It has taken about five years of deliberation by expensively suited bankers in the extravagantly marbled corridors of the European Bank for Reconstruction and Development (EBRD). But finally some long overdue upgrading of the Ukrainian nuclear power sector can go ahead – not before time, with nuclear plants accounting for around half of Ukrainian energy supply. As reported in this month’s news, the EBRD on 7 December approved what could turn out to be a landmark US$215 million loan to Ukrainian nuclear utility Energoatom, for the completion and safety upgrade of Khmelnitsky 2 and Rovno 4 (K2/R4) to a level comparable with Western levels. Khmelnitsky 2 and Rovno 4 are both Soviet-designed 1000 MWe pressurised water reactors (VVER-1000s), originally ordered in the late 1970s/early 80s and estimated to be about 80 per cent complete.
The total cost of upgrading and completing Khmelnitsky 2 and Rovno 4 is put at US$1.48 billion. The rest of the money will come from: the European Commission (US$ 585 million), the biggest single investor; export credit agencies (US$ 348.3 million); Russia (US$ 123.7 million); Energoatom itself (US$ 158.6 million); and the Ukrainian government (US$ 50 million).
The long awaited EBRD decision triggered the green light for the European Commission (Euratom) loan, which announced its approval a few days after that of the EBRD, on 13 December. The completion work will be done "sequentially", with work starting at Rovno 4 only after successful completion of the measures at Khemelnitsky 2. It is to be hoped that the problems and delays encountered in integrating Western and Eastern technology in the Temelin VVERs in the Czech Republic will be avoided in the Ukraine. (Although the final outcome at Temelin, which is just starting up, seems to have been well worth the wait, with a recent delegation of Western European safety regulators pronouncing that it should be able to reach a safety level comparable to that of currently operating Western European reactors.) What seems pretty clear is that had Western financing not become available, the Ukrainians would have continued construction themselves. The indications are that they had been stepping up indigenous efforts in recent months. Their construction pace would have probably been somewhat slower than currently anticipated in the Western completion plan and they would not have aspired to the "Western safety standards" now being aimed at, but costs would have been much lower and they would have probably got there in the end.
The Bank’s Board voted decisively in favour of the completion loan (63.7 per cent were for it). But there are some stringent conditions attached. Before the loans become effective there must be confirmation that the last remaining operating unit of the ill-starred 4×1000 MWe Chernobyl RBMK station has been permanently shut down (scheduled for 15 December). The International Monetary Fund must also resume a $2.6 billion loan package to the Ukraine, which was suspended in September 1999. Above all there must be safety assurances, "including a report from international nuclear regulators that the Ukraine Regulator has the necessary independence and resources to assure operations of Ukrainian nuclear facilities according to Western safety standards, a commitment from the G-7 and European Commission to provide technical assistance, and a commitment from the Ukrainian government to provide the necessary independence and resources to the country’s nuclear regulator." This is reassuring as a strong and independent regulator is the sine qua non of nuclear safety. In addition the conditions of the loans and the loan guarantees will also "require enhancement of the safety, not only of K2 and R4, but of the other 13 nuclear facilities owned by Energoatom, and implementation of electricity-sector reform, particularly privatisation of energy-distribution companies and increases in tariffs and tariff collections." No one can accuse the Western funding bodies of rushing into the K2/R4 completion project. Back in 1995, the G7 countries, the European Commission and the government of Ukraine signed a memorandum of understanding regarding the closure of the Chernobyl station and the EBRD was asked to provide financing for the completion of Zaporozhe 6 (another VVER-1000) and K2/R4. In 1996, the Ukrainians managed to complete Zaporozhe 6 with their own money (to Ukrainian safety standards) but the K2/R4 completion proposals have been the subject of exhaustive Western analysis and voluminous reports ever since.
Among the key preoccupations of the EBRD, in addition to safety, have been establishing that lending on the completion project would be "sound banking" and demonstrating that completion is "least economic cost" when compared with alternatives. The alternatives considered along the way have included rehabilitation of fossil fuel plants, construction of combined cycle and simple cycle gas turbines, pumped storage and green-field fluidised boiler plants, increased use of existing CHP plants and demand side management to save 500 MW. To the chagrin of nuclear critics, solar and wind plants were not included as alternatives "because these forms of electricity generation are not thought viable in Ukraine on a significant scale." There have been at least five least cost studies of the completion option, including one in 1995 by Lahmeyer, one by the Science Policy Research Unit of Sussex University (which, perhaps predictably, came out firmly against the completion option although it included a minority opinion in favour) and no less than four by Stone and Webster (1997, 98, 99 and 2000), with the 2000 study taking on board criticisms contained in an analysis commissioned by Greenpeace from German engineering firm Fichtner. While criticisms have been levelled at the EBRD conclusions, and there are always going to be uncertainties in this kind of analysis, there do seem to be good grounds for arguing that the nuclear completion option is "least cost", with repowering of coal plants by modern fluidised bed boilers next best.
Nuclear has also recently been pronounced the "least cost" option in the rather different context of new generating capacity for Finland. Comparison with gas combined cycle, coal-fired condensing plant and peat-fired condensing plant shows nuclear power to be competitive. On the strength of this, Finnish utility TVO has submitted an application for a decision in principle on constructing a new nuclear unit, with operation envisaged around 2008-10.
There are of course many difficult hurdles to negotiate yet. Back in 1993 a previous attempt to get approval for a fifth nuclear reactor in Finland foundered when it was narrowly defeated by a parliamentary vote. But the fact that a level-headed and commercially minded utility wants to build a new reactor and is prepared to admit it in public and then actually submit an application, must bring a little bit of pre-Christmas cheer to the world’s nuclear industry.
