Eastern Europe’s Love Affair With Nuclear Is Hitting the Rocks

(Bloomberg) -- Zoltan Gorog is ready for the Russian invasion. The real estate agent in the Hungarian town of Paks has added Cyrillic to the blue and white sign hanging above his offices. He’s set up empty desks for when he needs to expand to cope with the surge in business.

Rather than a flood of people, though, there’s barely a trickle. Five years after Hungary’s government signed an agreement with nuclear energy company Rosatom Corp. to build two new reactors at the aging plant near the town, there’s still no start date for the bulk of the work.

Eastern Europe’s Love Affair With Nuclear Is Hitting the Rocks

“We had to realize it’s not as simple to construct a nuclear plant as, say, a car plant,” said Gorog, who plans to be the go-to guy for settling the engineers, metal workers, electricians and physicists needed to complete the job. “It’s hard to imagine the changes ahead,” he said, as he pecked at his laptop to show off available apartments – unaffordable for most locals, but fitted out to accommodate richer Russian guests.

While wealthier countries such as Germany and France balk at adding facilities because of the cost and environmental risks, in former communist Europe the problem is that enthusiasm for nuclear isn’t matched by the ability to make projects happen. Across the region, where the Soviet Union fit out most of the reactors still in use today, authorities are squeezed by time and money.

Plants near the end of their operating lives, increasing demand for energy and deadlines for cutting carbon emissions are spurring governments to seek to add capacity. Along with Hungary, Slovakia, the Czech Republic, Romania and Slovenia are looking to expand or refurbish facilities. Bulgaria and Poland want to build new plants.

But plans are often stymied by soaring construction costs and the complexity of design requirements for European Union members, making most planned projects from the region at least a decade away from completion. With new reactors often costing anything up to 15 billion euros ($16.8 billion) to build, governments may find themselves hard-pressed to push on. 

“In terms of costs, it’s not a winning technology right now, and the odds are it probably never will be,” said Rob Barnett, a senior energy policy analyst with Bloomberg Intelligence in London. “It’s ultimately a question whether governments want the technology to exist and are they willing to subsidize the costs in order to have it as power generation technology.”

The furthest along is Slovakia, which may connect a new reactor to its grid by next year, though even there the process has been fraught with delays, opposition by neighboring Austria, a spat over financing and accusations of mismanagement.

A more typical example is Bulgaria, which has so far been unsuccessful in finding the cash to build a second plant in the northern town of Belene. The plan was first shelved after communism fell and would cost the state almost a quarter of its economic output to complete. Poland, Europe’s biggest consumer of coal for power, is looking to start its first-ever reactor in 2033, though it lacks government approval for the funding.

Eastern Europe’s Love Affair With Nuclear Is Hitting the Rocks

Even the plans that look the most solid have suffered delays. Romania, which debated for a decade whether to add new reactors to its Cernavoda plant near the Black Sea, signed a preliminary deal in May with China General Nuclear Power Corp. Still, there's no agreement on the financing or a timeline.

Hungary does have most of the money lined up for its 12.5 billion-euro contract for the Paks project it signed in January 2014, a deal that reflected the cosy relationship between Prime Minister Viktor Orban and Russian President Vladimir Putin. Russia is financing 80% of it via a 10 billion-euro loan to Hungary that must be repaid along with interest.

That still hasn’t been enough to get the project going. It took almost two years to obtain the EU’s seal of approval and another two years have passed since then. The government in Budapest indirectly blames Rosatom for failing to file the required plans. With the only certainty being that the new reactors won’t start producing electricity in 2026, as originally scheduled, the cabinet is in talks with Moscow on delaying the loan repayment until after the new capacity goes online.

Rosatom’s chief executive, Alexey Likhachev, blamed the EU and said work would continue through the summer. “The project had delays because of the procedures in the European Union,” he told RIA newswire in June. “We are now adjusting the timing. We are not dragging out the work. We have already contracted most of the heavy equipment and are actively contracting Hungarian companies now to build the construction and installation base.”

Building out nuclear power facilities is the most expensive option because of the layers of safety that are continually being factored into the process. The three most notable nuclear accidents – Three-Mile Island in the U.S., Chernobyl in Ukraine, and Fukushima in Japan – helped strengthen the science and technology behind nuclear.

At Paks, just over 100 kilometers (62 miles) down the Danube river from Budapest, only 300 of 6,000 permits have been approved.

“One of the lessons of Chernobyl is that it is very important to deal with nuclear safety questions transparently,” said Balthasar Lindauer, the European Bank for Reconstruction and Development’s director of nuclear safety. “It’s impressive when you go and see the magnitude the problem created there.”

Whatever the risks, nuclear power is supported among general populations, especially in towns closest to the operations, where facilities are the main sources of income.

Eastern Europe’s Love Affair With Nuclear Is Hitting the Rocks

When the first reactors at Hungary’s Paks plant were being built prior to starting up in 1982, the small town was transformed. A cultural center and theater were built and workers and locals mingled and sometimes got married, said Judit Kunfalvi, 60, a jewelry store owner who is looking forward to catering to the Russians who may eventually come.

This time around, residents estimate as many as 10,000 workers and their families will flood in once the project gets going properly. Gorog is not the only local gearing up to cater to the Russians. On the riverbank, Paks’s most popular restaurant, the “Halaszcsarda” fish tavern, has added Russian to the menu and has already won some customers from the initial Rosatom workforce.

“It gives a chance for the town to develop,” said Kunfalvi, standing behind a glass counter that covers an array of broaches and earrings and stretches across most of the 40-square-meter store on the tiny main street. “There’s a lot of hard work around the project.”

©2019 Bloomberg L.P.

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