Cutting the investment programs to Rosatom and Rusgidro, Russia’s hydroelectric utility, was tabled by Deputy Prime Minister Igor Sechin. The cuts should bring the state budget some 15 billion roubles ($375.5 million) in savings, and some 11 billion roubles will be saved on Rosatom alone. Sechin’s suggestion was supported by Prime Minister Vladimir Putin, and no objections were voiced on the part of the nuclear industry. After all, electricity prices in regions where there are nuclear power plants have already exceeded a 30 percent price spike. Further inflation of electricity prices could lead to social unrest, something members of the government should understand.

Rostatom Investment program the reason for electricity price rises

Among the reasons for a rise in electricity prices, Sechin cited increased investments toward nuclear power plants (NPPs).

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Because of these increases, Rosatom has been allowed to collect more from electricity consumers, including the public, for the construction of new reactors. The situation is somewhat scandalous if it’s taken into account that Rosatom is puffing up its profits while 78 percent of the public has come out in various polls to say they are against new reactor build outs in their respective regions.

Putin says the ‘decision is adopted’

“We are speaking about very reconciled, exact work on the reduction of subjective factors on the final price for consumers,” said Sechin. “We suggest reductions in targeted investment funds for NPPs and hydro-electric plants, and I have in mind the possibility of redistributing the internal profits of these companies – internal to Rosatom and RusGidro,” said Sechin. “For Rosatom, for example, this is possible via the supplemental effect of external economic activities on the world uranium market – this possible according to data from the Ministry of Energy.

In Sechin’s opinion, the savings to the government budget by decreasing expenditures on new NPP and hydropower plant construction will be up to 15 billion roubles in the current year alone. 

According to analysts quoted by RBK daily, an online Russian business publication, the reduction in state expenditures on “RusGidro” will equal 4 billion roubles, and Rosatom will not, by the government’s decision, receive 11 billion state-budget roubles. Of course, this is just a part of the government subsidies received by Rosatom.

Putin agreed to Sechin’s proposal, after all holding back on the growth of electricity prices at around 15 percent a year is impossible without suppressing the appetite of the nuclear industry.

As Putin was quoted as saying on the transcript of the governmental meeting:

“So the decision is adopted: 15 percent and not more. And I ask you all to support this. Everyone has their own sphere of responsibility – both at the federal centre and to regional colleagues and to authorities. Sechin suggested a number of measures aimed at solving problems – carry them out and in about a week and a half, report to me on the results.”

Environmentalist for cutting the Rosatom investment program

Environmental organizations welcome the first steps of the government to reduce subsidies to nuclear energy.

“Cutting the Rosatom investment program is a reflection of the true state of affairs in nuclear energy, which cannot uphold the announced tempo of NPP construction,” said the group Ecodefence in a release. On paper, the development program for nuclear energy looks grandiose and expensive, however in reality it is unfulfillable for technical and financial reasons. In March 2010, Russian Audit Chamber (of the Duma) released results of its audit in the Ministry of Energy. Based on the results it was announced that 60 percent of new reactors, which were supposed to be connected to the grid by 2015, will be delayed. According to the General Scheme for the Placement of Electrical Energy Installations (adopted by the government in 2008) it was planned to begin construction on 13.3 gigawatts worth of new nuclear stations – this equals 13 reactors of the VVER-1000 type, or 11 reactors of the VVER-1200 type. According to date from March 2010, a reduction of 5.3 gigawatts was already planned. However even these benchmarks will probably not be achieved.

“Rosatom originally announced a program of NPP construction that was not fulfillable under any circumstances. One can only speak in Russia about this program as if about the dead – that is, only good or nothing at all. The reality is that neither the original goal of 13.2 gigawatts nor the reduction of 5.2 gigawatts is achievable today. The maximum that can be expected by 2015 is 2 to 3 gigawatts. Along with this, the construction of new reactors is economically ineffective in comparison to the reconstruction of natural gas energy blocks – shifting them from a steam turbine cycle to a steam gas cycle,” said Ecodefence so-chair Vladimir Slivyak. “Environmentalists from the moment of the adoption of the General Scheme called on the government not to finance the admittedly failing investment program of Rosatom. By all accounts, the reason for its actualization is far from considerations of economic advisability and environmental safety,” said Slivyak. 

Is corruption to blame for overblown NPP construction plans?

If it is so easy to back off plans to build new NPPs, then the question arises as to how unneeded energy entities were included in an energy development program for the country.

Ecodefence suggests that the reasons for adopting economically ineffective and environmentally dangerous investment programs by Rosatom lie in the sphere of corruption. That the potential for corruption in the state corporation is rather high is illustrated by a joint investigation by Ecodefence and Transparency International Russia released late in 2010.

Will refusals to build NPPs abroad come next?

Whether Rosatom will succeed in building reactors at the Kalinin, Beloyarsk, Rostov, Baltic, Novovoronezh and the second Leningrad NPPs with reduced government subsidies will become clear with time. But the question as to whether Rosatom will continue to finance nuclear power plant construction abroad still lingers. After all, these projects are implemented by the government with state furnished export credits, often at little interest, with the payoff date set far in the future, and, most importantly, with no real perspective for pay off in the future.

And things are not going so well with foreign projects. Recently, Russia announced it was pulling out of the Belene NPP in Bulgaria.

Negotiations over the financing by Russia of a nuclear power plant in neighboring Belarus are still ongoing and interesting details are coming to light. Belarusian Deputy Prime Minister Vladimir Semashenko told reporters on February 16^th that he was requesting a $9 billion government credit from Russia because financing the build of the Belarusian NPP, as well as the accompanying infrastructure, will be on Russia’s tab.

“Semashko also announced that delays in paying back the credits will be offered until the moment construction begins on the NPP, that is, until 2016. The agreement on construction and crediting a Belarusian NPP could be signed on March15 at a government meeting,” reported Navini, a Belarusian online newspaper.

A careful Semashko is all the same not convinced of success: “If there is political will, the agreement will be signed, however, earlier, the situation changed 180 degrees.”

After the internal Russian investment program in Rosatom has been subjected to cuts, it’s logical to assume that there will be no money forthcoming for a dangerous and unneeded nuclear power plant in Belarus. So long as blind and unpredictable political will does not triumph…

Regions that have NPPs see power bills ride faster

At the February meeting of the government, another scandalous fact came to light. It turns out that energy prices are rising fastest in the Russian regions that have nuclear power plants. As Putin was quoted as saying in the transcript:

“I would like to remind everyone: we have defined that the growth in prices for electric energy for the end consumer must not exceed 15 percent. Growth in prices! However, according to information coming from the regions, the rises are much higher: For example, in the Tversk region [reported rises are] 32.9 percent; in the Kursk Region, 33.2 percent; in the Saratov Region, 32 percent; in the Omsk Region, 30 percent; in the Astrakhan Region, 46.5 percent, and in the Penza Region, 37 percent.”

Of the six regions Putin named, the ones that lead in electric price spikes are the Tversk, Kursk and Saratov regions. It’s clear that if Rosatom’s appetite is not quelled, then everyone in Russia can expect a 30 percent rise in electricity bills, if not more…