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Czech Republic: Political Impasse Delays Newbuild Tender

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Czech plans to build new nuclear capacity at the Dukovany plant were set back this week due to a continued political impasse over the national security implications of courting either Russian or Chinese nuclear technology. A technology tender previously promised by year's end was pushed back only until next month, but debate over whether to allow Russian supplier Rosatom and China General Nuclear (CGN) to bid may not be resolved until elections set for next October, or even after that. Meanwhile there remains considerable distance between state-controlled nuclear operator Cez and the government on a key financial underpinning for the project: the guaranteed long-term power purchase agreement (PPA) for the output of the new reactors at Dukovany II (NIW Jul.17'20). "It is necessary to find a common position of the government and the opposition on how to ensure the security interests of the state and the interests of citizens when choosing a supplier of a new nuclear source in Dukovany," Prime Minister Andrej Babis was quoted as saying in a Dec. 10 announcement. "This is a basic condition for the success of the entire project, for which our government is doing its best." At the heart of the current impasse is a disagreement over whether a major role for Rosatom or CGN in Dukovany II would represent a security threat -- an argument pushed by the Trump administration in the Czech Republic and across Europe. The issue was debated during a meeting of the Standing Committee on the Construction of New Nuclear Resources in the Czech Republic, which includes key government ministers, the head of Cez, and members of the opposition. Washington's argument has gained a receptive audience among Czech opposition parties, the country's security services and foreign ministry, and in the Czech Social Democratic Party, the partner of Babis' ANO party in the current minority government. With only 92 of the 200 seats of the Czech Parliament, the government is reliant on the 15 seats of the Communist Party of Bohemia & Moravia to hold power. The Communists see no problems with a Chinese or Russian nuclear deal, and neither does populist President Milos Zeman, of the Civic Rights party. While Zeman holds very few formal levers of power, he has considerable political influence due to the shaky power of the Babis minority government. In Thursday's meeting four options for proceeding with the tender were discussed: 1) allow all five bidders, 2) exclude Russia and China, leaving only three bidders, 3) allow Rosatom and CGN to participate in a consortium with the other bidders but not as the lead general contractor, the so-called 3+2 option, or 4) postpone the tender until after parliamentary elections. Deputy Prime Minister and Minister of Industry, Trade and Transport Karel Havlícek described that third 3+2 alternative as "the most acceptable option," allowing the Czech Republic to get the best price while still protecting national security. But even this compromise wasn't adopted, as the committee effectively punted any decision to January. And the controversy may only pick up before then. Pavel Fischer, chairman of the parliamentary committee for foreign affairs and national security, said on Thursday that on Dec. 15 a Parliamentary committee would hold a discussion with six different Czech security agencies on the ramifications of the 3+2 model, which he says has not been analyzed sufficiently. "Yesterday was one big victory for the Czech political opposition," Pavel Havlícek, an expert on Eastern Europe with the Prague-based Association for International Affairs, and no relation to the industry minister, told Energy Intelligence. Dukovany II is a "huge topic" right now in the Czech Republic, and any technology tender would be "the biggest tender that the government has launched for the last 30 years." With the popularity of the Babis government already hit by its response to Covid-19, a wrong move could be fatal to the ANO in the October legislative elections. A Broad Competition? Complicating the situation is the fact that offerings from the non-Russian and non-Chinese reactor vendors are more embryonic, and likely more expensive. Both Rosatom and CGN are offering mature designs with reference plants already commissioned or likely to be commissioned before ground breaks on Dukovany II, according to a slide released by a member of the government's new nuclear committee (see table). CGN is building twin HPR1000s at its Fangchenggang plant in Guangxi, while Rosatom is close to commercial operation of the second of its twin VVER-1200 reactors at its Leningrad 2 plant. The story isn't as simple for the other vendors, two of which don't have an obvious offering to fit the likely tender requirements of 1.2 gigawatts of initial capacity, with an option for up to 2.4 GW. The APR1400 that South Korean firms exported to Abu Dhabi is too large, and even an OPR1000 rebranded as the "APR1000+" will need significant changes to meet European Utility Requirements such as a core catcher. EDF's EPR design that's operational in China is similarly too large, and the French vendor has therefore pointed at a smaller -- and new -- option for Dukovany (NIW Sep.18'20; NIW Apr.17'20). When EDF CEO Jean-Bernard Levy recently met in Prague with Babis, Havlícek and Cez CEO Daniel Benes, senior EDF executive Vakisasai Ramany explained that this was a chance "to present the strengths of EDF's EPR reactor mid-size adaptation: #EPR1200." Westinghouse's AP1000 might meet the requirements, although its reference plant at Vogtle in the US isn't completed and is behind schedule and over-budget (NIW Dec.4'20). None of these offerings are likely to be cheap, and a Westinghouse-led project would likely come with added risk for the Czechs. All of which might help explain why Benes and Havlícek have been so eager to keep the Chinese and Russian offerings in the mix. Babis is reportedly pushing a PPA price of €50-€60 per megawatt hour, which Benes worried during the Thursday meeting would not guarantee a profitable project, particularly if cheaper Chinese and Russian offers were eliminated. While a July agreement between the government and Cez commited both sides to the €100 million-€150 million project development phase through June 2024, Cez could still drop out ahead of a final investment decision. Specifically, Cez has the right to sell off its Elektrarna Dukovany II after Jun. 28, 2024, if a construction-phase implementation hasn't yet entered into force, and if a PPA hasn't been signed, the company said in a December presentation. Phil Chaffee, London, and Gary Peach, New York Possible Technology Vendors for Dukovany II Reactor

Topics:
Elections, Security Risk , Nuclear, Nuclear Fuel
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