In effect, the real question, when one thinks of where, in today’s tough economic conditions, the State Nuclear Corporation Rosatom – Russia’s topmost authority in all things nuclear – will likely invest its remaining resources is this: What field or fields of development will it be where most threats will be newly created? It is becoming increasingly obvious that Rosatom is going to concentrate its efforts first and foremost on those technologies and projects that have at least some conceivable prospects on the international market. That can be anticipated either in reactor construction abroad or in export of energy. And, apparently, in uranium production as well.
Rosatom, without doubt, will also be doing something in the domestic arena, but given the current economic environment, this will be far from original stated targets. This, though, is quite a tired old song – the atomic industry of any country is usually expected to make some grand statements about plans that then rarely get translated into reality. One needn’t look further than the United States’ erstwhile intention to build a thousand reactors by the year 2000 – or the high hopes once placed on thermonuclear fusion and plutonium-based energy, concepts best left languishing where they are.
Examples are aplenty both in the former USSR and in contemporary Russia. The more recent grandiose plans are still fresh in memory – the push to secure a non-existent market of spent nuclear fuel, which implied importing 20,000 tonnes of nuclear waste into Russia (2001), the programme of building 26 new reactors (1998), the as-yet unresumed construction of the RT-2 reprocessing plant in the closed nuclear town of Krasnoyarsk-26 (which was to reprocess spent fuel from VVER-1000 reactors and, ostensibly, just maybe finally close the nuclear cycle).
The noble tradition is continued by the latest promises to launch what was at first three new commercial reactors annually and then shrank to two – and seems, today, unlikely to ever go beyond just one. Judging by the rate things are proceeding at, in a couple of years, Rosatom will be forced to announce plans to commission half a reactor per year.
Floating nuclear danger
Floating nuclear power plants are the new rage. These are expensive, and the future of this technology is hazy at best, though plans to supply such facilities to Asia and even Africa are frightening indeed. Seeing as even high-ranking state officials have been heard expressing concerns of the extravagant costs involved, betting on the rise of this energy sector in Russia is surely a hopeless affair – nothing hints at large-scale deployment of floating nuclear power plants domestically any time soon. So, export seems the best way to go.
This, of course, is a sad prospect: dangers of nuclear proliferation, terrorist attacks, and radioactive contamination of the shorelines in those countries that would risk buying floating nuclear power plants from Russia and stationing them in their waters. It will surely blow some fresh wind in the sails of Somalian pirates, however, who will be inspired by such lucrative new opportunities.
Still, the many risks also improve the chances for an effective – if not quite overt – international resistance to a proposed spread of this technology. Rosatom is certainly free to try and surely will try this avenue anyway, but the odds that it will strike gold here are pretty lean. I would fully expect this project to remain at the bottom of Rosatom’s priority list.
Export of reactors: Bulgaria, Turkey…
Building new reactors and exporting energy from them seems a much more promising, if intricate, path. Considering the complications around Russia’s first commercial reactor project on the territory of the European Union – Bulgaria’s Belene Nuclear Power Plant (NPP) – Rosatom will have, for now, to put on hold its hopes to sell reactors to the financially reliable customers in the West. Bulgaria, of course, is currently nowhere near the list of capable customers where reactor sales go, but a European Union membership enables it, theoretically, to count on attracting European investment into a nuclear project. (This will predominantly have to be private funds, since Europe, unlike Russia, takes a dim view of subsidising nuclear energy, a reluctance caused by the less-than-desirable reputation atomic energy enjoys as a sector of the economy).
Bulgaria’s access to European money is indeed, so far, a theoretical advantage only. The stance taken by European financial institutions rather serves to disprove such a claim. In the period of 2008 to 2010, some fifteen large European banks denied Bulgaria a credit line to finance building Belene. Statements made by Atomstroiproyekt – Rosatom’s nuclear export wing – that it is Bulgaria’s own government’s fault for failing to create attractive investment conditions for the project, are nothing but an attempt to shift the blame. If only the banks were now to start shelling out loans for Belene, as they were hoped to do a couple of years ago, the Bulgarians would have been extolling the project’s virtues with an elegance that might do credit to the world’s most able diplomats.
Curiously, it was at first quite respectable companies that sought European money for Belene. Among them, for instance, was the German giant RWE – but it begged off the project, having served as its “strategic investor” for a while only to find it completely untenable. Participation in Belene did little good to strengthen RWE’s reputation and hurt Rosatom’s chances at attracting Western investors for projects in the future. And to think that all it would have taken was a little thinking before doing.
…and other failure stories
As far as European Union member states are concerned, Rosatom may still have a go at the Czech Republic, Slovakia, and maybe Hungary. But there, too, Russia’s prospects look rather bleak, what with the price tags that Rosatom’s projects are now bearing. The prices, meanwhile, are approaching those of the French EPR reactor series. And if earlier Russian reactors were at least trusted to sell well because of the lower prices, this hope is now vanishing fast. When a nuclear power plant project was under negotiation with Turkey, for instance, the amount settled on was in the vicinity of $5 billion per power unit, a price that was on level with the initial offer by the French. True, costs incurred by building an EPR reactor can grow significantly as construction progresses, just as happened in Finland. But nor are there any guarantees that the price will remain the same with a Rosatom reactor.
Where the French ran into serious headaches in Finland, Rosatom found its trouble in Iran and China. There is, however, one important difference. France’s project in Finland has been plagued by financial difficulties – introducing changes into a new project that led to substantial price increases as a result. But what Rosatom encountered in China was the latter’s numerous grievances with regard to the quality of the equipment supplied (over 3,000 complaints brought to Rosatom’s notice). As for Iran, it is not quite clear what the nature of the fuel problem there is – the aged 30-year-old equipment may be at fault, left by Siemens when the Germans withdrew from Bushehr in 1979. But the story still raises an issue with the Russians’ competence: It is Russia that now bears responsibility for the NPP in Bushehr, and it is the Russian specialists who should have determined exhaustively whether the old German components were still usable at the plant.
None of what was said above means that no one will ever buy a VVER or BN reactor from Rosatom again. Still, anticipating a rush of orders and a bullish demand for Russian reactors would be unjustified. Rosatom is bound to yet flush tons of money into its European PR campaign to try and improve its image. And it will promise more greener pastures yet to come. But for now, the greener pastures for new contracts lie in lands such as Turkey. There, Rosatom got its hands on a deal to build a nuclear power plant with four power units – but on the condition that it shoulder all costs and that it will own and manage the plant, too. And that reveals the main problem with this path: It ends in a deep quagmire called the Bog of No Profit. And even if there are, just yet, enough budget funds to cover this “act of sponsorship aid,” the money will not stretch too far.
The return-on-investment period will take at least 20 years – and could be even longer for the simple reason that a stable commercial environment in countries like Turkey is sometimes hard to come by. This includes political stability, and Turkey’s example is quite telling here. Numerous tenders for NPP construction have been held in that country for over 30 years, but every time, the results were voided. Rosatom owes its win in the latest tender, for the most part, to the fact that its offer was the only one. Looks like all other potential contenders had just had enough of this nuclear merry-go-round. And taking into account that stability, historically, has not been part and parcel of the Turkish political landscape, any talk about Rosatom’s project succeeding there is at the very least premature. Safer to bet that the money needed to build that nuclear power plant will in fact be allocated from the Russian budget and successfully expended (It’s not as if anyone’s going to turn down $20 billion dollars! Are you kidding?) than to bet that the Turkish project will actually get completed.
All those statements about building new nuclear power plants for countries in Southeast Asia and Africa and little island nations do not probably even call for commentary, not for the time being anyway. The main question – how realistic these plans are – still remains unanswered. Statements abound, but the same cannot be said about actions. And there is the sneaking suspicion that money in Russia does not, in fact, grow on trees – though every now and then the Russian national budget surprises us with its resilience.
Domestic construction – supposedly
To be sure, if we look at what is happening domestically, at the sites where new reactor construction is underway in Russia, the obvious “export” angle will be hard to miss. Real efforts are being invested where Rosatom is looking to export energy to other countries. These sites are Leningrad NPP-2 (the second line of construction at the plant, which is near St. Petersburg) and the Baltic NPP (a site in Russia’s westernmost enclave of Kaliningrad). The no-holds-barred push for construction in Kaliningrad Region – where no local demand exists for energy produced by the future plant and the only supply contracts Rosatom can hope to land are export ones – speaks for itself. Incidentally, not only is the plant being built in absence of power lines that would actually have to relay the power to foreign customers, but there is not even any certainty that neighbouring countries will agree to Russia laying those cables.
Initial plans envisioned the invitation of a foreign investor that would hold 49 percent in the Baltic NPP – a first for Russia – but no such investor has turned up yet. The idea is clear: A major foreign participant is at least some sort of guarantor of future energy sales. But the only company that has shown any interest in the project was Italy’s ENEL – thanks, apparently, to the close friendship of the Russian Prime Minister Vladimir Putin and his Italian counterpart Silvio Berlusconi, who has direct ties with ENEL. But ENEL is currently treading some very rough financial waters. It will have a hard time dealing with yet another project without serious outside help. One wonders if help, just as in the case of the Turkish NPP, is once again going to come from the Russian budget.
These developments do not mean at all that Russia is putting a freeze on its domestic NPP projects. Construction is ongoing at Novovoronezh NPP-2 (second line at this site in Voronezh Region, Southwestern Russia) and Kalinin NPP (Tver Region, Central European Russia). A second reactor was just completed at Rostov NPP (Rostov Region, Southern Russia). Then, there is the fast breeder project just barely hobbling along at Beloyarsk NPP (near Yekaterinburg, the Urals) after it was first initiated in 1987. The idea, which is over a quarter of a century old, has clearly been reanimated with an intent to get budget funds disbursed for future projectss – i.e. so as not to lose one of the those cash cows the industry has at its disposal.
Should the funding source be at risk of drying up, there are always new fairy tales to tell the iditiots in charge of the country’s budget about the “closed nuclear cycle.” The closed nuclear fuel fable that started some forty years ago is summoned up time and again to help keep the money flowing – and many an annual budget will bleed before those at the helm will again run smack into the realisation that the technology offers no tangible prospects (to say nothing of the fact that completing a BN-800 reactor whose design was developed several decades ago makes even less sense).
The comeback of the plutonium dream
None of this is original. France widely exploited the idea of “very promising” fast breeder reactors, keeping it afloat through a string of governments, until one of them had a look at the volume of investments, measured it against the results, and pulled the plug on the programme – which by then had launched the world’s largest plutonium-burning reactors, Phenix and Superphenix, only to be happily shut down after proving to be an utter failure.
This was hardly a long time ago – only in the mid-1990s. But the idea is still breeding dollar signs. Some specialists still refer to the costs of completing the BN-800 at Beloyarsk as Rosatom’s biggest secret, but an additional several billion dollars was recently earmarked from the federal budget for a new fast breeder programme, which includes developing the next breeder series, the BN-1200.
The fourth reactor unit at Kalinin NPP, too, is a story of never-ending construction. There was a time when environmental protection authorities banned the works at the site until an additional source of water was found to feed the cooling system. No source was found; construction is in progress. Tritium levels in nearby lakes are fifty times the sanitary norm.
As for Novovoronezh, the second line of construction there was an election trump card of United Russia, the country’s ruling party, when it was running for seats in the federal parliament in 2007. The message was along the lines of “We are reviving our industry.”
Still, the new project of Nizhny Novgorod NPP (in Navashino, Nizhny Novgorod Region in Central European Russia), was put on the back burner. On paper, construction is more or less moving along, but in reality, an additional survey is being planned for the site, chosen in a sinkhole-ridden area, and it’s not a certainty that anything will be built there in the long run. On the other hand, what is that survey going to show? Is it going to happen at all? We’ll wait and see. Maybe we’ll even see a nuclear power plant sinking into the ground. God forbid, of course.
That most of these sites are now-abandoned, now-resumed construction projects that have been in development for decades is a perfect illustration of Rosatom’s capabilities today. After the long nuclear construction crisis that befell Russia in the late 1980s, only one project was started from scratch – Novovoronezh NPP-2. And that one, too, seems to have been launched for mostly political considerations. Otherwise, as the Russian tradition goes, Rosatom would have likely channelled the money into unfreezing some other long-forgotten project. Plus, the export-oriented Leningrad NPP-2 and Baltic NPP.
Aside from the still unclear situation with Nizhny Novgorod NPP, the fate of such projects as Seversk, South Urals, and Kostroma (Central) NPPs remains, in effect, undecided. It is obvious that the resources Rosatom can avail itself of to start new reactor construction from scratch are quite limited. They are obviously not enough to dash around laying first bricks at one site after another. These are the circumstances in which Rosatom is seeking out new contracts abroad, including those that other market players consider unfeasible. These are the conditions in which it is speeding up works at the new domestic sites designed solely for profit drawn from exporting energy to Europe. All of this points to spending choices being made on the basis of those export prospects alone.
Another activity that Rosatom is currently developing with vigour is buying out foreign uranium-production companies and expanding its foothold in those countries that have uranium deposits. Besides cooperation achieved with Kazakhstan and Ukraine, there are active attempts at gaining access to uranium production in Mongolia, Tanzania, Australia, etc. By various estimates, Russia will start experiencing a shortage of uranium sometime between 2015 and 2017. But despite the billions of dollars already invested in developing new sources of uranium supplies, the anticipated demand still exceeds forecasted production, even with all latest purchases taken into account. Therefore, expansion is strongly indicated in order to forestall future squeezes on uranium supplies for both the domestic market and numerous foreign customers – nuclear power plants built abroad, which Rosatom must keep flush with uranium fuel by contract obligations.
The uranium rush will continue to leech a lot of money from the nuclear industry’s budget. Furthermore, one should not discount the political instability in Africa – another factor that might bear the threat of delivery failures in the future. With the burden of foreign fuel delivery contracts on its shoulders, Rosatom will have to create a backup system that will allow it to make up for undersupplies in case there are problems on territories beyond its control. And yet another consideration not to be downplayed is the potential risk of theft of radioactive materials in these regions, something that became painfully obvious with the latest Wikileaks revelations (here and here).
The export philosophy and its consequences
Summing up, this export-oriented profit-making system Rosatom has deployed looks far from flawless and is likely to face many significant risks down the road. The choice for such a strategy on foreign markets must have been based on analysis of unoccupied or partly occupied market niches so as to avoid serious competition where Rosatom will necessarily yield to rivals.
But the other side to this equation is that the near empty market niches are exactly so because they are crawling with tremendous risks which, in turn, may lead to financial losses. If only Rosatom’s activities were associated with less risk and more profit, the corporation would have no problem attracting investors. For now, Rosatom is spending state budget money that it has next to no difficulty obtaining. Private investors assess nuclear projects as high-risk, and ones that furthermore entail a long pay-off period. This was what eventually led to a lack of funds that torpedoed the “nuclear renaissance” idea from gaining any traction in Europe. In the United States, even the huge state-provided credit guarantees seem to be failing to get new reactor construction off the ground.
Experience shows no state budget is enough to work miracles in Russia, either. If subsidies continue to flow into the nuclear industry in today’s generous volumes, Rosatom will continue to operate at a relative advantage compared to companies that are not enjoying direct support from the state. But we will unlikely see a full-fledged revival of the atomic industry or expansion of its activities on a large scale. Within a mere 10 years, a downward trend will become evident, one that will not yield to attempts to compensate for losses using, as per the old habit, the state as a bottomless money bag to support nuclear export or the operation of nuclear power plants.
What the new decade will likely bring, however, is a “forced migration” of the multitude of existing nuclear risks to new countries, the new markets Rosatom is “discovering” for its enterprises. Judging by its extremely biased and near-sighted analysis of prospects offered by the development of the global nuclear energy market – feasibility studies tailored to soften up politicians as much as for any other reason – Rosatom will keep investing in high-risk ventures – and keep multiplying nuclear risks around the world. Eliminating those risks is what will become the global environmental community’s task for the foreseable future.
Vladimir Slivyak is co-chair of the environmental group Ecodefence.