The geopolitical and geo-economic context of the Belene project has changed in many respects, but at the same time, it has retained some permanent and stable features. Some of them stem from the link between the civilian and military nuclear programs of leading countries and from the aspirations of global military-political alliances to “keep an eye on” the development of nuclear energy, not only in respective member states, but also around the world under the nuclear non-proliferation regime. As in the past, the nuclear programs in the military and civilian fields operate in tandem, intertwined at R & D, manufacturing and operational levels.
In fact, civil nuclear power is a by-product of military nuclear programs – which are both natural spin-offs of the nuclear arms race, but also of a strong desire to raise additional funding for fundamental research in nuclear programs. That was true, at least until recently – as nuclear arms competition has encouraged the pursuit of strategic nuclear superiority both in weapons of mass destruction and in their means of delivery.
Modern nuclear power plant projects are no exception, but their geo-economic context has changed. On the one hand, the reduced post-Cold War nuclear confrontation has weakened the pressure on leading countries to invest in research and military nuclear programs. The US nuclear weapons program, for example, has been sharply reduced and nuclear tests have been suspended since 1991. Such self-restraint was observed by major nuclear powers.
A recent surge in the nuclear arms programs of Iran, North Korea, Turkey and other countries intent on developing their own nuclear weapons via indigenous fuel enrichment programs explains investments in nuclear power units, which are not based primarily on economic and financial logic.
On the other hand, the capital intensity of new breakthroughs in nuclear research has increased exponentially, a fact reflected in the perceived or hidden failures of a number of “promising” ventures. Examples include fast breeder reactors in the Russian Beloyarskaya NPP (BH-600), the SPX Rapid Reactor in France — closed in 1997 after operating for less than 10 years and being plagued by interruptions and far from optimal work levels — and various thorium-based reactors tested without much follow-up in the US, Russia, India, Germany, and Canada.
These new realities forced former Cold War enemies to share the costs and the risks both in space exploration and even in nuclear research. The latest proof is Bill Gates’s decision, together with the Chinese CNNC, to build for 2020 a Travelwave Reactor – TWRs, featuring more effecient use of fuel without enrichment or reprocessing.
To summarize, the global nuclear industry has remained without its main engine – the nuclear arms race. The countries that had to take on the role of global nuclear power locomotives are now less inclined to do so. Nuclear renaissance hopes that sparked at the beginning of the ‘00s quickly vanished. Developed countries cut their civil nuclear programs, opting instead to focus on lifespan extension of reactors.
The Fukushima disaster deepened the negative perception of nuclear power projects – too risky, too unpredictable and too expensive. In practical terms, it is impossible today to build a valid financial model for a nuclear project on a pure market basis, using project financing models and commercial loans. Safety requirements undergo regular upgrades, which add to project costs and delays. The tally is further boosted by higher costs for nuclear waste treatment and spent nuclear fuel storage, for plant decommissioning. Nuclear risk insurance premiums in Bulgaria are kept artificially low, well below Paris and Vienna Convention established benchmarks ($350 – 450 million per reactor) so as not to compromise NPP electricity price competitiveness.
Global nuclear energy majors, with the possible exception of the Chinese nuclear companies, are undergoing a rough ride as most are facing existential problems, seeking ways to remain afloat in a sea of troubles and seeking to diversify their activities in the renewable energy field. Attempts to position nuclear power as a “clean”, optimal choice and balancing RES partners are futile against the backdrop of proven competitive alternatives.
The Belene NPP project from this point of view could hardly feature significant differences in such a geopolitical and industrial context. Even a quick glance at the project’s place on the Russian Rosatom Corporation work list could trigger ample queries on the ties of its civilian nuclear program to the country’s military nuclear program. After 2007 Rosatom took full control of the Russian military nuclear complex.
Rosatom today is a fully self-sufficient and self-regulated entity – it issues all needed building and operations licenses, and it owns, builds and operates nuclear power plants in Russia and abroad, often enjoying official representation status at Russian embassies. Its military wing – the Nuclear Weapons Complex – covers both Rosatom’s military nuclear centers in Sarov and Snezhinsk and the “Mayak” enterprise in Ozersk (which produces weapons-grade plutonium), which is managed by Electrochimpribor), as well as other key centers of Russia’s nuclear weapons infrastructure. These companies, which have been subsidiaries of Rosatom since 2007, cover a wide range of activities – from design and mass production of nuclear bombs to seaborne nuclear reactors, providing maintenance and operational services throughout their life cycle.
Since the military and civilian parts of Rosatom are not fully separated and independently managed, it has been difficult to prove that payments for civilian projects do not end up as nuclear bombs in missiles targeting key infrastructure, even NPPs, abroad.
The physical protection of nuclear reactors is becoming a difficult-to-manage task that, beside the national security dimension in countries hosting them, directly reflects on the development and operational mode of nuclear power plants. Nuclear reactors sharply increase national security risks and vulnerability, as in the event of a military conflict, they become potential targets for military strikes.
Nuclear power plants’ defenses include protection against direct hits from civilian airplanes, but hardly against military strikes. They are not off-limits as targets in armed conflicts, even with use of nuclear weapons.
One needs not panic, but a critical review of physical defense systems is more than warranted, especially given gaps in the protection of the NPP Kozloduy. In feasibility studies and financial models for new nuclear power in Bulgaria, including the recent BASc report, there is no mention of adequate costs of items covering integrated defense systems against military strikes, which could easily escalate in damages amounting to many human lives and hundreds of millions and even billion of dollars. At present, the existing NPP is guarded by totally obsolete and outdated air-defense systems, which makes them easy targets.
Despite Bulgaria’s NATO membership, our allies are under no obligation and are unable to pre-empt a nuclear attack, not least because decisions on the construction and operation of nuclear reactors remain national responsibility without coordination with NATO or EU defense and crisis reaction plans. A strike on nuclear power plants is a highly speculative option. Nuclear reactors are not nuclear bombs, due to the substantial differences between civilian-use nuclear fuel and weapons-grade material. In defense planning, however, even a conventional attack on the reactors could trigger a greater than Chernobyl catastrophe, which could literally put Bulgaria on its knees due to the magnitude of the impact that could measure up and exceed the country’s gross domestic product. Any nuclear power plant, especially in small and medium-sized countries, such as Bulgaria, becomes a strategic security “black hole,” potentially ending up in an Armageddon.
The risk of a military, cyber or terror attack should be factored in the national security system as part of the project planning. However, the costs associated with managing these risks are generally underestimated, both regarding direct project incurred costs and such accounted for by the national and regional defense budgets. The difference between protection of critical infrastructure in principle, on one side, and nuclear reactors on the other, is stark and implies totally different scales of vulnerability. Only hydropower plants and dams could come at a distant second. While the country can survive a hit or a major accident at any infrastructure site, strikes against nuclear reactors could be potentially fatal to its economy.
A more succinct look into the cyber and anti-terror security budgets in nuclear reactor projects, at development and operational phase, could add hundreds of millions of euros in precautionary measures, without any certainty of the end result — especially against the backdrop of hacker attacks against key energy infrastructure facilities and institutions in Ukraine, Ireland, the United States, Turkey, Switzerland, Bulgaria and other countries.
The nuclear risk insurance policy of the NPP in Bulgaria is a far cry from the European industrial standards for nuclear risk insurance, even in Central and Eastern Europe. The level of insurance premium and coverage is 3 to 10 times lower that of analogous EU benchmarks – Germany, France, the Czech Republic, etc. Lower insurance and physical protections costs, as well as lower outlays for decommissioning, artificially lower nuclear energy prices, boosting the appeal and profitability of nuclear power projects at the expense of consumers and taxpayers. The state budget is where all the project deficits end up.
These aspects are not taken into account at all in the BAS report.
Following the implosion of the European nuclear energy market after France and Germany reversed their nuclear programs and halted new projects, Rosatom turned to Africa and Latin America, trying to market nuclear energy as a solution to energy poverty. For a number of energy-poor countries, the BOOT plus finance scheme proposed by Rosatom was tempting as they did not have to provide huge upfront money. On their own they could not afford a nuclear power plant. Due to the funding option, Rosatom won most of its backlog contracts – 34 reactors worth $137 billion, expecting to recover investments through guaranteed power purchase contracts and electricity prices.
Problems with such a scheme occur when the funding source back home – the state budget and the National Welfare Fund – is depleted and banks refuse to step in. This has led to an immediate chain effect as most Rosatom projects abroad experience funding shortages and delays. New contracts are postponed.
To add to the problems of global nuclear energy, the costs of alternatives energy sources competing with nuclear power continue to fall. Coal is slow to exit and in good shape regardless of gloom and doom talk.
The difference between the mean levelized cost of energy (LCOE) in US Dollars per MWh for different power generation sources on utility scale, as given in the chart above by one of the industry’s benchmark analytical centers – Lazard – considered in historical perspective, further attests the case for nuclear energy’s lack of long-term competitiveness. Although this angle on LCOE is not the sole indicator, as the total system costs for each generation source should also be factored in, the picture is clear – nuclear energy is not a long-term winner in the race for the consumer’s dollar, and betting on it for new investment in power units is a premeditated loss.
Gas prices remain low, which has caused early project termination of at least three new nuclear power projects in the US over the last 5 years.
Technological advances in the non-nuclear field dwarf developments in the nuclear field, which implies a long-term lack of competitiveness of nuclear energy compared to alternatives on cost and risk base.
Consumption structure has changed radically in recent years as individual and industrial consumers enjoy versatile supply and self-sufficiency options, which limit the room for ‘’central planning” of supply and demand.
Demand for balancing power is growing, while huge NPPs need balancing on their own, further depriving the system of flexibility.
Geopolitical risks in development and operational phases are impossible to calculate, and even harder to mitigate, exemplified in the recent tension between the West and Russia. For Bulgaria’s NPP plans, political risk mitigation in the current international environment presents the greatest challenge, yet the risk is not recognized at project level, as evident in the recent summary on the BAS report on Belene.
Whenever tensions between Russia and the EU and the United States arise – as in the case of recent US and EU sanctions – there is an imminent cost and time impact as uncertainty piles up with nuclear exchange with Russia immediately falling under direct monitoring. In most cases, security issues top the agenda, with risk assessment and vulnerability checks (given that nuclear power plants are “sleeping bombs”) following suit.
Although Rosatom is technically not on the sanctions list, safety and control systems suppliers in NPPs could come under scrutiny, leading to delays and higher costs. Until May 27, 2011, Rosatom had been operating under restrictions in the United States, needing explicit permission from the US Department of Commerce. Today all US-Russia nuclear cooperation is practically frozen.
Collateral effects following recent crises in West-Russia relations can easily spill over and have a potentially harmful impact on Rosatom’s nuclear power projects in the EU. This could come through shortage of capital or lack of access and delays in the delivery of critical sensitive to embargo or review process items, or it could simply add to bureaucratic impasse or to strained relations with third parties to sanctioned nuclear programs (Iran).