Energy
EC to greenlight Paks 2 nuclear plant on two conditions
Two conditions
According to reliable sources, the two conditions the EC expects Hungary to meet are:- All issues related to, and supervision of, Paks 2 should be clearly separated from the current power plant supervision system and other energy sector policymaking (which belong under the National Development Ministry).
- Electricity generated by the Paks 2 plant should not be sold to grid operator MVM but should be put up for sale through the power exchange. (This appears to be a logical demand, as the current question is whether the project is viable on a business basis, without government support.
Another source close to the project confirmed that talks between the EC and Hungary touched on the possibility of auctioning off the electricity generated in the Paks 2 plant, but said these (selling though MVM or excluding MVM) are not the only options, and Brussels could require the sale of electricity to go through not MVM but instead a dedicated company separate from the state. Brussels is concerned about market concentration, in this case the concentration around MVM, our source said.
The negotiations are now over and the EC is working on its final position. According to our source, the two proceedings regarding Paks (one concerning government subsidies, the other public procurement) are now handled as a single package, which means that should Brussels approve the subsidy with the above conditions, it will also rule favorably in the other case.
About the project
Russia and Hungary concluded an intergovernmental agreement (IGA) on a nuclear program in January 2014. The IGA foresees cooperation between the two countries in the further development of the Paks nuclear power plant, including the development of the Paks 2 project. The new capacity will be constructed next to the four existing 500 MW nuclear reactor blocks in operation since 1982, with the first 1,200 MW block to be opened in 2023. The estimated total cost of the project is EUR 12 billion, 80% of which will be covered by a 30-year loan from Russia.The Paks 2 project initially belonged to the MVM group but was subsequently transferred to the Prime Minister's Office. ROI calculations using the Rotschild model indicate that the two 1,200 MW reactor blocks will return the investment by the end of the 60-year life cycle if the market price of electricity is between EUR 50.5 and EUR 57.4 The Hungarian government reckons with at least EUR 65, though, which is why it envisions a profit from the project.
The feasibility of Paks 2 is the main point of contention between the EC and Hungary. If the commission decides that the project would not stand on its own, without state funding, it will then have to assess whether the state subsidy would lead to significant market distortion.
