EKIP– Expert Club for Economics and Politics A Different Opinion
A ghost has been haunting the Bulgarian political space lately. The ghost of the supposedly suspended Belene NPP project. Although it was suspended in 2012, as anyone who has followed the developments in recent months knows, some of the equipment needed for the construction of the new nuclear power plant is already on its way to Bulgaria, and the Bulgarian Academy of Sciences was even tasked with analyzing the need for the plant.
The reason why the Belene NPP is being discussed again as a potential project is the fact that last year NEK was ordered to pay around 600 million euros for equipment ordered by the Russian company Atomstroyexport for the construction of the future nuclear power plant back in 2008. The plans for the implementation of the project were later suspended and the first GERB government decided not to undertake the construction of the Belene NPP...or at least it gave such indications at the time. After the arbitration decision last year, however, the situation began to change - drastically. The Bulgarian Socialist Party renewed its demands for the project to be renewed, and we even heard talk from the now former GERB cabinet about attracting potential investors and building the Belene NPP on a "market basis". Prime Minister Borisov himself spoke in support of the construction of the plant.
The construction of the Belene NPP on a completely market basis is a fantasy
First, we must be aware that the implementation of a project like the Belene NPP on a fully market basis is an illusion. The implementation of a large-scale nuclear energy project, anywhere, on a fully market basis is almost impossible these days for technological and economic reasons. Private energy investors usually avoid nuclear projects because the construction of a nuclear power plant requires an initial investment many times higher than that for the construction of a thermal (or other type of) power plant and of course takes much longer to complete, which leads to the relevant state authorities deciding to "support" such investments in one way or another.
An interesting fact is that in the decades since the emergence of nuclear energy as an energy source, the costs of building nuclear power plants have not fallen, but have even risen. Initial estimates of the final costs of building and maintaining nuclear power plants very often significantly underestimate the real ones. Such errors in estimates have much worse financial consequences for investors in nuclear than in alternative power plants, due to the much higher initial investment required for their construction. Because of these factors, which make investments in nuclear energy very risky for private investors, whether through subsidies or tax incentives, nuclear energy everywhere in the world enjoys strong state support in one way or another.
The cost to the Bulgarian taxpayer will be astronomical.
Where there is strong state intervention, there is also corruption, poor-quality investments and misuse of taxpayers' money - we are all too familiar with such practices in Bulgaria. But even if we assume the complete absence of corruption and the waste of financial resources, the costs of the project remain colossal. All calculations indicate that the construction of the Belene NPP alone will cost over 20 billion leva (according to IME calculations from 2011, the project would cost 11.66 billion euros), and this does not include the future costs of operating the plant. This money will most likely have to be taken out of the pocket of the Bulgarian taxpayer, who has already practically paid over 1 billion leva in the form of "state aid" to NEK for the purchase of the equipment, the payment for which was the subject of the arbitration decision.
Even if a private investor is found for Belene, taxpayers will still bear the bulk of the financial burden, because by law, replacement capacities and the infrastructure necessary for the construction of a nuclear power plant can de facto only be built by the state.
In any case, restarting the Belene NPP project would certainly have a very negative effect on the state of the state treasury, which of course will come out through the noses of taxpayers, and not the politicians who lobby for the implementation of the project. But even abstracting from the enormous cost of the project and the way in which it will be financed, the key question we must ask ourselves is what is the need for the Belene NPP in the first place? Does the Bulgarian energy market need the construction of another nuclear power plant? The answer is a categorical "no".
Besides, the project is completely unnecessary.
A few days ago, the European Commission published a report on the dynamics of electricity consumption in the EU member states from 1990 to 2015. Over these 25 years, electricity consumption in Bulgaria has decreased by a total of 33%, and over the period 2005-2015, by 6.5%. According to a forecast by the Bulgarian Industrial Chamber from the end of 2014, this trend of decreasing electricity consumption will persist until at least 2025.
In this context, it is a complete mystery why anyone would even consider building a new nuclear power plant. With declining consumption, the construction of Belene NPP would most likely lead to the bankruptcy of NEK in the long term. The energy that Belene NPP would produce simply would not be bought by anyone at a price high enough to compensate for the costs of the initial investment and maintenance of the plant.
And even if we assume that additional electricity production will be needed at some point, why should this need be met precisely through the construction of new nuclear power plants, which is one of the most expensive possible options? There are two thermal power plants in Bulgaria, one in Ruse and one in Varna, which are currently not operating, but could be.
The reason they are not functioning is that they operate on coal, and according to EU policy, the use of coal for generating electricity should be gradually minimized and switched to "cleaner" energy sources for the environment. This in itself is not an obstacle, however, because the two power plants can be converted to operate on gas, which is a "greener" source of energy than coal. This can happen at a price tens of times lower than the price of the Belene NPP - within a few hundred million leva.
Why then is it being seriously discussed?
In short, the Belene NPP project is not only too expensive, but also too redundant for the needs of the Bulgarian electricity market, and even if it were not unnecessary, it is not as if there are not much cheaper alternatives to meet such needs. In the absence of any serious arguments in support of the project, we cannot help but reach Prime Minister Borissov's initial conclusion from 2010 that the Belene NPP is nothing but "the highest form of corruption."
But whether we like it or not, this project has quietly become one of the main bets in the upcoming parliamentary elections in March. Given its scale, the issue of the future of Belene may actually turn out to be the most important bet in these elections, even though the focus of the parties' election programs is not on it.
The danger lies in the fact that both parties with the best chance of winning the elections, GERB and BSP, have recently openly supported the construction of the Belene NPP. The only disagreement is the level of state participation in the implementation of the project – a detail on which a compromise will most likely be reached in favor of BSP, which insists on high state participation, in view of its improved electoral position and the deterioration of GERB’s.
In short, if the BSP wins the elections – the construction of the Belene NPP as a state project is certain. If GERB wins the elections – the construction of the Belene NPP as a state project is likely. And this does not bode well for the Bulgarian taxpayer.
