Does the Czech Republic need new nuclear reactors?

By Ondrej Zicha

By Ondrej Zicha on 30/07/2018

The current Czech nuclear reactors will retire in 2035. As this means a loss of 2 000 MW of installed capacity, building and financing new nuclear reactors is currently being discussed.

The State Energy Policy defines that 25 to 33% of the electricity production should be nuclear by 2040. Once Dukovany stops producing, the nuclear share would decrease below 20%. The Czech government would like to build 1 or 2 new reactors to replace this capacity.

ČEZ (the nuclear plant operator and the biggest Czech energy company) already launched the tender for new reactors in the second nuclear power plant in Temelín in 2011. However, the tender was cancelled in 2014 as the electricity prices were too low. Could building the new reactors be feasible at the current electricity prices?

Anyhow, it’s clear that if these new reactors should be finished before 2035, construction should start as soon as possible.

However, the main question remains the same – who needs to pay for the investment? Despite significant price increases in last two years (electricity prices more than doubled since February 2016), building new reactors is still unprofitable, even if the construction would be finished within budget, (which wasn’t the case for similar projects in Europe recent years).

Both the Czech government and ČEZ are passing the buck for the financing to each other. One of the considerations a few months ago, was to divide ČEZ into 2 companies where the Czech government would be the sole shareholder of one of them.  This way the latter could push ČEZ to build the reactors. It’s not clear what the cost of such a decision would be but the proposal wasn’t accepted so far and the final decision on what the solution should be was again postponed. This time until autumn 2018.

This discussion of who pays the bill, makes clear that nuclear is far from a cheap source of power production. In the UK, power production giant EdF was only willing to invest in a new nuclear power plant after the commitment by the UK government to hand out large subsidies. It is clear now that the market prices paid for electricity are not sufficient and if a country wants new nuclear, the taxpayers or power consumers will be confronted with extra cost to cover for the state aid necessary to convince investors. It can be questioned whether nuclear is the best option for that public money. But for Czech Republic, we can even ask a more fundamental question:

Does Czech Republic really need new sources of electricity?

Czech Republic’s net export was 13 037 GWh in 2017. During the same year, the Dukovany power plant produced 11 861 GWh. If we have a look at previous years, net export and Dukovany’s production were mostly similar. This means that if Dukovany closes, Czech Republic will no longer be able to export but it would still have enough sources to cover its own consumption – unless it increases significantly.

But what if we face a similar situation as neighbouring Poland back in 2015? The country has enough domestic capacity as well but in case of exceptional circumstances, such as a drought or unforeseen outages, the short-term coverage of electricity demand is at risk. Back then, big Polish consumers had to decrease their consumption for a few days to avoid a blackout. Some excess supply capacity is therefore advisable.  The question is whether expensive nuclear is the best option for such back-up supply.

What alternatives are there to extra nuclear power in the Czech Republic?

Let’s look at coal first. Coal accounts for 50% of the Czech energy mix. However, the energy policy aims at decreasing this number in the next years, a trend widely spread across Europe, with the exception of Poland. More restrictive emission limits and the increasing price of CO2 allowances would probably further augment the cost of production from coal.

If we want to go against the main trend and further invest in coal, it can easily happen that production from coal becomes no longer profitable. We’d then have to catch up with other countries that will already have invested in other technologies far ahead of us.

Natural gas is the second alternative. Electricity production from gas increased by 40% in the last 5 years, which still only accounts for 8,5% of the energy mix. Production from gas is low emission and many European countries see gas as a very good alternative to coal and nuclear power. However, the Czech Republic already imports nearly 100% of its gas needs, and on top, the most of it comes from Russia. A further increase of energy dependency on Russia is not a good option from a geopolitical point of view and an increase of imports from Western Europe would require massive investments in gas infrastructure.

Renewable sources are the third alternative. However, the Czech Republic faces a few challenges. From a resource point of view, Czech Republic isn’t the best country for wind and solar, as there aren’t many areas where sunshine and/or wind are stable and strong enough. Therefore, critics are questioning the Czech Republic’s potential.

Additionally, renewable energy is not widely supported by the public. During the solar boom in 2010 (an effect of massive subsidies), solar energy increased from 0% to 2.5%. Unfortunately, there were many frauds to obtain subsidies. Any government that would like to invest in renewable sources again would probably risk a decrease of popularity.

However, these arguments against renewable energy are based on shortcomings of yesterday, which in the last years have been overcome by technological evolutions:

  • The cost of solar technology has continued to drop, bringing it below the so-called grid parity threshold. This means that in many countries now, including countries without sunshine, solar power produced on your own rooftop is cheaper than the electricity that you buy from the grid. Therefore, we see that the solar power production continues to expand, even without any subsidies. There is no reason why this evolution could not come to Czech Republic. And that means that a lot of extra MWh’s are going to hit the Czech grid anyhow, just because people invest in solar panels without any subsidies.
  • A similar decline in the cost of wind turbines can be noticed. This means that with small subsidies – definitely smaller than subsidies needed for nuclear – the wind energy production continues to expand.
  • More and more consumers are tapping into the potential of their flexible energy consumption. This means that in case of shortages of energy, it becomes more easy to reduce the demand, as happened in Poland in 2015, this is again a much cheaper option than investing in nuclear power plants.
  • The cost of battery technology is also dropping rapidly. In countries like Germany, Belgium, the Netherlands, Australia, US, we see the first investments in stand-alone battery stations. This week, for example, Tesla announced a successful trial for building a 250 MW battery station in South-Australia. If batteries continue to become both cheaper and more powerful, this would also boost the usage of electric cars. And many see a large potential for using those car’s batteries for balancing the grid. If the battery revolution that we currently see continues, many of the worries over intermittency of solar and wind power will become void.

If the Czech Government prefers a conventional source, new nuclear reactors seem to be the best solution from a strategic point of view. Especially in a country where the public nuclear support is among the biggest in Europe.

On the other hand, nuclear seems to be more and more a conservative and expensive choice of yesterday’s technology. A choice that could become absurd if the declining trend of the cost of renewable power and batteries continues. If abundant and cheap solar and wind MWh’s become available and they are backed up by batteries, there is no need for expensive nuclear.

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