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Lithuania Closer to Nuclear Deal 10 April 2012
Text: Ray Vysniauskas

Lithuania is ever closer to constructing a new nuclear plant in Visaginas after signing a concession agreement with Hitachi Ltd recently.

kubilius Hitachi

Photo: BFL/Tomas Lukšas

The agreement, covering the right to design, construct, operate and then decommission the plant, is still subject to Finance Ministry examination and Parliamentary approval before a final sign-off is expected in late June.

The Lithuanian sentiment in pushing this deal forward is largely driven by the desire to reduce its reliance on Russian crude, gas and electricity.

Lithuania was hoping to build the Visaginas 1,300 megawatt advanced boiling water reactor (ABWR) which would be part funded by neighbours and Hitachi, but as plans have progressed, Latvia, Estonia and Poland have shown a growing reluctance to enter into the arrangement.

The cost of the Visaginas Nuclear Power Plant is expected to be LTL17 billion or just short of €4.92 billion, in which Lithuania was hoping to have at least a 34% stake, or LTL6 billion.

This would be the largest project ever undertaken in Lithuania.

Visaginas

VIsaginas NPP Artist Impression

The cost of electricity production at the new plant was originally trumpeted at 7 – 10 cents per kWh, but is now acknowledged to be more accurately at 17 – 25 cents per kWh. Adding the cost of finance and the growing burden of repayment on an ever-reducing population makes the mathematics of cost ever more complex and less appealing.

While various polls and research suggests Lithuania has around 70% support for nuclear energy - despite our experience with Chernobyl and the recent Fukushima tragedy - the growing concern for the cost of the project, especially if we are left without any partners to share the burden, is proving the major hurdle to widespread support.

Opposition parties are calling for a referendum on the Visaginas NPP, and with the current government holding a majority of just one, the wording and timing of any such public poll will prove a total political bunfight.

Confounding the partnership agreements with Latvia, Estonia and Poland in the Visaginas NPP is the fact that they are only to be finalised in March 2015, so there are plenty of unknowns being assigned to the future generations of Lithuania.

In the meantime Poland is currently tendering for a 2,000 megawatt coal-fired plant of its own. Hitachi is also tendering on the project and it brings into question Poland’s commitment to a nuclear partnership outside its borders.

The Polish 12 – 15 billion Zloty or €2.9 – €3.6 billion plant is due to come online in 2016 – 2017.

Poland however recently had its shale gas reserves drastically downgraded and with EU pressure to reduce carbon emission from its mainly coal powered electricity industry, they are also considering nuclear as the road to energy independence. But this could mean they are now more likely to construct a nuclear power plant of their own.

Also on the horizon are two other nuclear power plants, one in Belarus and another in the Kaliningrad Oblast of Russia, just on Lithuania’s south-western border. This could mean that there will be three nuclear power plants within a 300 kilometre stretch.

The Belarus reactor will be just 50 kilometres from Vilnius, while the Russian plant is on the banks of the Nemunas River, surely an uneasy situation for any sovereign state already having suffered the literal fallout of Chernobyl.

And a good bet is that both Belarus and Russia will offer cheaper export electricity than Lithuania. This may be because we are subject and will have adhered to stricter legislation, but when it comes to buying export electricity price is generally king, especially if energy costs are particularly hard hit by inflation.

The Kaliningrad reactors are scheduled to begin operation in 2017- 2018 and the Belarus reactor in 2018. Both will have a capacity of around 2400 megawatts, dwarfing Lithuania’s output.

So where does that leave Lithuania? Eight years after knowing that Ignalina would be shut down in 2009 (a requirement of joining the EU in 2004) we are about 10 years off having a replacement.

Our desire for energy independence has led us to sell our soul to a Japanese-American consortium.

Lithuania’s dilly-dallying has allowed Russia and Belarus to capitalise on an energy shortage in the area which will result in our country being surrounded by larger, and I will confidently say, less safety conscious and environmentally aware alternatives that will in the end offer electricity at cheaper prices, adversely affecting the economy and safety of Lithuania as a whole.

In the end, there are still a lot of variables, and the Belarus plant is still no certainty, but for Prime Minister Kubilius to gleefully state that we are in the process of weaning ourselves off Russian imports is a misnomer.

For one, we buy Russian crude, gas and electricity because it is cheaper than we can get it anywhere else.

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