STATEMENT on Plans for Nuclear Power Plant “Belene” in Bulgaria

STATEMENT

On

Plans for Nuclear Power Plant “Belene” in Bulgaria

To the Attn:

Energy and Transport Directorate – General

European Commission

Energy Commissioner Andris Piebalgs

Sofia, Bulgaria

November 22, 2007

The Institute for Market Economics (IME), supported by independent analysts and energy experts, for years opposes the project for construction of the NPP “Belene”. The project has many pitfalls and has not proven economically feasible for Bulgaria.

Herein we present to your attention a brief list of main argumentation against the second nuclear plant project in Bulgaria:

1) There is no detailed economic and social impact assessment of the project. All questions concerning economic feasibility of the project remain unanswered as the only backing used insofar are based either on populist grounds (Bulgaria to become center of energy on the Balkans) or on unproved expectations for electricity shortages around 2010-2011.

2) There is no calculation about the net present value of the project. For instance, the costs for the secondary infrastructure may turn to be considerable higher than all existing expectations. The same issue exists with waste disposal. Electricity price per kWh will most probably turn to be much higher than existing promises of 3.5-3.6 eurocents per kWh. If comparing with similar plants in other countries and most recent studies it would be more reasonable to expect prices above 5-6 eurocents per kWh.

3) The project may significantly hamper energy market liberalization. The majority share of the nuclear plant will be owned by the government, which closes the door for true market liberalization and emerging of competition among energy producers. If government promotes nuclear power, a large part of the energy market will be subject to government intervention. Suppliers of gas and coal, on grounds of consistency, may well want to receive some kind of favored treatment. A return to a protectionist energy policy would restrict competition in product markets, adversely affect efficiency, raise prices, probably reduce security of supply and disadvantage all energy consumers.

4) At present, Bulgaria is mainly reliant on energy resources from Russia: oil, natural gas, high-quality coal and nuclear fuel. The project will further increase the dependence of Bulgaria on Russian resources and thus, the Bulgarian economy will become even more vulnerable to Russian energy policy. Bulgaria has awarded a contract to “Atomstroyexport”, in which the Russian gas company “Gazprom” owns an 84 percent stake, to build the plant and install two 1,000 megawatt water-pressurized reactors. The design of the plant will be based on Russian technology. Russia will also provide all the nuclear fuel for the power plant, and recycle its spent fuel.

5) The very need for additional power in Bulgaria has not been proved. Bulgarian economy exhibits a very high-energy intensity. The energy intensity of the Bulgarian economy, defined as the amount of energy needed to produce one unit of economic output, is seven times higher than EU average according to 2005 Eurostat figures. Therefore potential savings and energy efficiency activities are a serious alternative to building new power facilities.

6) Electricity transportation losses in Bulgaria are from two to three times higher compared to Germany or Italy. Thus, it is not clear why efforts are not focused on transportation saving technologies instead of building additional powers.

7) Even if needed in the long run, it has not been proven that any additional electricity production should be nuclear. Rehabilitation of existing thermal and building additional hydro plants and utilization of local renewable energy resources appear to represent a serious alternative to nuclear projects. Up to now there is no cost and benefit analysis of different alternatives.

8) Electricity imports may turn to be more cost efficient than local production. With this respect the biggest problem appears to be stereotypes from the past as imports are considered lost per se. This way of thinking is wrong especially if we realize that Bulgaria is importing around 80%-85% of all energy resources.

9) There is ambiguity about the cost of the overall project. At a value of EUR 1.7 billion in 2005, the signed in 2006 contracts for the construction of NPP “Belene” turned out to be to the amount of EUR 6 billion, or about three times more. That makes that project the most expensive public works project in the country's post-Communist history.

10) The Bulgarian government plans to retain more than 50% ownership of the plant and to provide loan guarantee for 50% of the cost of the project. Thus, the nuclear power plant will be constructed with money, collected from the present and future taxpayers. It is imperative that politicians justify their decisions to spend taxpayers’ money before the general public and explicitly prove that the benefits of the project are more than the costs. Instead, there is lack of public debate and a more clear reasoning behind the state-backed financial guarantees.

11) The proclaimed idea of the merger of “Kozloduy” power plant to “Belene” plant is an example of non-transparent privatization. It would complicate or would rather make impossible all economic calculations and would hide the actual results from “Belene” project. If this idea takes place we would probably never know the real price per kWh since all data will be mixed.

All these arguments show that rather than meeting Bulgaria's economic needs, the project seems a response to lobbying pressures thus open to corruption and mismanagement and will further multiply Russian dominance of Bulgaria's energy sector.

Market solution of “Belene” case would be if the existing infrastructure is sold at an open tender and is used according to decision of new owner. If there is private interest to build additional nuclear facilities without any government support then all related risks will be taken by private investors.

The Statement have been sent to the energy commissioner and signed by several NGOs and individuals.