on the overall cost of the investment.
Poland seeks to build its first plant by 2033, with construction starting in six years. It plans to use Westinghouse’s pressurized water reactor (PWR) technology despite its reputation for delays in similar projects around the world.
Most PWR projects currently under construction are “financial disasters,” said Chris Gadomski, a nuclear analyst for BloombergNEF. “The technology itself is fine but in what’s more important is the team of people that can successfully build the reactor on time and on budget.”
Gadomski said it was surprising that Poland was now moving forward with traditional large reactors instead of waiting several years for the development of technology to operate more flexible mini reactors.
Poland relies on coal for about 70% of electricity generation. Unlike all its EU allies, it hasn’t signed up to meet the bloc’s 2050 climate neutrality goal on a country basis, saying that its overwhelming dependence on fossil fuels make it a special case.
Poland may use this to gain leverage to include nuclear power in the bloc’s green push within its 1.8 trillion euro ($2.1 trillion) seven-year budget and recovery fund.
Construction of the nuclear plants would help the Polish energy industry reduce carbon-dioxide emissions by 70% in 2045 compared with 2020, according to government plans. The country plans to build six reactors with total capacity ranging from 6 to 9 gigawatts. Cost estimates range from $35 billion to $60 billion.
Poland wants to utilize the domestic industry’s input as much as possible to reduce the cost of the investment, Naimski told reporters. He also said that Poland doesn’t rule out talks with other providers of technology and will turn to “plan B” if the talks with the U.S. partners fail.
The shares of Warsaw-listed utilities jumped on Oct. 1 when the government announced plans to take over the nuclear project. PGE’s Chief Executive Officer Wojciech Dabrowski said at the time that the investments needed to pursue atomic power exceeded the capacity of the state-controlled utilities, which are already struggling with financing due to their reliance on coal energy.
Instead, Poland wants to create a state-owned nuclear entity, in which it may later sell a minority stake to international partners helping with the financing. It’s not certain if the government will need to issue state guarantees, which would further inflate public debt that has ballooned during the coronavirus pandemic.
EU public-aid rules may curb Poland’s ability splash funds on its nuclear project, but the bloc is offering subsidies for solar and wind power. This casts even more concern over the economics of Poland’s atomic push.
“The nuclear power-plant market is a shrinking one, with limited capacity to provide technology at a competitive price” and Poland hasn’t found a viable financing model for years, said Joanna Mackowiak-Pandera, the director of Forum Energii, a Warsaw-based think-tank, and a former deputy environment minister. “There are many doubts.”
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