Single Lithuanian nuclear power plant desperately seeking investor

«За будущее без атома» - демонстрация против трех АЭС в Вильнюсе, 26 апреля 2010 г.

Publish date: January 30, 2011

Written by: Tatyana Novikova

MINSK/ST.PETERSBURG – The media in the small Baltic state of Lithuania are busy discussing the recent fiasco with a tender that failed to home in on any investor for a nuclear power plant (NPP) project Lithuania hopes will replace its shutdown Ignalina. Nuclear proponents attack Russia and environmentalists insist Lithuania will be better off without nuclear energy. Meanwhile, tensions are rising over the three developing NPP projects in the region – Lithuania’s own, Russia’s Baltic, and Belarus’s Ostrovets sites. The neighbours are clueless about where to sell future output and keep passing the blame around.

Vilnius closes Ignalina, yet wants to remain a nuclear state

Lithuania’s old Ignalina NPP, a Soviet-built installation with two RBMK-1500 reactors, was officially shut down on December 31, 2009, when its second reactor was taken offline. Shutting down Ignalina had been one of the conditions of the small Baltic nation’s ascension to the European Union.

But even before the closure, Vilnius had begun making plans to replace Ignalina with a new NPP. Throughout 2009, Lithuania was seen pursuing negotiations over a new nuclear power plant project in Visaginas, where Ignalina is based, with Lithuanian Prime Minister Andrius Kubilius indicating in June that year that a new nuclear reactor serving all three Baltic states – Latvia, Lithuania, and Estonia – as well as Poland, could be completed by 2018.

That May, AFP reported that Canada was pitching a CANDU reactor to Lithuania during the Canadian trade ministry’s promotional tour in the region. By then Lithuania’s government had already talked with such reactor manufacturers as the French Areva, Spanish Endesa, General Electric-Hitachi and Westinghouse from the US, the British Nukem, and Japan’s Mitsubishi Heavy Industries.

And in December 2009, after a number of delays and hitches, Lithuania finally moved to announce a tender on a concession for the construction, management, development, and design of a new NPP.
A year passed and the tender turned out to be a flop. Early last December, the last company to announce it was quitting the race was South Korea’s Korea Electric Power Corp. (Kepco). Kepco withdrew its bid two weeks after it was asked to present a final offer without ever stating the reason for doing so. The other of the two bids, which had been supposed to be entered by the November 10, 2010 deadline, did not meet the tender’s requirements.

Premier Kubilius tried hopelessly to salvage the situation, even appealing to South Korea’s President Lee Myung-bak to lend his support to Kepco’s participation in the project.

Undispirited by a failed tender, Lithuania sets about arranging direct negotiations

These disappointing developments, however, did not detract from the optimism shown by proponents of nuclear energy in Lithuania. They seem to believe a new investor will be found soon.

Lithuania’s Vice Minister of Energy Romas Svedas is reported to have announced that, lest no time would be wasted, new, direct negotiations with potential investors would start already in January this year.

Rokas Zilinskas, Chairman of the Nuclear Energy Commission of the Lithuanian parliament, the Seimas, tells Bellona that after the concessionary commission announced it had failed to find a strategic investor for a new Visaginas NPP within the determined time frame, the process entered a different phase, in correspondence with relevant Lithuanian legislation.

“This is direct negotiations with potential strategic investors, including those that participated in the tender and expressed an interest in the project. This process has already started and is expected to be completed within the next few months,” Zilinskas told Bellona.

Moscow twisting investors’ arms?

Earlier, however, Zilinskas was not so confident when he distributed a press release, cited in a December 3 report by the Russian news agency Regnum, in which he blamed Russia for “scaring South Korea off.”

Russia is building its own nuclear power plant, the Baltic NPP, in Russia’s westernmost enclave of Kaliningrad Region, which shares a border with Lithuania. The two projects are in direct competition and Moscow and Vilnius will have to fight for customers in Europe to sell energy to.

As it happens, Russian President Dmitry Medvedev was on a visit to Seoul in early November, which included signing a number of contracts with the Koreans regarding supplies of gas and South Korea’s participation in a liquefied natural gas plant project in the Far East.

“This demarche by the Koreans is, of course, a sad development, but it was not a complete surprise for me. I had certain information at my disposal that Russia had scared away all other potential investors of the Lithuanian project, using promises and blackmail,” Zilinskas said in his press release. “Apparently, the same happened with Kepco.”

He also spoke of receiving, while at an energy conference in Kaliningrad, signals from representatives of the Russian electric power trader Inter RAO UES that the Koreans were reportedly in negotiations with the company and were looking for “polite” ways to beg out of the talks with Lithuania.

Inter RAO UES, the Russian power generation and electricity trading company that supplies energy both to domestic and foreign markets, is majority-owned by the Russian State Nuclear Corporation Rosatom and the national nuclear power plant operator Rosenergoatom.

According to Zilinskas, though, Lithuania is not throwing in the towel and is even securing European support to increase the investment appeal of its project.

“The European Commission is ready to provide its backing in the construction of the new Lithuanian NPP, including financial support,” Zilinskas said.

Will investors believe in the new NPP’s rosy financial prospects?

Just a little over a year ago, Lithuania’s Energy Minister Arvydas Sekmokas told journalists at a press conference that the new NPP project in Visaginas was viewed as a purely commercial endeavour. The amount of potential costs would range between EUR 3 billion and EUR 5 billion, depending on the design.

“This is, without a doubt, a commercial project. No one will invest considerable funds without understanding how this investment will pay off,” Litovsky Kuriyer (The Lithuanian Courier) quoted Sekmokas as saying then. “This is why we are looking for a private partner, and the state will contribute its part, but for the most part, this is a private commercial project, and it has to produce certain profit.”

He also said the Lithuanian state would have to create a transparent, clear regulatory climate to ensure it would attract investors.

But how likely are investors to believe in future commercial success of the new NPP when the very idea of nuclear power plants bringing any returns on investments has never been proven in practical experience? Experts point out that nuclear energy in such major nuclear nations as the US, Russia, or France, has historically only existed at the expense of direct and indirect subsidies from the state.

The Lithuanian environmentalist Linas Vainius, from the ecological organisation Atgaja – which conducted an independent evaluation of the future Lithuanian NPP project – told Bellona that the project does not take account of a number of certain fundamental factors that will necessarily figure in the site’s eventual costs, thus undermining the project’s official economic feasibility assessment.

“There is no information as to how much the project costs, but we know already now – and it is demonstrated by the experience of countries engaged in NPP construction – that the costs will be going up as the implementation progresses,” Vainius told Bellona.

He says project developers failed to account for issues arising with the management of new and accumulated nuclear and radioactive waste and those of building and maintaining a nuclear waste storage facility.

“New nuclear waste will be generated, added to the old waste from [Ignalina NPP]. The authorities are not solving this problem, and they have no plan regarding waste management – just a dream to return the waste to Russia,” Vainius said.

Another, political – and commercial, as well – argument punching holes in Lithuania’s economic feasibility assessment of its future project is the imminent competition threat emerging from rival projects in Russia and Belarus. While Russia is developing its Baltic NPP in Kaliningrad, Belarus is dead set on building, whatever it might cost, a nuclear power plant in Ostrovets in Grodno Region, close to the Lithuanian border.

Furthermore, Belarus can only build its own site with the help of Russian money and expertise and has recently secured Moscow’s backing in the Ostrovets project. Russia will, in return, own 50 percent in the future plant and is likely to offer supplies of excess energy output on the European market.

It may not be for nothing that the Lithuanian energy minister underscored at his December 2009 press conference that the new plant would be operating in market conditions:

 “We, as the state, cannot guarantee any profit, and we are not giving any guarantees,” Sekmokas then said.

A rash decision that has safe alternatives: The doubters…

Both environmentalists and liberals in Lithuania believe the government’s decision to build a new nuclear power plant was hasty and poorly thought through. Opinions vary on whether Lithuania needs to re-commission Visaginas with new reactors, as a range of economic, political, and technological considerations all factor in, but experts mostly agree there are safer paths to Lithuania’s primary goal of energy security.

The Russian publication Rosbalt, citing Lithuania’s Lietuvos rytas, says the Lithuanian Liberal Movement, Kubilius and Sekmokas’s partners in the governing coalition, “began both to express open doubts that Lithuania needs a new NPP and speak harshly against the idea. They believe huge amounts of money will be spent in vain, while real benefits from the new NPP and the need to have it remain dubious.”

These were the objections Lithuanian liberals voiced last October when the government presented the country’s National Energy Strategy, which included the NPP project.

“I am a supporter of the new nuclear power plant. But I am far from being among its unconditional enthusiasts,” Rosbalt quoted the Lithuanian Minister of Transport and Communications, Eligijus Masiulis, as saying. “Besides, there are doubts and sceptical opinions in the party and the coalition. It’s still unclear how the project’s capital will be formed, how the partners will be chosen.”

Scientists and energy experts share the politicians’ concerns. Jurgis Vilemas from the Lithuanian Energy Institute told the website Geopolitica.Lt, maintained by the Lithuanian public organisation Centre for Geopolitical Studies, that by 2015 Lithuania was expected to produce 982 megawatts’ worth of additional capacities in excess of its internal demand.
Furthermore, the commissioning of the Estlink energy bridge – a submarine cable from Estonia to Finland, the only major access route to the Nordic grid for the former Soviet Baltic republics, whose outdated USSR-built power distribution systems are an impediment to the nations’ full integration into the synchronous grid of Continental Europe – and NordBalt power lines that connect Lithuania with Sweden, as well as the Lithuania-Poland 1,000-megawatt power link that goes from Lithuania’s Kruonis through Alytus to Poland’s Elk, will give Lithuania opportunities to buy power from other suppliers. Vilemas plainly says that Lithuania does not need to build a nuclear power plant.  

The financial analyst Rimantas Rudzkis told Radio Svoboda last December that in any case, the new NPP project cannot rely on unsubstantiated claims that Lithuania is to see a drastic rise in energy demand in the near future.

“Our population is diminishing, our economic structure is changing: In the future, we will base it more on exporting services, rather than goods […],” Rudzkis said. “Our big production plants, it’s quite likely that there will be none in some ten to fifteen years.”

He also believes that while uranium prices are going up – and by extension, costs of producing nuclear power – the answer may be found in alternative energy sources, such as wind power generators, or, for example, the new combined-cycle unit to be built with European funding at the fossil-fuel-based thermal power plant in Elektrenai. In the end, the anticipated competition with Belarus’s Ostrovets or Russia’s Baltic NPP may not even be an issue.

 “We may simply not have the demand [for power from a new NPP of our own…]. We may end up in a situation where we won’t know what to do with the energy. […] Besides, if [Russia’s] Kaliningrad NPP is completed by 2016, and it apparently will be, we will have a resource of quite inexpensive power nearby: We have our own power accumulating station, which means we will be able to buy cheap nuclear energy at night and use it in the daytime,” Rudzkis said.

…and the believers

Others use rather extravagant arguments to justify the need for a new nuclear power plant – and disagree with demographic and industry forecasts. The economist and Seimas member Kestutis Dauksys told Radio Svoboda in the same December broadcast that Lithuania needs the plant as it will – if only partly – ensure its energy independence and certain influence on the market.

“If it happens so that most cars in the future will be driven by electric engines, we will need two or three times as much energy. Plus, our industry will be growing too. […] Lithuania can pull off such a project […] I think there will be enough room for all – Belarus, Kaliningrad, Lithuania. Power demand will be growing while production capacities that are now based on coal and schist will be phased out, because they are environmentally dirty. Something will have to replace them,” Dauksys said.

According to Vainius, it is exactly the ecological risks – along with economic ones – that Lithuanian NPP project developers turned a blind eye on as they prepared an environmental impact assessment of the future plant. The assessment report downplays accident risks, does not consider any non-nuclear alternatives, and provides for no mechanisms to handle the resulting radioactive waste and spent nuclear fuel, among other safety aspects, he told Bellona.

Renewable energy, energy saving and efficiency plans, and energy bridge projects with Sweden and Poland are the ways to go, Vainius says – both for diversification and energy security. But renewable energy is getting little attention in Lithuania or is hindered by implacable bureaucracy.

“If the same energy that Lithuania is using to push its way through to a nuclear power plant were applied to finding the right solutions, those solutions would be found,” Vainius said to Bellona.
“For that, a political will is needed and real actions to implement that will.”

Thwarting Moscow’s come-ons

However, with or without the Lithuanian NPP, the situation in the region remains complicated, with Russia, Belarus, Poland, Lithuania – and Latvia, which, like Estonia and Lithuania, is one of the former Soviet Baltic republics – all embroiled in messy political and economic squabbles. A certain tinge is added to the overall colour by the three Baltic countries’ strained relations with Moscow – a vestige of the bitter Soviet history that began with the USSR’s annexation of that region in the 1940s.

The Latvian publication Ves.Lv, deploring a lack of accord and due brotherly loyalty between former states of Soviet influence, rehashes a story stemming from 2006 and involving the failing project of a new Lithuanian NPP which Russia allegedly has been using as a tool in promoting its own nuclear construction in Kaliningrad.

In 2006, the mid-January story by Ves.Lv says, Latvian, Lithuanian, and Estonian premiers signed a memorandum on equal participation in Lithuanian NPP construction, with approximate costs of 1.4 billion to 2.1 billion in Latvian lats ($2.7 billion to $4 billion). Poland was later engaged as well and plans were discussed to give Vilnius a 34 percent shareholding in the future plant, with 22 percent kept by each of the other participants.

In 2008, Ves.Lv says, the Lithuanians founded a company of their own to build the plant. A year later, however, Lithuania itself declared the creation of the company illegal. A variety of contentious issues, meanwhile, kept sabotaging Lithuania and Poland’s cooperation.

But in the five years that politicians in the Baltics and Poland have been incapable of coming to an agreement about the Lithuanian NPP, Russia has made the necessary steps to begin construction of its own plant in Kaliningrad. Lithuania is being essentially pushed out of the market niche, Ves.Lv laments.

The publication claims the Kremlin is advancing its own project at the highest levels and, arguing that there is now little hope for the Lithuanian NPP project to take off, has been propositioning to Latvia, Lithuania, and Poland to come to Kaliningrad as future customers and investors with 8 to 12 percent of shares. Latvia has refused out of allegiance to Lithuania – and so will reportedly Estonia, if it gets a similar offer: Agreeing to Moscow’s part arm-twisting, part courtship would go contrary to the very concept of energy independence from Russia, a core political and economic sentiment shared widely in the Baltics.

It looks as if the uncertainties that have sprung up since last year around the future sale of energy from the three NPPs planned in the region are the kind of intricate issues that should have been taken care of at the stage of economic planning, not after the decisions to build the costly NPPs were made. Judging by the heated passions, Vilnius, Minsk, and Moscow first decided to go ahead with construction, leaving the financial and energy-supply thinking for later.

At the International Atomic Energy Agency (IAEA) round table “Regional Nuclear Energy Projects,” held in Vilnius on June 16, 2010, Lithuanian representatives told envoys from Belarus and Russia that Lithuania would not buy power from their nuclear power plants. This was later reiterated by Lithuania’s Minister of Foreign Affairs Audronius Azubalis.

Lithuania’s complaint

Then, on January 11, 2011 in Vienna, Azubalis brought Lithuania’s plight to IAEA Director General Yukiya Amano, complaining of both the construction of an NPP in Russia’s Kaliningrad Region and the one of Ostrovets NPP in Belarus.

According to the Lithuanian Foreign Ministry’s press service, Azubalis said Lithuania was concerned by the planned construction in Kaliningrad as Russia, Azubalis claimed, had moved ahead and started building works at the chosen site without first coordinating its decision with neighbouring nations and securing their approval of the Russian state’s official environmental impact report on the project. Russia thus went against its obligations as per international environmental agreements, Azubalis said.

As regards the Belarusian project, Azubalis told Amano that Lithuania was especially concerned by Minsk choosing the site in Ostrovets, which is located less than 50 kilometres away from the Lithuanian capital. In case of a serious accident in Ostrovets, Lithuania has repeatedly said in official statements, it would be forced to evacuate all state and government institutions from Vilnius.

Furthermore, as both experts from Lithuania and other countries potentially affected by the plant’s future operation have said, the official Belarusian environmental impact report on Ostrovets significantly underrates possible ecological risks associated with the plant’s normal-mode operation or accidents. The criteria used by Belarus in selecting the site, said the minister, had not been explained to Lithuania, nor had the potential harmful impact on the Neris – a river that Lithuania and Belarus share and that Ostrovets NPP will have to use it to collect water for its reactor cooling systems – been sufficiently analysed, just like potential detrimental effects on population health.

In fact, Lithuania has forwarded an official note to the Ministry of Foreign Affairs of Belarus, protesting both the construction in Ostrovets and Belarusian officials’ claims that Vilnius ostensibly removed all prior objections. Azubalis said Lithuania was appealing to Nordic countries as well for help in dealing with the situation.

Belarus’s counter-complaint

For its part, Belarus is none the happier about Lithuania’s own NPP project. The new NPP, just like its predecessor Ignalina, would be built in the same town of Visaginas, if only at a different site than the old station. As such, it will be located near the Lithuanian-Belarusian border and, like Ignalina, will draw cooling water from Lake Drisviaty (Druksiai, in Lithuanian), which, like the Neris, is shared by the two countries.  

Environmentally, the problem now seems to be acquiring new, and more ominous, dimensions, since all the ecological woes that old Soviet-built Ignalina brought about and that still remain unsolved will now be compounded with new issues brought by the new nuclear infrastructure. This concerns spent nuclear fuel and radioactive waste, “sanctioned” and accidental radioactive discharges, potential contamination of nearby water bodies, and other risks. Furthermore, the new infrastructure is either present or planned to be built in the area of Braslav Lakes, an erstwhile ecologically pristine recreational parts beloved by the Belarusians.

During a public hearing in Braslav, in Belarus, held in 2008 to discuss the environmental impact report presented by Lithuania for its new NPP, both local authorities and residents protested vigorously against the project. Belarusian specialists, too, voiced their well-founded objections to the document. Belarus’s Ministry of Environment now says all these grievances remained unanswered – a mirror claim to the one made by Lithuania against Belarus’s own nuclear plans.

Alexander Andreyev, head of the Belarusian Environment Ministry’s department for state ecological project assessments, insists that Lithuania, as it asserts its adherence to the Espoo Convention – the UN’s Economic Commission for Europe’s Convention on Environmental Impact Assessment in a Transboundary Context, to which both Lithuania and Belarus are signatories – and blames Belarus for violations of the convention’s provisions, itself goes against its obligations.

“Part of the sanitary protective zone of the new Lithuanian NPP will touch on the Belarusian territory, and the plant will be making significant harmful impact on at least this part of our territory. We have made the unacceptability of this [situation] known repeatedly to the Lithuanian side, and have sent our written objections as part of consultations held as per the Espoo [Convention]. But we have not seen any response to them,” Andreyev told Bellona in an email correspondence.

Belarus’s argument is not without holes. While Belarus fears environmental detriment from the Lithuanian NPP, which is likely to use any reactor design but Russian, it claims its Ostrovets NPP will not be in any way environmentally harmful – even though the design it has chosen is an experimental model developed by Russia, but never yet tested in practical operation.

Similarly, as it ignores the potential harm that its own Ostrovets project may bring to the river Neris, Belarus objects to the future use by the Lithuanian plant of water from Lake Drisviaty/ Druksiai for cooling purposes. According to Belarusian laws, water in the lake may not be artificially increased by more than five degrees Celsius compared to normal background values.

“We insist that the values taken for normal background levels be those that existed before Ignalina was built. The Lithuanians are not in agreement about that,” Andreyev told Bellona. “We also insist that in addition to the [environmental impact assessment] of the new Lithuanian NPP, we also see one on its [spent nuclear fuel] storage facility and all other sites comprising its infrastructure. But these [environmental impact assessments] have not yet been made available to us.”

But Lithuania already completed its consultation process with Belarus as required by Espoo, and already sent Minsk its final decision over a year ago. Belarus, according to Andreyev, intends to turn to the Espoo Convention’s Implementation Committee with a complaint over Lithuania’s actions.

The vicious Baltic nuclear circle: Is there an exit?

The messy nuclear brawl involving Moscow, Minsk, and Vilnius is fast picking up steam. Experts do not see that it could get resolved in favour of one nuclear power plant or another any time soon – negotiations between the three countries show little hope for an amicable solution. Both ecologists and scientists agree the only way out of the current impasse is abandoning all three projects altogether and settling on a non-nuclear development scenario.

Last year, environmentalists from all the three states – Belarus’s Ecodom (Ecohome), the Belarusian Anti-Nuclear Campaign, the Belarusian Green Party, Russia’s ecological group Ecodefense!, and Lithuania’s Atgaja, among others – launched a massive public campaign dubbed “For a Nuclear-Free Baltic Region!”

On June 16, 2010, representatives of these organisations handed the participants of the IAEA’s “Regional Nuclear Energy Projects” round table in Vilnius a statement calling on them to adopt an alternative view.

The statement said, in particular, that regional nuclear projects tend to be accompanied by international tensions and unfair discrimination between those who turn a profit from such projects and those who get radioactive contamination, illnesses, and ecological and economic damage as a result. All three projects fit the description in the Baltic case: Russia’s Baltic NPP, Belarus’s Ostrovets, and the new Lithuanian plant.

The environmentalists proposed the three governments look for non-nuclear alternatives based on energy efficiency and renewable energy technologies.

“Residents of Lithuania, Russia, and Belarus have a right to a nuclear-free, ecologically clean future. We demand that our governments and the IAEA stop their nuclear lobbying and invest efforts into working out a safe and ecologically clean programme for the development of the Baltic Region,” the environmentalists’ statement said.

As latest developments suggest, the ecologists’ plea could not be more urgent.

Quotes from press sources used in the translated English version of this report, which first appeared in Russian on Bellona’s Russian site (complete with links to relevant sources), were rendered into English either from original Russian publications or from the text of the original article for the purposes of this translation.