Tag Archives: nuclear

Russian foreign minister visits Budapest and ‘sells’ expensive nuclear

In the history of this blog, under the Orban government, I have never been able to take seriously the official relationship between Hungary and Russia . This is despite both countries having significant areas for economic relationships, particularly in energy and other areas. The reason for my jilted attitude stems from the passing off of the relationship of one of equals that engage in mutually beneficial energy projects. When Hungary discusses energy with Russia it only means greater dependence on a country that plays politics with energy resources. So when it comes to official visits between the two countries, instead of just discussing Hungarian exports of salami and apples to Russia, we engage in this charade of energy equals.

Good friends, with expensive energy taste (source: MTI, http://dailynewshungary.com/russian-foreign-minister-hold-talks-in-budapest-photos/)

Today Russia’s Foreign Minister, Sergey Lavrov is in Budapest to meet with his counterpart and with Prime Minister Viktor Orban. The expansion of Paks Nuclear Power Plant is on the agenda and how Budapest is spinning its ‘non-state’ aid and ‘transparency’ argument with the European Commission. There already is a very good study on the non-viability of Paks II, so my comments will focus more on the increasing disparity between government projections of the price of nuclear power and the decreasing cost of alternative energy technologies.

In the world of renewable technology, particularly in the area of solar and wind power, the set rate of the feed-in tariff is now out of fashion. Instead an auction based system is now in place. This provides the chance for project developers to line up their financing and bid on how much their project will cost in comparison to other projects along the same parameters. This gives us a good idea of what the cost is for particular projects and their associated technologies. And the latest projects (albeit in sunny locations) drives the price of Paks II into the ground. Particularly when the life span of Paks 2, from 2026 to 2085 is taken into consideration.

The cost of solar power fell 50% in the past 16 months. It is now at USD 3 cents per kWh in sunny Dubai for 800 MW of solar power, and with favorable financing from Abu Dhabi. In comparison, Paks II will have the capacity of 2400 MW at a cost of USD 9 – 12 cents per kilowatt hour (kWh) for the first 21 year period – when the loan to Russia will need to be paid, and with a cost of USD 3 – 4 cents per kWh afterwards (at today’s HUF/USD exchange rate). And this is with a ‘favorable’ Russian loan.

In the opinion of Attila Aszódi et al., power prices of HUF 28.74-35.56/kWh, depending on the various scenarios, would have to be attained in the 21-year period of the repayment of the Russian loan taken out in relation to the investment, for the power plant to be able to cope without any further financial support. The authors firmly believe, on the other hand, that the project might be a good investment despite the above as, after repayment of the loan, the power plant would generate power at a price of HUF 8.05-11.09/kWh, which will result in a good average price over its entire lifetime (Source: Felsmann, Balazs, 2015).

If we look at the US, then we can see that the price of 5 cents per kWh is achievable now without government subsidies. No doubt the price for solar will continue to drop, so much so, that in ~2026 when Paks II (if it is ever built) will open in a electricity market, which takes no stretch of the imagination, will have the cost of solar even lower than the price of nuclear (Southern Hungary is actually pretty sunny). According to the author of the chart below, southern an central Europe will have solar prices at 6.5 cents/kWh by 2020/2021. Even Steven Chu, the former US energy secretary and supporter of nuclear power stated, “Clean energy is actually getting much cheaper than even I, as a perennial technical optimist, thought it was going to be.”

Even if we put Hungary in the ‘average solar’ category, Paks II electricity will be more expensive. (Source: http://rameznaam.com/wp-content/uploads/2015/08/Future-Solar-Cost-Projections-PPA-LCOE.jpg)

Some might say I’m comparing apples and oranges, that is baseload power to ‘unreliable’ variable solar power. But when we take into account the developments in energy storage technology and other renewable energy sources, combined with the longer term operation of Paks I (with near 2000 MW), then it can be confidently stated that by 2026 – in just 10 years, storage technology, that is already being deployed around the world, will be even more competitive.

In addition, solar should be seen as a ‘bridging’ fuel in Hungary’s nuclear transition. That is, as Paks I units are decommissioned, solar and other renewables can begin to replace them from (earliest) 2036 and onwards. That is right, the current plant and all its units operates until 2036. It is projected between 2024/2026 and 2036 the output of Paks will be over 4000 MW – Hungary will need to dump this electricity outside of its own borders.  Solar can easily be a cost effective source of bridging while either newer nuclear power technology is developed or alternative sources are integrated. In any case, the cost will need to be less than the current Russian offering.

Paks NPP 1 and 2 capacity by year (source: Aszodi, Attila. “A Paks2 projekt energiapolitikai értékelése és a szakember utánpótlás kérdései.” Budapest, March 20, 2014. http://nuklearis.hu/sites/default/files/docs/Aszodi_MNT_20140320.pdf.)
Paks NPP 1 and 2 capacity by year (source: Aszodi, Attila. “A Paks2 projekt energiapolitikai értékelése és a szakember utánpótlás kérdései.” Budapest, March 20, 2014. http://nuklearis.hu/sites/default/files/docs/Aszodi_MNT_20140320.pdf.)

Hungary’s energy relations with Russia is not one of equals. The country is being saddled with an outdated and expensive technology that even today (the day when Russia’s foreign minister is in the country), that is more expensive than alternative technologies. This summer Budapest takes delivery of the refurbished Soviet era metro carriages from Russia (as part of the Paks II deal, us citizens of Budapest had to accept these outdated models), let’s hope that Paks II is not delivered on the citizens of Hungary, the bill is already too high, in 2026 it will be astronomical.

Sources:

“MVM Hungarowind Invests HUF 4.9 Bln in Solar Power Plant | The Budapest Business Journal on the Web | Bbj.hu.” Accessed May 25, 2016. http://bbj.hu/business/mvm-hungarowind-invests-huf-49-bln-in-solar-power-plant_112171.

Naam, Ramez. “How Cheap Can Solar Get? Very Cheap Indeed.” Ramez Naam, August 10, 2015. http://rameznaam.com/2015/08/10/how-cheap-can-solar-get-very-cheap-indeed/.

“Russian Foreign Minister: Hungary ‘important, Reliable Partner’ | The Budapest Business Journal on the Web | Bbj.hu.” Accessed May 25, 2016. http://bbj.hu/politics/russian-foreign-minister-hungary-important-reliable-partner_116608.

Naam, Ramez. “How Cheap Can Solar Get? Very Cheap Indeed.” Ramez Naam, August 10, 2015. http://rameznaam.com/2015/08/10/how-cheap-can-solar-get-very-cheap-indeed/.

“Steven Chu: Mexico’s Energy Auction Reveals True Price Of U.S. Renewables – Forbes.” Accessed May 25, 2016. http://www.forbes.com/sites/jeffmcmahon/2016/05/08/steven-chu-mexicos-energy-auction-reveals-true-price-of-u-s-renewables/#1a94bf3575d2.

“The Price of Solar Power Just Fell 50% in 16 Months – Dubai at $.0299/kWh! | Electrek.” Accessed May 25, 2016. http://electrek.co/2016/05/02/price-solar-power-fell-50-16-months-dubai-0299kwh/.

Felsmann, Balazs. “Can the Paks-2 Nuclear Power Plant Operate without State Aid? A Business Economics Analysis.” Energiaklub, June 23, 2015. http://www.energiaklub.hu/sites/default/files/study_can_paks-2_operate_without_state_aid_energiaklub_2015.pdf.

Aszodi, Attila. “A Paks2 projekt energiapolitikai értékelése és a szakember utánpótlás kérdései.” Budapest, March 20, 2014. http://nuklearis.hu/sites/default/files/docs/Aszodi_MNT_20140320.pdf.

 

Putin-Orban Politburo Meeting: Cash and energy co-dependency

The global fall in oil prices and the shaking foundation of Russia’s economy has analysts and the media questioning Russia’s commitment to financing and  building Hungary’s expanded Paks II nuclear plant. On February 17, Hungary’s Prime Minister will be in Moscow for a meeting with Putin – almost a year to the date Putin visited Hungary. Top of the agenda is energy. In this short analysis, I’ll simply be stating the importance of energy projects and the historical commitment both Russia and Hungary hold to supply side economics of energy resources. Their common energy policy is: Immediate cash is more important than long-term energy reduction methods. This is in contrast to more advanced countries which are moving to tackle demand side inefficiencies and rolling out low cost distributed generation technologies.

The autocratic habits of Putin and Orban make them susceptible to stick with supply side economics. Pushing out natural resources and producing more and more energy to grow an economy is straight from the Politburo playbook. Or more accurately, Gosplan’s book.

To frame my discussion on supply side history of energy resources let’s go back to the 1980s, when the Soviet Union’s organization of Gosplan set the five-year plans. And let’s frame this discussion within the general economic difficulties the Soviet Union found itself in the 1980s. Energy investments were planned to increase 50% between 1981 and 1985. More broadly, this “implied that energy was to absorb fully two-thirds of all new Soviet investment during the coming five-year plan…. [With] the share of energy in the planned increment of industrial investment came to a whopping 85.6 percent.” This means, almost all of the money meant to build the Soviet economy was going towards energy projects. Much of this was down to the increasing costs of extraction and expanding the energy network from Siberia (Gustafeson 1989, 36). We can also insert gas pipelines to Eastern and Western Europe. In short, the energy sector was the primary recipient of financial resources for the Soviet Union. The sector held both domestic and foreign political-economic dimensions.

Just to bring us back to the era of Soviet energy policy and the Politburo

Wrapped in the Soviet energy strategy was rolling out nuclear reactors across the Eastern bloc. Hungary was a recipient of this push with the building of Paks in the 1970 and early 1980s. But Hungary pursued Paks only after it became clear that oil was going to be very expensive over the long term for producing electricity. Paks II represents the continued economic investment abroad for political-economic influence, and this supply side ideology.

There was a moment of rationality, by 1983, Gorbachev recognized the need to re-orientate, at a significant scale, capital onto energy conservation measures. Nonetheless, by 1985, global oil prices plummeted along with the dollars fall against other currencies. Oil profits were wiped out in the Soviet Union (Gustafeson 1989, 36, 46 -48).

It is important to pause here, I’m spending time on this, as it reflects our world today – in 2016, low oil prices and external conflicts (even down the the Syria/Afghanistan comparison).  The push for conservation was a watered down for the five-year plan starting in 1985, investment into energy supply would continue at a high pace – the money was needed, while energy conservation was given lip-service (Gustafeson 1989, 36, 46 -48).

An energy conservationist?

Russia is built on an export hand-to-mouth energy system. Political influence and immediate cash needs supersede long-term planning for efficiency and effectiveness of energy resources. Putin is lucky to find a friend like Hungary’s Orban who also understands the benefits of supply side energy for political and economic purposes. Cash generated from consumers helps to finance government expenses.

Hungary holds no ambition to reduce its raw energy needs. The solution of the Orban government since 2010 is to take money from foreign and domestic energy companies to reduce household’s energy bills by 25 percent. I’ve outlined how unsustainable this is before. The drop in oil and gas prices over the past few months, has seen households in Bulgaria pay less for their gas, but the same has not happened to Hungarian households. Essentially, either the financial losses in the system are being paid off, or the money goes into the ether.

Under the Orban government, over the long-term, Hungarian households are no better off than the foreign energy companies. The dramatic reduction in investments into the energy sector means fixing things as they break will cost more money. In addition, there is almost no money to invest into energy efficiency. If a large number of Hungarian households have trouble paying their energy bills – and this is the rational used for nationalization and reducing bills 25 percent – then they don’t have money to invest in energy efficiency which will reduce their bills more than 25 percent. Thus over the long term, Hungarian households will  pay more for an energy system with spot repairs and for leaky windows and walls.

Demonstrating the common perception in Hungary of corruption at the highest levels, the government is reallocating EU funds of HUF 309 billion meant for energy efficiency measures in 50,000 homes. The money will now be used only in public buildings. In my opinion this is an attempt to satisfy the EU’s energy efficiency directive. This stipulates that governments must renovate three percent of the buildings they own per year. Just like other large scale projects in Hungary (notably LED street lighting by Orban’s son-in-law), these government controlled projects are susceptible to corrupt tendering practices. Or in the eyes of the government, they can meet the EU energy efficiency directive while also channeling money to selected companies. They also do not need to finance this three percent goal from the state budget.

Just like the government of the Soviet Union, both Russia and Hungary place supply side energy economics ahead of demand side efficiency measures. Even if these measures cripple and stunt the economic growth of each country. Supply side measures are only short term building projects pumping out more and more natural and financial resources. Only the companies and individuals vested into building the infrastructure and selling energy resources make money. The financial resources of households are degraded over the long term because they must pay more for emergency repairs and inefficient homes.

Hungarian gas bills represent a simple wealth transfer to Gazprom and both the Russian and Hungarian governments: Twenty-percent of every gas bills goes to pay Hungarian VAT (this is higher than in 2008 – and even higher than Norway’s VAT), around 70% of householders bill payments go to the (mostly) Russian entities that sell the gas, including Gazprom Export. Thus, Hungarian households do a wealth transfer to Russia and to Hungarian government approved entities involved in the gas business. Only a small percentage of the bill actually covers the network costs – which the government waged the war against foreign utilities over. The increase in corruption in Hungary and the endemic corruption levels in Russia means Hungarian households are forced to pay for energy services that may also be involved in corruption. The costly expansion of Paks II, also fits into this narrative. If investments into energy efficiency (both electricity and gas) were carried out households could reduce this wealth transfer to Russia and the Hungarian government.

Source: European Commission, 'Energy prices and costs in Europe' 2014, https://ec.europa.eu/energy/en/publications/energy-prices-and-costs-europe
Source: European Commission, ‘Energy prices and costs in Europe’ 2014, https://ec.europa.eu/energy/en/publications/energy-prices-and-costs-europe

The original push for energy conservation by Gorbachev in the mid-1980’s was also a push for increase resources to benefit consumer goods and the lifestyles of Soviet citizens.  In the end, the financial resources went into expanding the energy sector to underpin an inefficient industrial sector. Immediate cash was the main concern. This is the same concern that underpins the operations of Hungary and Russia – thus they maintain a supply side energy system with high taxes. It would be useful if Putin and Orban spoke together about improving the lives of their citizens through energy efficiency efforts – and not expanding the profits of Gazprom and intermediaries involved in the gas business or large government projects meant expand energy production (Paks) or steering energy efficiency contracts to approved companies.  Hungarian household should not subsidize the supply side energy interests in Russia and Hungary. It would also help if Putin and Orban stopped acting like members of the Politburo in 1985.

Additional sources:

European Commission. “Energy Prices and Costs in Europe,” 2014. https://ec.europa.eu/energy/en/publications/energy-prices-and-costs-europe.
Gustafson, Thane. Crisis amid Plenty: The Politics of Soviet Energy under Brezhnev and Gorbachev. A Rand Corporation Research Study. Princeton, N.J: Princeton University Press, 1989.

Why Russia wins against the EU’s single energy market

A battle of ideologies is underway in the energy sector of the South and Central Eastern Europe. Just as the ushering in of democracy after 1989 was viewed as a done deal, infusing market mechanisms into energy system was also viewed as an obvious choice. In Hungary, preparing energy companies for privatization began in 1989. However, just as democracy is now eroding in the region, so are the neoliberal energy market mechanisms. State ownership in energy is maintained, while formerly privatized companies are bought back. A new era exists of state owned utilities, politicized energy regulators and retreat of private investors marks the EU’s eastern energy markets.

The cost is high for the energy systems of Bulgaria, Hungary and Poland. State ownership in Bulgaria results in failed strategic endeavors and huge debut (Belene NPP and NEK). In Hungary the repurchase of MOL shares, EON Foldgas transit and storage, gas distribution from RWE and now the take-over of electricity distribution obligations. These are all funded by taxpayer money, most of the endeavors in Hungary affecting end-user pricing are done by their development bank, with the potential to cover losses.

In Poland, large state ownership exists while the failure to launch a shale gas industry partially stems from the inability and the lack of experience to work with foreign investors [each of these three countries and these issues will be discussed in other blog posts, along with costs]. The financial cost of mismanagement and cancelled projects stymies efficient, secure and lower cost energy systems from developing. The once hoped flow of private capital in the region is in retreat.

My bias on the issue of state ownership is clear, I do not favor mismanaged state owned companies or overtly politically shaped utility rates. In the US government ownership exists, and there is political influence in rate setting and market structure. However, in our three countries examined, political influence prevents the system to function in both an environmentally and economically sustainable manner. Electricity and gas rates are cut across the board, benefit even those that heat their swimming pools in the summer, rather than those stuck in energy poverty. Investments into energy efficiency are neglected in favor of maintaining lower electricity and gas prices. Corruption and favoritism often floats around state ownership. From the favored gas trades with MET, in Hungary to selling yearly capacity in a no-bid sale to a private company in Bulgaria; the exclusion of transparency and competitive bidding for capacities stymies fundamental components for a market based energy system from developing.

Excluding the air of favoritism, the political view in all three countries is clear: State ownership (or deals with favored companies) protects the natural resources of the country and provides social benefits that private companies do not. This contradicts the neoliberal competitive market agenda and cross-border operation of energy companies instilled into EU institutions and treaties. The past Communist system held development of the energy infrastructure central to social acceptance. The panel house (with a lifespan of 30 year) may be badly insulated but at least the central heating is cheap. Centrally controlled pricing is still linked to income levels.

(Source: European Commission, 'Energy Prices and Costs in Europe', 2014)
(Source: European Commission, ‘Energy Prices and Costs in Europe’, 2014) Overall, the cost of electricity for households in Eastern Europe is low to average in comparison to other European Union countries.

Universal access to electricity was the last great global energy project. The goal was clear, provide access to electricity – almost at any cost. This agenda drove the development of energy systems in North America and Europe. Communism accepted the same mantra, thus we should not view some central tenets of political-economic systems as exact opposites. But there are fundamental differences in financing system expansion and operations. The Communist state, as compared to users, pays the overall bill. For example, wages, in the factories of Eastern Europe, may not have been high, but nor were daily living costs. The district heating facilities of Dunaujvaros (previously Stalin City) are connected to the town’s main employer, Dunaferr steal mill. Shutting down certain parts of the steal mill requires a new cogeneration facility – based on full market pricing. Just as universal access was an engineering and political project (hydroelectricity in America), integrated energy and socio-political systems are integrated.

The full commodification of the energy services, electricity and gas, in the household is a market mechanism. Private owners of generation and distribution facilities need to be reimbursed, and with a profit margin, to provide ‘efficiently’ managed services. The energy value chain in both Capitalist and Communist systems holds the fundamental flaw of incentivizing energy production and not demand reduction.

Despite great strides in Western Europe reducing energy intensity of economies, full commodification of energy efficiency does not exist. In Eastern Europe, energy efficiency programs are usually funded by EU funds without governments viewing efficiency as reducing gas imports or improving people’s living conditions. It is still more ‘efficient’ for politicians in Hungary and Bulgaria to sell discounts on people’s utility bills than to provide them with better living conditions in the form of insulation and new windows.

The incentives for supply side, while existing in both neoliberalism and Communism, plays out despite both sitting in contrast to each other. Neoliberalism is inherently an economic project. It was developed by the Chicago School of economists and is often linked to the privatization of energy companies in Latin America and Pinochet’s regime of oppression and rise of Neo-Marxist guerrella fighters. In general, the shift towards global capitalism took off in the 1980s and early 19990s. Neoliberalism, viewed as a project by academics focus on the inherent evil obliterating state support and jobs for three quarters of the world’s poor. Economic shock therapy, eloquently described in Naomi Klein’s ‘The Shock Doctrine’. Neoliberalism, privatization and the market economy rob the factory workers of their jobs, heat and wages.

In Eastern Europe, Communism and political suppression of free speech and religion were just a few ‘costs’ that were paid for living in a utopia – a non-market economy. Now the Communist days of low cost utilities and relatively low cost living standards are now fondly recalled in Hungary, Bulgaria and Poland. Marxist economists trained in Moscow guided the broken and inefficient economies of these countries. While the engineered infrastructure of these countries were designed with efficiency and rational engineering principles in mind, operating them created a different level of engineered and economic inefficiencies. Such as opening windows to regulate heat and an economy based on bartering.

Five year plans favored the academic discipline of engineering for developing the energy system of Eastern Europe. Markets worked according to the infrastructure, rather than the markets dictating what infrastructure would be built. The failure of the EU to integrate its energy system lies more with the market policies that must underwrite new infrastructure, with short pay back periods and avoidance of state aid rather than a lack of engineering skill to integrate the markets.

Even from a market perspective, infrastructure projects planned out over a five year time horizon (or longer) hold significant financial savings for companies supplying the energy and for consumers consuming. The failure of the Nabucco and South Stream pipelines are partially attributable to the conflicting demands of open market access and infrastructure ownership. Energy regulators are meant to create these efficiencies in a market based system. Their role is negated when decision making is politically influenced and returns on private investments are not realized. Thus Bulgaria, Hungary and Poland cannot secure long term advantages from a market based system.

Profits then losses in Hungary's utility sector. Source: Hungarian Central Statistical Office
Profits then losses in Hungary’s utility sector. Source: Hungarian Central Statistical Office, draft statistics compiled for a benchmarking report for the European Commission – not done by me.

The higher risk for investors and the inability of the state to secure long-term private financing for large infrastructure projects opens the door for Russia to have it’s way (this is less relevant for Poland). The ability for Russia to finance large pipeline projects (North Stream, South Stream, Turk Stream) and nuclear power projects (Bulgaria and Hungary) demonstrates the strength the Russian state has (paradoxically) in financing energy infrastructure in the EU. Thus while the EU’s energy market is based on economics it can’t compete on financial terms.

The market approach also can’t compete when political involvement overrides long term private investments. Political interference pushes these countries closer to Russia as the availability and interests of private companies shrinks. In an environment with politically influenced energy prices, realizing returns on investment becomes more and more challenging. In Hungary, the response has been clear. Private distribution companies, paid out high dividends thereby removing capital from the companies while slashing investments. With the rejection of a market based approach, a financing gap emerges. Russia is happy to fill this by offering its former satellites a one stop shop for finance, infrastructure, technology and the potential for politically favorable pricing.

 

The Collapse: Utility investments in Hungary
The Collapse: Utility investments in Hungary H1 = first half of year, H2 = second half of year, draft statistics compiled for a benchmarking report for the European Commission, not done by me.

It is no coincidence that the biggest supporter of Putin and Russia in the EU is Hungary’s Prime Minister, Viktor Orban. After securing a secret late night deal to expand Paks nuclear power plant with Putin, Orban now acts as Putin’s European cheerleader for building Turk Stream. The ultimate goal is political support for Orban and his 25% utility price cuts – that must be maintained.

The clash occurs in South and Central Eastern Europe between former Communist systems and the neoliberal regulatory approach to EU energy markets. The two overriding academic disciplines of engineering and economics only realize their potential with political permission. While these two approaches are reconcilable, politically, past and current adherance to one or the other approach dominants. Favoring a market orientated approach relies on trust in market forces that efficiency will be introduced to the energy market. Trust in engineering enables political involvement to set energy prices – rather than the market.

After the fall of Communism trust was placed in the neoliberal market approach, after 25 years of playing with economic markets, politicians are no longer willing to place significant trust in markets. Thus the crisis of the energy system in the region is set to escalate between the neoliberal market approach required by EU membership and a politically guided market price resting on centrally controlled and engineered large energy systems backed by Russia.

SCEE countries extend the Communist energy systems to the future

There is a delicate and blurred line between investments into the sustainable energy technologies and security of supply. Both are overreaching concepts that describe a multitude of approaches. At the core is the attempt to upgrade technologies with a low environmental impact while ensuring energy resources (primary and secondary) are secure. Creating a sustained momentum of investments through a clear trajectory is core to an efficiently managed system. The sustained trajectory towards a more secure and environmentally sustainable energy system is where countries in Central Europe fall short.

In Europe, there is a clash of how embedded energy systems contribute to energy security. There are two distinct approaches, one in older member states (UK, France, Germany) and one in newer eastern member states (e.g. Poland, Hungary, Bulgaria). Some countries transformed their energy systems in a rapid manner, like Germany and Spain, where solar and wind received a tremendous boost through feed-in tariffs. This transition is now self-sustaining due to the drop in the cost of technologies and a mature domestic service industry. While Spain cut off financing the industry became well established. In Germany, support remains and the renewable sector will continue to grow.

More broadly, the transformation boosted both countries’ energy security while moving them towards a sustainable energy system. Both environmental and commercial reasons (being leaders in energy technology) fueled this conversion. Spain reduced its oil imports while Germany reduced coal (temporarily) and nuclear power in their energy mixes. Social support existed in both countries for this transition.

Energy technologies in the SCEE region

Building a sustainable technological trajectory to transform energy systems is not occurring in South and Central Europe. Some countries, like Poland, Hungary and Bulgaria have not noticeably altered their energy systems. In fact, these countries are marked by a reassertion of their older technologies. Renewable energy technologies are kept to the minimum EU requirement which is below 20%, and little or no government financial incentives. Instead, these countries are clearly reliant on extending and expanding their current energy technologies. Poland will maintain a high mix of coal in electricity generation, currently this is near 90%. The overall 2050 energy mix is projected to have 60% from coal, 20% from gas and 20% from renewables. Thus a rough projection can see electricity generation from coal being around 70%, while boosting gas and renewables in electricity generation.

Hungary is set to increase nuclear power to over 70%, by expanding its nuclear plant. If life extensions are done for current reactors, then by 2050, this 70% ratio could remain in place. Electricity generation from coal and gas and some renewables will remain. Thus, Poland and Hungary pursue a 70% mark for their electricity systems based on previous technologies. This percentage, when combined with gas, effectively locks out renewable energy to any meaningful degree.

Poland’s Electricity Generation Mix

Source: European Commission Country Report 2014 - Poland
Source: European Commission Country Report 2014 – Poland

The energy mix of Bulgaria, from the outside, is diverse. It is a net exporter of electricity and has hydro, nuclear and renewable energy (wind and solar). However, as I will explore elsewhere on this blog, there are systemically high costs associated with Bulgaria’s solar feed-in tariffs, expensive long term contracts for coal-fired power plants, and the general overcapacity of nuclear power, which means even this ‘cheap’ source of energy either needs to be exported or (at times) taken off line due to the oversupply from solar and coal. The future of the Bulgarian energy system, while on the face of it, appears nuclear and centralized, consistent mismanagement may result in technologies with shorter payback periods dominating the energy mix, such as gas and renewable technologies.

Bulgarian Electricity Generation Mix

Source: European Commission Country Report 2014 - Bulgaria
Source: European Commission Country Report 2014 – Bulgaria

Technology and Resource Dependency

The choice of Poland and Hungary to maintain their future energy mix at 70% based on technologies from the previous energy era are directly connected to the perceived final price of electricity, gas and energy supply security. Bulgaria continues to debate and engage with reliance on Russian nuclear technology and gas pipelines – on the same level as Hungary. Bulgaria lacks the momentum to diversify away from Russian resources and technologies. All three countries are affected in their choice of energy systems by Russian control of resources and technologies. New investments fall into one or both of the categories of resource in/dependency and technology in/dependence.

The future energy systems in these countries are based on the previous Communist energy technologies and resources. This is not a trajectory that moves these energy systems towards being both sustainable and secure. Rather, ‘cheap coal’ and ‘cheap nuclear’ are perceived to provide the affordable energy that the citizens of these countries accept. The competitive advantage deriving from ‘cheap’ resources and technologies rests on the previous Communist energy complex. Today, these facilities are built under considerably different market conditions than what we have today or in the future.

It is the difference between the old political-economic regime and the one that exists in the EU that is a source of friction today. Financing of the expansion of Hungary’s Paks NPP is now provided by Russia. Russia attempts to influence the future energy choices of the region by extending the previous political-economic system of resource and technology dependency. This will be discussed in the  next blog post.

Present and Historical Benefits of Nuclear Power for Hungary and the Soviets

Buda to Baja: Leg 1 of the South & Central European Energy Expedition (#SCEEE), post 2 of 2. Post 1, can be found here.

“Energy is ideology,” stated a Bulgarian energy expert in relation to Russia’s use of energy as a projection of power. But, he continued, the age of energy as a weapon is over, the options are now plentiful. While there are more options today, it is important to frame Soviet and Russian technology as a form of influence corresponding with particular ideologies and forms of governance. This is an emerging theme from my interviews and conversations on the historical role of the energy system in former Communist countries.

Picture of a young Communist worker building the foundation of Hungary's future energy system
Picture of a young Communist worker building the foundation of Hungary’s future energy system. Displayed at the Paks NPP Visitor Center.

Ideology is often perceived to be a function of governments. That is, it is a top down process – similar to building up the idea of nation. But we can also see that ideology – like market ideology in the EU – also works in the form of governance. And here I change from the use of ‘government’ to the use of ‘governance’. Because in academic literature (including mine) we perceive governance as a technocratic rule making process. This is invoked for the regulatory systems propagated by the EU. But even within the EU (and discussed elsewhere in this blog and in this project) we have the propagation of neoliberal market ideology.

The connection I want to make to nuclear power in Hungary and in former Communist countries, is the Soviet Union was able to use ‘governance’ to instill and propagate its own ideology of societal goals through technology, including scientific expertise and processes. Nuclear power was one element of the energy system used to integrate and build grand projects that modernized the economies of COMECON countries (see my previous post).

Looking at the history of Paks (and nuclear power in the region) integration of the eastern satellites into the Soviet Union was facilitated by the energy infrastructure, such as gas pipelines and nuclear facilities. This integration lends itself to political integration and resource dependency through fulfilling social contracts for the built up expectation the state will provide low cost energy – and not payed from the salaries of citizens.

Continuity of Investments

Recent Russian efforts to foster integration by building new nuclear power plants and gas pipelines in the region represents building on past investments. Continuity of investments, is an areas I’ve examined in the past for companies like E.ON and RWE entering new EU Member States, but I (and others) have overlooked and failed to perceive the sunk costs of the Russians/Soviets into the Eastern Members states’ energy infrastructure and knowledge networks. Previous rounds of investments are represented in the Paks power plant itself, built in the 1980s. There is considerable knowledge capacity (including the extensive training given to each worker) built up since the early 1980s.

Brief video of the Soviet Memorial at Dunafoldvar where I spent one night on my bike trip to Paks.

Shifting of the governance system – and also the accepted ideology – away from a centrally planned economy to one emphasizing market forces, building and operating the energy infrastructure, undercuts and devalues the previous round of investments (under the previous regime). This observation is extremely important in my later examination of the current expansion of Paks NPP. Paks therefore is not just a component of Hungary’s and the region’s energy system, but an ingrained technological, political and social element of the previous and current economic system (including the guiding ideology). Renewable energy may make market sense, due to its smaller scale and shorter payback periods, but in political and social systems operating in a governance system of centralized energy systems, nuclear power fulfills multiple five-year plans.

Nuclear power works within this centralized governance system on multiple levels, in the respective order: 1) physical; 2) knowledge; 3) economic; 4) geopolitical; and 5) social.

Physical integration into the environment
The physical location of Paks Nuclear Power plant on the bank of the Danube is as much of a technical requirement as it was for assembling the structure. Cooling towers are not necessary, as river water is used for cooling and steam generation. In addition, production of the nuclear power plant components was a regional endeavor, enabling key components to be shipped on the Danube. For example, the reactors were made in Czechoslovakia at transported on the Danube. The use of the Danube and the sourcing of the parts underscores the regional dimension and participation in nuclear power.

In my future bike trips on the Danube I will be visiting the other nuclear power plant facilities, documenting the role of the Danube in tying together both the nuclear facilities and the economies of the region.

Knowledge integration
Operating the nuclear power station required students and employees to travel to Russia and the German Democratic Republic (DDR). This extensive education and travel results in the acculturation of experts into nuclear science and operational cultures. Education and training was also done at the Technical University of Budapest, this is where the Hungarian nuclear experts formed the basis of their careers.

Interestingly, during the early years of operation at Paks, the shift of workers were duplicated. There was a Hungarian team and a Russian team of operators performing the same functions. This enabled training and assisted in double checking that everything was done according to procedures.

Economic and competitiveness
The focus here is on the role of nuclear power in laying the groundwork for lower energy prices. But let’s not lose sight that the slogan ‘too cheap to meter’ is also an American expression to demonstrate the projected prowess of nuclear power. Currently, over 50% of Hungarian electricity consumption is supplied by Paks NPP. The working assumption (by some experts) is the full cost of nuclear power is reflected in the market price. I’m currently researching the construction costs and how these were paid. But the working assumption by some Hungarian experts and politicians is the full cost of nuclear is reflected in the current electricity price. From their perspective future nuclear power is perceived to offer this price advantage over renewable or coal power. The dominant paradigm in Hungary, Bulgaria and Russia is nuclear is cost competitive, resulting in a competitive economy.

Geopolitical
The extensive physical and knowledge integration into the Communist economic system enables a legacy of Russia to remain embedded into the nuclear power industry. This extends the technical hand of Russia and keeps the former satellites close. Thus the current raging debate over expanding Paks and how this ties Hungary to Russia for another two generations. The debate is not only technological (nuclear or not) but an issue of sovereignty and political alignment. Does Hungary want to cut off a highly symbolic and historical tie that offers Hungary economic and social strength, and go with a more short-term neoliberal market based energy system? Under the current Orban government this is simply not an option – the centralized energy system remains reflecting the political governing style.

In a region that placed science in the highest regard, and energy infrastructure development as an expression of ideology along with a symbol of economic might, moving away from large scale energy projects goes against the grain. More deeply, the embedded physical assets, the developed knowledge and supply networks contribute to a legacy system that locks-in technology, engineering choices and geopolitical influence. Shutting down the nuclear power industry in these countries is akin to shutting down German solar or closing the coal mines. In a region and country with high support for nuclear power, it is unlikely that Hungary or Bulgaria will give up nuclear power. It is essential to consider these aspects and the embeddedness of energy technology into broader political-economic and social networks.

Social integration
Politically the choice to remain with nuclear is a continued expression of national might and scientific prowess. Solar and wind energy represent – not just a decentralized system, but technology owned and developed by Western firms that also control and profit from selling this. Giving up on ‘Russian’ nuclear technology undercuts CEE politicians own political and social standings. The fond recollection by workers of how Paks was built and the role of KISZ (the young Communist party), holds a strong legacy throughout the country. The 1980s were a time of prosperity for Hungarians, Goulash Communism worked. So much so, that by the time reactors 3 and 4 were being built new Hungarian companies were supplying the technologies for these, rather than Russian ones. Entrepreneurship was alive in Hungary in the 1980s. (I’m concentrating on the nuclear up-sides of Communism, not the significant downsides of the political-social regime)

In the present day, the town of Paks thrives off the largess bestowed upon it by the power plant. The cultural life is said to be equal with cities much larger, sport and cultural clubs are prominent. It is probably the only ‘factory’ town from the 1980s still surviving in Hungary today (although maybe Gyor could be considered as well). The country as a whole is viewed benefiting from Paks. MVM (the state owned company and owner of Paks) holds significant sponsorship throughout the country of cultural events. Tangible benefits are perceived from nuclear power in Hungary. In a sense, in a political-economic climate dominated by corruption, the only law that still works is the law of physics, and the role of science (maybe things were not perceived so differently under Communism). Corrupting or swaying this scientific knowledge can only result in a disaster. At least some social faith can be placed in physics of the atom.

Conclusion
The term ‘governance’ has a much more modern connotation to it. Often this is expressed in reference to EU expansion and technical rule making. In relation to Soviet nuclear technology, the spread of technical knowledge and exchange of ideas among experts can also be viewed as a form of governance. Hungary’s decision to remain nuclear is set within these historical and broader networked elements that hold centralized systems essential for the political system. Socially, it is still expected government will assist in price support. Providing continuity to past investments – of a centralized system – attempts to fulfill political and social expectations. Whether this is financially sound, considering broader technological trajectories, remains to be examined.

Energy Expedition Summary: Nuclear Power and the Danube

Buda to Baja: Leg 1 of the  South & Central European Energy Expedition (#SCEEE). Post 1 of 2.

The Danube river proves to be an essential element to the energy system of Eastern Europe. The Danube integrated Eastern European Communist countries with the Soviet Union, facilitating economic cooperation through COMECON, the counterpoint to the Western OECD. To gain a unique and new perspective on energy technologies and relations I am biking down the Danube river from Budapest to the Black Sea and in a shale gas region in Poland. Here is a summary of the first Hungarian leg from Budapest to Baja.

I traveled by bike from Budapest to Baja, from May 21st to May 24th. On Friday May 22nd, I stopped at the Paks Nuclear Power Plant to meet with representatives of Paks and a local Paks politician. Honestly, after biking 140 km in the rain, over two days, their genuine hospitality and patience was outstanding. In another post, I’ll dive into the history of Paks and my visit, because first it is important to connect with the Danube river and its emerging meaning for me in the energy system of the whole Eastern European region.

Budapest to Baja: Basic route I took on bike - but there are some exceptions.
Budapest to Baja: Basic route I took on bike – but there are some exceptions.

Biking down the Danube began as a separate personal goal. It merged with my idea for a book and a research project when I realized nuclear power plants were located along the Danube. I wanted a method to connect with the average citizen to understand their perspective on regional energy politics and technologies. What I learned by this four day bike trip is the Danube serves as an essential conduit for the region’s energy infrastructure and facilitates political economic aims for integration of the region. It is a silent player in regional integration, but one which I hope to highlight through my research.

Reflecting on my trip (in a dry room back in Budapest) the perspective, I gained by riding a bike along and through the countryside surrounding the Danube, connected me to the land and water. This connection is essential when we consider the energy resources and technologies.

The natural beauty and history along the channelized Danube is striking. Contrasting these with the most technologically advanced and dangerous energy technology humans have created is profound. It is also this nature that cools and enables the technology to function. The contrast with farms, vineyards, and Roman ruins provides the historical context to frame how humans existed without electricity to the means we now use to generate electricity.

The building of Paks also relied on the Danube to transport materials: creating a regional supply chain of nuclear power plant components. For example, the reactors were made in Czechoslovakia and transported on the Danube.In addition the turbines were made in Germany, while the steam generators are Hungarian made by Ganz. The use of the Danube and the sourcing of the parts underscores the effort the Soviet Union went to create a regional involvement of countries in building a nuclear power industry – they embedded nuclear power in the region through knowledge and commercial networks.

I made it to Paks
I made it to Paks

Importantly, the building of the nuclear industry was based around COMECON (Council for Mutual Economic Assistance). COMECON served an important role in integrating the national economies of Communist states with the Soviet Union. This offered an economic and political framework to build NPPs in Czechoslovakia, Romania and Bulgaria. Poland, after giving the go-ahead, later opted out. In all these countries similar physical integration of parts networks and sourcing was done. Rather than the technological components emanating from Russia (as we think today), the parts suppliers drew on COMECON countries. We can now view the Danube as facilitating this relationship and construction of NPPs.

Finally, it is important to reflect on the special view biking provides in connecting the Danube to energy infrastructure. Honestly, biking in the rain for over 160 km out of about 216 km wasn’t the most enjoyable (seriously, a little pity is earned). But I really gained a new perspective. From the bike I was able to reflect on and experience Hungary, which is dramatically different from what I (and most people) experience in Budapest. Hungary has four of the poorest regions out of 20 in the EU. Placing this poverty and the people within the broader energy debate enables a better contextualization of either justifying, or not, the pursuit of certain energy technologies and policies. I look forward over the next few months to provide this perspective more for Hungary and the region.

Some experimental videos made on the way

Hungary is a Russian Gas Fuelled Grasshopper Biting Ukraine

This post is also available on Natural Gas Europe. But with a more professional title.

Just as surely winter comes every year, so does the heating season. However, if the justification from Hungary’s TSO, FGSZ is to be believed, they need to stop gas shipments to Ukraine to prepare for this winter. The Hungarian Prime Minister, Viktor Orban appears to be the grasshopper in Aesop’s fable. The Grasshopper and Ant story is about a grasshopper that plays all summer while the ants work – in preparation for winter. Well, in the cartoon version, it only takes the fall leaves to be blowing for the grasshopper to get cold and regret that he didn’t work harder. In our version today, it is the Hungarian government who didn’t work hard enough in the summer. Although on a state radio news broadcast last Friday night, Orban was credited with ensuring the country has enough gas for the winter – the announcer just didn’t mention this was at the expense of Ukraine.

If we can piece together events, on September 25th it was Naftogaz of Ukraine that suddenly found out, through an email from Hungarian TSO FGSZ, the counterpart was halting deliveries to Ukraine. Media reports imply this was after pressure from Gazprom’s head Alexei Miller met with Orban. However, I do not agree. Hungary is on too good of terms to be threatened by Russia – unlike Poland which disrupted flow for a few days after Russian pressure in September.

The reason Russia refrains from threatening Hungary is the Hungarian Prime Minister is at the forefront in Europe arguing against sanctions over Russia’s involvement in Ukraine. In addition, Orban spearheaded and flew in secret to Russia to sign a deal with Putin to expand the existing nuclear power plant. A big win for Russia to get an EU member to sign up to Russian nuclear technology. Hungary has secured a Russian loan to build the plant, despite having no discussions with the Hungarian public or any feasibility studies. Orban is in charge of Hungary’s energy policy – and representing Russia in the EU. He also pushes to restrain Ukrainian western leanings. Pushing for great autonomy for ethnic Hungarians in Ukraine matches Orban’s nationalistic zeal and his regional agenda; autonomy for ethnic Russians also matches Putin’s agenda in Ukraine. Hungary turning off the taps to Ukraine benefits both Russia and Hungary, by keeping Kiev under pressure.

Technically speaking, Hungary halted deliveries to Ukraine to receive significant quantities of western bound Gazprom gas to be stored in Hungary. The history here is on September 16th Hungary’s Development Minister Miklós Seszták received Russian deputy Energy Minister Anatoly Yanovsky. They discussed the ability for Hungary to store gas for Russia, around 500 million cubic meters. This would take 15 – 20 days to transfer into Hungary’s underground storage. In a scenario that gas flows from Russia, traversing Ukraine, are cut off then Gazprom’s gas would be available to European consumers – and to Hungary. Importantly, it helps Hungary because as of September 27th, the storage capacity was at 62%. It is, however, no accident that Hungary’s capacity is this low at the onset of autumn.

In May 2014, at an event hosted by Central European University the issue of Hungary’s ill preparedness was discussed. A now former manager at Hungary’s state owned Hungarian Gas Storage company, stated that the biggest issue facing Hungary was the low reserves and the financing of gas purchases. The reserves then were at 25% capacity. In short, money to buy gas was inhibiting Hungary’s ability to prepare for the coming winter. Therefore, the current low gas levels of 60% should not be seen in isolation. The lack of gas is a result of the lack of stable state finances for the energy sector and Orban’s energy ‘war’ waged against foreign owned energy utilities. The energy sector is now showing the stresses of heavy state ownership. The flooding of gas into the Hungarian system is at best a result of poorly managed state energy assets, at its worst, it is a calculated move against Ukraine.

Since 2010 Orban has put energy assets under state ownership and driven utility prices lower. Now, the utility sector, and particular retail gas companies, are deeply in debt, they are incurring huge losses to pay for the Fidesz government’s more than 25 percent reduction in electricity and gas bills instituted a year ago. The Orban government is now laying out a plan to have ‘non-profit’ utilities. This is hard to see how the sector can shift from horrific losses to a non-profit-chartable-status without increasing consumer costs. The cost reduction and continued nationalization of assets are set to continue.

Mike and HU energy billboard
A billboard proclaiming Hungary winning the energy war against the foreign owned utilities. This is me biking around Lake Balaton – my field research.

The story of Hungary cutting off gas supplies should not be seen as Hungary bending to Russian pressure, rather Russia is helping out Hungary. Central to Orban’s grip on elections is ensuring Hungarian’s feel benefits. Whether this is in the form of retroactively changing mortgage loans between banks and their clients – forcing the banks to payback money in cash, or buying E.ON’s gas storage unit – for energy security reasons – Hungary needs to project power and responsibility over its own fate – and at the same time, deliver cash into the pockets of Hungarians. Russia can help finance and make life more comfortable for Hungarians. Ensuring the Hungarian energy system functions is now dependent on Russian short and long term investments into the country (gas and nuclear).

Hungary needs more gas in its storage in case there is an interruption between Russia and Ukraine. Russia is more than happy to store gas in Hungary, this deal does the following four things to benefit Russia and Hungary: 1) Russia stores gas in Hungary and not in its normal location in Ukraine, giving it European market access and depriving Ukraine of the chance to siphon any off; 2) Previously stored gas was ensured by E.ON Foldgaz Storage, but storage is now owned by the Hungarian state- which lacks the funds to buy large quantities of gas; 3) Hungary boosts its gas reserves with no money down, it only buys from Gazprom if there is an emergency and needs to use it; and 4) Hungary gives the elbow to Ukraine (like it has throughout the entire Ukraine-Russia conflict) but doesn’t inflict significant pain, just cuts off gas for a few weeks proclaiming its own security as more important. Nowhere in this analysis is the assumption that Russia threatened Hungary with a gas cut-off for supplying Ukraine with gas.

Hungary could have – and should have, bought sufficient amounts of gas over the summer. Instead, the country’s leadership were playing with grasshoppers. Back in the spring or early summer the Hungarian government could have struck the same storage deal with the Russians. Instead both Russia and Hungary have waited until the last minute to unroll their ‘technical’ response to Hungary’s low storage capacity. By Russia flooding Hungary’s gas system, Ukraine is deprived of valuable and necessary capacity to help mitigate their looming winter gas shortage. In a generous reading, Hungary is an unprepared neighbor. In a bad reading, Hungary is colluding with Russia to short Ukraine of gas. Let’s hope Hungary is a grasshopper.

Nothing says energy independence better than Russian nuclear

Energy independence, energy security and security of supply are all tightly connected concepts. Each is different and represents its own strand of knowledge and impacts. The regime of Orban that runs Hungary is dancing again with the Russians over their nuclear prowess. Back in 1999 I helped organize a conference on nuclear power in Hungary. The question then, as now, ‘Will Hungary choose Russia to build a new bloc for their nuclear power station?’ If the country is serious about energy independence, as the leadership claims, then they should not even be considering Russian nuclear power technology. But they are.

Energy is not a rational field, nor is Hungary run by rational people. This week the headline was to import Israeli gas to Hungary. It’s always good to play out the idea of independence but not actually building true independence from the Russians. The public statements by Hungary’s National Development Minister and Deputy Minister for Energy, supporting South Stream – while slamming the Nabucco consortium as high paid (private) consultants, at a recent conference on South Stream reflect the true thinking of the Government. These true feelings combined with the support of re-nationalization of the energy sector all plays into the cosy hands of Russia and the politicization of energy.

Dependency

We can begin to imagine Hungary will buy into another Russian nuclear plant and rely on Russian sourced gas being pumped through the Russian owned South Stream. Orban has stated his goal is to produce 70% of the country’s electricity from nuclear power. The country’s current reliance on Russian gas is near 80% (although this should drop slightly over time). Current electricity production is around 30% from gas. With South Stream, this dependency can be assumed to grow. Even with other diversification projects, the overall ‘normal’ business scenario is an extremely high dependency ratio. Under this scenario future domestic production from wind, solar or biomass is irrelevant, as it remains at niche production levels. Russian nuclear and Russian gas will continue to rule Hungary’s energy system.

The turn away from the EU and Western European energy companies and the embracement of Mother Russia for ‘energy security, security of supply and energy independence’ is no security at all. Once the Russian pipeline and nuclear bloc are built, Hungary will be embarking on another 50 years of dependency on Russia. By this time it will be a century of Russian dominance and dependency! Is this the ‘energy dependence’ talk that has the Orban regime on their high horse over German and French owned utilities?

Energy is politics: Hungary by accepting the subservient role in this relationship will be politically orientated towards Russia. We are only one step removed from the remark, ‘The groundwork is being laid for Hungary to join the Ukraine-Russia energy-economic alliance.’ If Hungary acceptance almost total domination of Russian in its energy supplies than it must toe the Russian line on economic, social and political matters. The EU is now being infiltrated by strong Russian influences on its Eastern borders. The choice is clear: lower gas prices for political and economic commitment to Russia vs. lost political control over domestic EU energy markets. While the EU sees its current satellites spiral back to Russia, the satellites and their revived European values and contribution to Europe are again being lost. Energy is the tip of the iceberg, it is necessary to look deeper and see what total Russian energy dependency means for Hungary, Eastern Europe and for the EU.

Nuclear Power in Europe – Debate results

The push for or against nuclear power has taken on a new dimension since the Fukushima nuclear accident in Japan earlier this year. The German government decision to go it alone, without nuclear power, is influencing the debate in Europe. These were some parameters of the debate last night at the Common Sense Society event that was held at the Ybl Palota in Budapest.

The organizers were kind enough to invite me to debate the merits of nuclear power in Europe. The discussion was moderated by András Deák (Center for EU Enlargement Studies), while Ada Ámon (Energiaklub) took the opposing side of why nuclear power is not needed in Europe. I argued for nuclear power and why it is central for reducing carbon emissions. However, it needs to be stated that I’m not an expert on nuclear power. But I feel strongly enough and informed enough, as I told the organizers, that I can explain why we need nuclear power to keep climate change in check. I believe I made a coherent case for it last night – or at least within the 7 minutes alloted and in the follow up questions. I thought I would share my bare bone notes here.

I'm clean and green.

My argument was based on the following:

Introduction:

1. Nuclear power is needed because of the failure of society and politicians to advance a more green agenda, with clean technology, earlier and fast enough.

2. Europe and the world need nuclear power for two reasons, because it admits zero greenhouse gases and it is a proven technology

My argument is based on T and T: Time and Technology.

  • We are almost out of Time
  • Green Technology needs to be widely deployed

However, there are strong time and technological limits that must be dealt with. The most pressing limit, is the rise in global temperatures due to CO2 emissions. This is particularly scary, when we consider the following study. There is now a greater than 50% chance that global temperatures will exceed 3°C increase by 2100. This is based on a study that says, pledges by countries are not sufficient to keep global temperature rises below the 2°C agreed in the Copenhagen Accord. Therefore TIME is of the essence.

Since time is of the essence we need to consider the evolutionary timeline of energy systems laid out by the United States Energy Secretary, Steven Chu. “Look how long it took to make the transition from wood to coal, coal to oil and gas: 50-60 years. We cannot make this transition in another 50 or 60 years. It will be too late for the climate” (Thompson 2010). Therefore, there is an urgency to transition to a new energy system. Only through a concerted effort, like in Germany, where there is a strong political and social agreement, that the high short-term price will be paid to transition to an energy system without nuclear power.

This transition in Germany is particularly important. (this point comes out of the discussion after the debate, but is very important). Germany is now ready to finance the shut-down of viable nuclear power plants. The ratepayers and the taxpayers of Germany will have to pay an extra amount to the owners of these facilities NOT to use them. This is a substantial development, as it indicates the importance of the transition. This is what occurred in the United States when they moved from a monopolistic to a ‘competitive’ electricity market. The sunk costs that had accrued under the monopolistic system, were taken over by states, in order to foster a more competitive electricity market, under the belief that electricity prices would be lowered. This is an important political and financial decision that does represent a systemic transformation in the dominant energy regime.

Time and Technology:

Homer can save the earth with his nuclear power

We need to consider the GLOBAL SCALE of climate change:

  • Downsides: Nuclear waste remains with us for 100,000 years. Finland is building a storage facility to last for 100,000 years.
  • Climate change caused by human activity, releasing CO2, remains with us for 100,000 years. If we don’t act within the next few years we will not be able to keep global temperatures low and even worse cataclysmic events will occur. How many people does severe weather kill each year – as a result of climate change? What will be the result of drought on global food supplies? (for a great discussion on this 100,000 year timeline listen to this podcast, with Curt Stager).

We also need to consider the LOCAL SCALE impact of nuclear power:

  • Fucushima has demonstrated the worst case scenarios of total meltdown of three reactors. The result has been a minimal environmental impact. No doubt very bad for the locals but on a global scale, much much less compared to the impact of global warming and the carbon and toxic emissions from coal power plants.
  • Third generation nuclear power is safer, less wasteful and is more efficient
  • Passive safety features. European regulators will require core catchers. A containment vessel around the main containment vessel.
  • Nuclear power is the outcome of the pursuit for a more sustainable and independent energy system from the 1960s and 1970s.

It is important to remember that energy systems are local. Local opinions and the governance systems matter – they choose the path for technology that will be producing zero carbon emissions by 2050. WE MUST DEVELOP MORE NON-CARBON BASED ENERGY SOURCES NOW. NUCLEAR GETS US TO WHERE WE NEED TO BE WITHIN THE TIMEFRAME. Not just because it is clean, but because it works.

The EU’s Second Strategic Energy Review, calls for decarbonizing Europe’s electricity system by 2050. How can we get there? Nuclear power is a product of past efforts to create a more sustainable and clean energy system. It was a concerted goal that had political, social and agreement with industry. We don’t have time to reinvent the wheel. Therefore, nuclear power is needed.

Conclusion:

The present energy system is based on a concerted government, economic and social regime. Focused over years, decades, to build a particular system. It is these factors that will shape whether we need to use nuclear power to meet our future energy demands. It would be great not to use nuclear power, but is that realistic? At least for the next 100 years? If gas is the present bridge fuel for another 20 or 30 years, then nuclear – and third generation nuclear is the bridge fuel for the next 60 to 100 years. The focus is on carbon reduction, AND QUICKLY. If we don’t do that then the planet for the next 100,000 years will be broadly impacted. Fukushima and Chernobyl show us the devastating localized impact of nuclear power accidents. We need to consider not just the developed economies of Europe, but the planet as a whole and the impact that our demand for energy has on the planet. If society, politicians and the economic sacrifices can build a zero carbon energy system without nuclear power – great, but so far outside of Germany there is not this widespread support. Six European countries overwhelming rely on nuclear power as their main source for power. Forcing them to develop a new energy system, along with other countries that use nuclear power too, will require a very long lead time. 50 or 60 years, we do not have that long. Nuclear power, because it is the product of a previous energy regime, can be used as a key power source to transition the planet to the next clean energy system.

 

 

 

    1. Time and Technology

  1. GLOBAL SCALE

  2. Downsides: Nuclear waste remains with us for 100,000 years. Finland building a storage facility to last for 100,000 years

  3. Climate change caused by human activity, releasing CO2, remains with us for 100,000 years. …………….If we don’t act within the next few years.. … How many people does severe weather kill each year – as a result of climate change?

LOCAL SCALE

  1. Fucushima has demonstrated the worst case scenarios of total meltdown of three reactors. The result has been a mininumal environmental impact. No doubt very bad for the locals but on a global scale, much much less compared to the impact of global warming and the carbon and toxic emissions from coal power plants.

    1. Third generation nuclear power is safer,less waste and is more efficient

    2. Passive safety features. European regulators core catcher

    3. Nuclear power is the outcome of the pursuit for a more sustainable and independent energy system.

    4. Why is nuclear power positioned so well for this transition?

  2. Energy systems are local. Local opinions and the governance systems matter – they choose the path for technology that will be producing zero carbon emissions by 2050. MUST DEVELOP NON-CARBON BASED ENERGY SOURCES NOW. NUCLEAR GETS US TO WHERE WE NEED TO BE WITHIN THE TIMEFRAME. Not just because it is clean, but because it works.

  3. EU’s Second Strategic Energy Review, calls for decarbonizing Europe’s electricity system by 2050. How can we get there? Nuclear power is a product of past efforts to create a more sustainable and clean energy system. It was a concerted goal that had political, social and agreement with industry. We don’t have time to reinvent the wheel.

After Fukushima: Assessing nuclear power projects in CEE/SEE

The critical situation at the Japanese Fukushima Daiichi nuclear power plant has already influenced European energy policies but may have limited impact in Central Eastern Europe. The Japanese nuclear crisis is in its early days, but is characterized by the attempt to prevent massive amounts of radiation being unleashed from damaged nuclear reactors, destabilized by two cataclysmic natural disasters. Whether a third man-made calamity, can be prevented remains to be seen. In Europe the political response was swift. Germany shut down seven nuclear power plants and is conducting a full scale review, while the European Commission is developing common EU nuclear standards to be issued in a Directive in the summer. In Central Eastern and Southeast Europe the disaster will have a limited impact on the already faltering efforts to build new nuclear power generation.

The social and political tensions over nuclear power center on the dangers of harnessing an inherently harmful energy source to produce ‘clean’ electricity. Despite these misgivings, the necessity for low carbon energy sources is critical. The projected ‘renaissance’ of nuclear power was seen as playing an important role that could contribute to producing sufficient quantities of power with zero carbon emissions. In Central Eastern and South East Europe, most countries have a long history with nuclear power. They now have plans to expand the amount of nuclear power, however these are faltering due to the significant upfront costs. Any reconsideration of expansion plans in this region due to events in Japan will be minimal.

Projects throughout the region can be seen to be far from being developed. Romania has long considered adding additional nuclear capacity to use for electricity exports and to replace aging coal fired generation. In January 2011, the consortium that was to build two nuclear reactor blocs in Romania fell apart; structuring the financing for the facility was a continuous problem. In March 2011, Bulgaria began to reexamine the cost and viability of a 2,000 MW nuclear power plant to be built by Russia’s Rosatom; disagreement over the price and financial conditions are the main points of contention. The Czech Republic and Poland both have plans to build new reactors but deadlines are continuously missed. Hungary remains committed to replacing its present nuclear capacity by 2030; the bidding process for building another bloc is to begin in 2013. Financing is expected to come from the private sector but Hungary is strongly politically committed to nuclear power and with a lack of natural resources for low carbon generation, the state may finance portions of this project. For all these projects, like in Hungary, it will have to be determined whether it is in the national strategic interest to build these plants as they will need to shoulder more of the financial risks to make the projects viable.

Pressure to actually build these plants in the CEE and SEE region may increase after 2013. This is when the EU’s Emissions Trading System will require power plants to purchase carbon allowances. The cost of producing electricity from coal will increase and be felt by consumers. As one utility executive stated in an interview (drawn from a recent research project by this author), “In Europe they push for dramatic and rapid CO2 targets, but no nuclear, no coal, whatever technological mix is left is costly and will not support European industry” (Energy Utility Executive 2009).  This is the crux of nuclear power: What are projected high costs today may be low in 2030 when carbon based energy will be substantially more expensive.

The safety issues of nuclear power will always surround the technology. Events in Japan, presented in dramatic helicopter water drops, demonstrate the failure of the technology. However, the countries in the CEE and SEE regions are geographically close to the last nuclear disaster of Chernobyl, the experience of nuclear failure is not new. While there has been considerable activity over the past week in Western Europe and at the EU level, suspending and reconsidering nuclear projects, none of these projects in the CEE and SEE region have received similar treatment. In fact Reuters reported on March 17, 2011, the Czech Republic’s Prime Minister, Petr Necas stating, “There is absolutely no reason to limit (Czech nuclear power plants). The government would have to be a bunch of fools to take such a step.” The region remains dedicated to nuclear power.

The current impediments to nuclear power projects in the region are numerous enough, new safety concerns may add an additional variable in decision making, but will not sink the projects. Over the long term, the necessity of having affordable base load generation will prompt the building, of what could be described as, ‘debt prone and day-late’ nuclear power plants. The present EU energy strategy is focused on stopping the much broader disaster of climate change. Nuclear power will remain a central pillar for CEE and SEE countries to reduce their carbon emissions.