Cheap nuclear energy secret: What Ukraine owes EBRD?

Author : Iryna Holovko

Source :

Ukrainian nuclear power plants will not work forever, and billions of hryvnias for their safe decommissioning we still have to find
23:36, 16 May 2017

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112 Agency

On May 9 the annual meetings of the EBRD heads began on Cyprus. Among other things, the fulfillment of Ukraine commitments regarding "nuclear" loans will be discussed there. Despite the credit agreements, the government still does not provide sufficient accumulation of funds for removal some units out of service and increase the safety of Ukrainian nuclear power plants (NPPs).

Among the biggest loans Kyiv received from EBRD are the loans for improvement of nuclear power status. Loan of 2005 year for the modernization of the second unit of Khmelnytska NPP and fourth unit of Rivnenska NPP had many conditions.

Ukraine should implement similar upgrades in the other 13 units at the expense of electricity tariffs and ensure reliable plan and finances for the closure of nuclear power plants, when the time will come. For this, Ukraine has received 150 million euro credit support from the EBRD and the EU in 2004, another 600 million - in 2013.

However, it turned out that it’s not so easy to implement these important promises.

What EBRD wants

Why EBRD is so interested in Ukrainian nuclear power? The fact is that the disaster at Chornobyl in Ukraine attracted considerable international attention, and other countries also got a significant chunk of radiation.

This experience has made Western Europe interested in stating the conditions for the safety of nuclear power and solving its problems.

Since the reactors have the "expiry date" - sooner or later they will have to be closed. In the case of Ukraine - rather sooner than later, because most reactors, seven of the fifteen already exceeded their design life.

How much decommissioning of 15 nuclear energy units will cost for Ukraine? For Germany one BBEP-440 energy unit of Greifsvald NPP cost 1.32 billion euros. Under the current concept of closing some units, Ukrainian authorities consider amount of 100 million euros adequate for this purpose.

In short, the EBRD wants Ukraine to provide a resource for the future closure of nuclear power plants and that resources should be accumulated and securely stored.

What do we have?

Ukraine began to collect money for decommissioning its nuclear power plants. In 2004, fulfilling the EBRD loan recommendations for modernization of two units at Khmelnytska and Rivnenska NPPs the budgetary fund to accumulate financial reserves for decommissioning nuclear reactors was established.

Since 2005, the state operator of nuclear power plants "Energoatom" annually donates UAH 283.4 million to the fund. Since 2014 started working its supervisory board, designed to control the use and investment of those funds.

Outdated at the start

The concept of stopping nuclear units – it’s a key strategic document for preparation reactors to closing, radioactive equipment to dismantling and transformation of the NPP site into the safe zone. The concept also defines the general expected costs of these processes and annual contributions to the decommissioning fund and radioactive waste management fund.

However, the concept was obsolete already at the stage of approval in 2015. Financial calculations are based on the course of 7.9 UAH per euro, which was at the time of its preparation. A major item of expenditure is salaries, and we must remember that most of the work will be carried out in a decade. The concept also makes calculations starting from the minimum wage 1134 UAH, while today it is 3200 UAH.

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The concept considers several strategies for dismantling, but none of them involves the removal of units out of service immediately after the project period.

The lack of funds for NPP decommissioning was cited as one reason why old power units in Ukraine should continue to operate - they still "did not earned" their own decommissioning. The decommissioning fund in 2005 gathered only 2.7 billion UAH, or about 90 million euros at the current rate.

Lack of funds

Energoatom Company and Energy Ministry have unrealistically optimistic expectations. Under the concept, the total cost of decommissioning one nuclear unit of 1 thousand MW capacity will cost 2.9 billion UAH (100 million euros at the current exchange rate), unit of 440 MW capacity - 2.3 billion UAH (76 million euros).

At the same time, the cost of decommissioning nuclear units project in Europe in seven to ten times higher. The relevant costs in Bulgaria, Slovakia, Lithuania continued to grow during the work and significantly exceed projections.

For example, the decommissioning of four units of Kozloduy NPP in Bulgaria in 2006 was estimated at 760 million euros, but until 2017 this country spent about 1.243 billion euros. It was planned to spend 500 million euros  for decommissioning of two reactors of Bohunice NPP in Slovakia in 2006, but later the sum grown to 1.246 billion euros.

Inflation eats money

Starting from 2006, fixed amount was directed annually to decommissioning fund - 283.4 million UAH, which was kept in local currency. These funds are not properly protected from use for other purposes in the state budget.

The fund is also not protected against inflation and devaluation of hryvnia. I wonder if there is even one Ukrainian businessman who would keep the same amount in local currency for a decade?

According to members of the Supervisory Board, the funds should be invested in government bonds to protect them against devaluation. This is stipulated by the law "On regulation of issues related to Nuclear Safety". However, the Ministry of Finance inhibits.

Mystery of cheap nuclear energy

EBRD gives Ukraine loans for nuclear power under the state guarantees. This means that in case of failure of the loans conditions the state will give the loan back on the budget costs. It happened in 2016, when Energoatom funds were arrested.

Ukrainian nuclear power plants will not work forever, and billions of hryvnias for their safe decommissioning we still have to find. NPPs will pull money from the budget in decades after they stop, if not enough money were accumulated in the decommissioning fund at first.

Donors help us, but the key decision should be taken by the government. Officials must realize the dangers of keeping artificially low tariffs for nuclear power and their responsibility to future generations by leaving them problems of "cheap nuclear power" to solve.

The concept of nuclear power plants decommissioning should be reconsidered soon.

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