Financial crisis slams a brakes on new Russian NPP construction

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Publish date: March 29, 2009

Written by: Vladimir Slivyak

Translated by: Maria Kaminskaya

MOSCOW – The Russian state nuclear corporation Rosatom, formerly the Federal Agency for Atomic Energy, has finally confirmed what environmentalists and unaffiliated industry experts have been talking about for months: The crisis is twisting the government’s arm enough to have to readjust Russia’s extensive nuclear power plant (NPP) construction programme.

According to the so-called “Master layout plan for energy-producing capacities projected up to 2020” – the current NPP construction schedule approved by the Russian government in April 2007 and then amended and re-endorsed in March 2008 – the state wants to build in the next decade 36 nuclear reactors. However, because of the unfavourable economic environment, the construction of a number of nuclear sites is bound to hit indefinite delays. The state television channel Vesti reports that adjustments will have to be made due to a slump in energy demand. In earlier statements, the government was not holding back reassurances that no plans that Rosatom had laid out for Russia’s nuclear energy future were going to be changed, crisis or not.

There is another way to read this latest development. Russia simply does not have sufficient technological resources to build all of the reactors on its federal nuclear agenda. By finally acknowledging the obvious, Rosatom is simply putting a brave face on a bad situation, sugar-coating its move with references to the inopportune financial climate that the crisis obligingly provides. It is thus sparing itself the embarrassment of later having to admit its inability to follow up on its own plans.

Those plans that the atomic corporation was previously so bent on envisioned taking online at least two reactor blocks annually beginning in 2015, further increasing yearly reactor production to three or four reactors by 2020. But already last year it became painfully clear that Russia had missed the train on starting necessary construction works on enough reactors to be able, after 2015, to plug two additional reactors into the grid each year.

“Today, under crisis conditions, the time frame when we will need three to four [NPP equipment] sets [per year] will be pushed back, but it will not be cancelled, just pushed back, taking into account the changing demand in energy. As we come out of the crisis, we will be needing all of this again,” Rosatom head Sergei Kiriyenko told journalists in early March following a visit to the machine-building plant ZiO-Podolsk in the Moscow Region.

ZiO-Podolsk, an entity owned by Russian Energy Machine Building Group of Companies (REMCO), has been a leading manufacturer of atomic energy equipment in Russia since building the country’s first nuclear power plant in Obninsk, near Moscow, in the early 1950s.

Despite Kiriyenko’s optimism, however, one will be prudent to expect further “adjustments” to the nuclear power plant construction programme, even more so if the crisis goes from bad to worse. It is not inconceivable that some of the NPPs slated for construction may in fact never see the light of day.

Vesti quoted Kiriyenko as saying that a broad-scale modernisation program is currently in full swing at ZiO-Podolsk, which intends to see the plant “become ready to handle the growing scope of NPP construction.”  

Rosatom’s chief underscored that the plant had already spent the majority of funds earmarked for the revamp, according to the Russian new agency Interfax. Overall, ZiO-Podolsk will have invested around RUR 3 billion (or nearly $90 million) into the upgrades that the modernisation programme, slated to be completed by 2015, involves.

A couple of years ago, a majority shareholding in ZiO-Podolsk’s parent company, REMCO, was bought by a newly created Atomenergomash – this Russian acronym stands for Atomic Energy Machine-Building – which, in turn, became a 100-percent daughter company of Atomenergoprom (Atomic Energy Power Corporation). As a self-described state vertical integrated company, currently in the process of working out its corporate structure, Atomenergoprom is part of the state corporation Rosatom and is soon to unite 89 enterprises of the Russian civil nuclear industry. In early March, Atomenergomash obtained the approval of the Federal Antimonopoly Service to acquire the remaining shares in REMCO.

Meanwhile, the Federal Target Programme for NPP construction in Russia, mapped out to year 2015, has a budget of roughly $45 billion at its disposal, of which around $20 billion – or nearly a half – is money expected from federal coffers. State support for the programme is supposed to peak in 2010, after which federal budget financing will start slowing down gradually in order to let the country’s atomic energy complex further develop in a self-sustaining mode: Beginning in 2015, it should be able to bring home its own bacon, bought with earnings from electric power sales. The economic crisis, though, may yet render moot these grand designs.

This comment by Bellona’s regular contributor Vladimir Slivyak, co-chairman of the Moscow-based environmental organisation Ecodefense! originally appeared as a blog entry on Bellona’s Russian-language site at Bellona.Ru.