June 9th 2020
The ongoing debate whether or not to build new nuclear capacities in Czechia has become much more tangible following a new law and contracts with the energy company CEZ introduced by the Czech Government in the last few weeks. These actions are, however, very untransparent and avoiding any wider public discussion.
The Czech government, together with the majority state owned utility CEZ, for years have been keen to build a new nuclear unit. In 2019, CEZ got a positive decision on the Environmental Impact Assessment for two new 1200 MW units at the existing nuclear power plant Dukovany. The current plan is to start the construction of one unit in 2029 and have the plant operating from 2037. The biggest obstacle so far have been the costs and lack of clarity of how the state would financially support such a huge investment. The government is hoping to overcome this Gordian knot within the next weeks and months in a surprising initiative during the coronavirus crisis.
In a nutshell, the Minister of Trade and Industry, Karel Havlíček and Prime Minister, Andrej Babiš, introduced two concrete forms of state support which complement each other: firstly, the state will be purchasing electricity from the new unit for 30 years or more for a guaranteed price. Secondly, the state would grant a loan for CEZ for the construction, to ensure a much lower interest rate than a commercial loan. However, no quantification of the burden for the state budget and the consumers was published for either of the two support schemes.
On the guaranteed price, in May 2020 the state introduced a draft law which sets a scheme of financial support to nuclear power. Called “The law on measures for the Czech Republic’s transition to low-carbon energy”, it only deals with nuclear power, which in a NewSpeak twist is defined to equal low-carbon energy. It basically establishes a scheme, where the state is purchasing electricity from nuclear sources for a guaranteed price negotiated with the state. The agreed price should cover all the costs and insure an adequate profit to the investor. However the price is not set in law, it will be negotiated in due time with the Ministry of Industry and approved by the government. Also, the law suggests that the finances needed to pay for the extra guaranteed price will come from surcharges on distribution and transmission fees, paid for by consumers.
The original adoption plan presented by the Ministry was that the law should be passed by the Parliament in a so-called “accelerated proceeding” in first reading without any possibilities of amendments. However, after some criticism, the law will undergo regular process including Parliamentary committees handling it. The impact assessment does not contain any economic analyses suggesting how much the guaranteed price would be, although some figures were mentioned in public interviews. The investment is believed to be 160 billions of Czech Crowns (6 bln EUR) and including a state loan for the project, the electricity from the new reactor would cost only 50-60 euro/MWh. Therefore the guaranteed price that would cover the difference to the power market price is supposed to be negligible. However, this is extremely optimistic as all other nuclear projects in Europe have shown much higher costs, and Czech electricity prices already count as among the higher ones in the region.
As for the state loan, there were no more details available and it is not clear where the state money for the loan would come from. There are only statements of politicians saying that the state can organize finances with significantly lower interest rates.
Next to the new law, in April the Czech Government approved two draft contracts with the energy company CEZ , with the plan to finalize and sign the contracts by June 2020. The contracts are not public and according to the Ministry of Trade and Industry, these contracts deal with zoning issues, with tender procedures and also under which conditions the state would buy off the project from CEZ (in case of big delay, higher costs etc). Later in May, the Czech media reported that the government has also approved another document, classified as “secret”, setting rules for a nuclear tender, to minimize state security risks connected with foreign investors, especially Russia and China (1).
While Mr. Havlíček tweeted that negotiations with the European Commission about the approval of such state aid have already started, the public has no access to many of the documents and no idea of how much this project would cost the public budget nor their own pockets. The legislative process on the proposed law is an opportunity for non-governmental organizations and hopefully some opposition parties to push for more transparency and more concrete and realistic numbers on the table and extend the debate to alternatives to new nuclear power, which might in fact be much affordable.
Jiří Jeřábek, energy campaigner at Greenpeace Czech Republic
Edvard Sequens, CALLA