Rhein on Energy and Climate

Until the end of 2009 Lithuania had depended for most of its electricity on two reactors of the unsafe Chernobyl type, which the country had to close down as a pre-condition for EU membership.

In order not to depend excessively on Russian gas and electricity supply the government decided to replace its two former nuclear reactors by one big plant to become operational by 2018-20. With a planned capacity of more than 3 GW it is scheduled to become the biggest and most expensive (€ 5-6 billion) nuclear power plant in Europe, also meant to supply electricity to Poland, Estonia and Latvia, which have signed up as venture parties in the nuclear enterprise.

An international tender procedure led to the pre-selection of five companies. The Korean Electric Power Company won the bid as strategic constructor and operator in mid-November, but two weeks later it renounced without indicating the reasons for abandoning what had appeared as a promising entry into the European power market.

This experience demonstrates again the political, financial and environmental risks of building and operating nuclear power plants in today’s demanding overall environment.

For Lithuania the question of whether to replace the outdated Soviet-built reactors by non-nuclear alternatives is a non-issue. The only issue is to find a supplier able to provide a safe technology and substantially share in the finance. A Russian reactor seems out of the question considering the government’s firm intention to reduce its dependence on Russia. The advanced French reactor being presently built in Finland is not an ideal alternative either, considering the delays and cost-overruns encountered.

Theoretically, the four consortium countries can decide to do without nuclear power, by dramatically enhancing energy efficiency, especially in buildings, and covering the remaining needs by a combination of coal, gas, biomass and wind power plants, plus imports of electricity from neighbouring countries like Finland or Germany.

But this unconventional and cost-effective alternative does not very attractive in a country that is proud of its nuclear experience. It would also imply higher C02 emissions and less “national energy security” on which the government seems excessively focused.

So the most likely outcome will be the continuation of the nuclear avenue and a deal with one of the companies that had been rejected during the tendering procedures. Both France and USA will undertake major lobbying to get their suppliers – EDF and Westinghouse – back into the race. Financing will be a crucial element. The four governments that form the consortium will find it next very hard to put up the necessary € 5-6 billion over the coming eight years. The supplier and operating company will therefore be expected to provide at least half of the total investment, not that easy in times of fiscal and financial austerity.

The EU Commission is also likely to favour a regional solution based on a nuclear power plant. It would facilitate an overdue grid inter-connection between the three Baltic States Poland, Finland and Sweden.

Brussels 06.12.10 Eberhard Rhein

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