Slovak government’s excessive entrepreneurial confidence and considered state guarantees to nuclear power plant may be costly to the Slovak consumer.

On 2^nd December 2013, INESS released a new study in reaction to the government plans to offer guarantees to the proposed construction of a new nuclear source in Slovakia.

The Slovak government’s recent land purchases confirm its determination to procure a third nuclear power plant for Slovakia. The considered electricity price guarantees present a considerable risk to the consumers. The hitherto forecasted energy consumption growth turned out to be consistently exaggerated. The purported build-up of yet another massive energy source at a time when the neighbouring countries find themselves in a similar predicament may lead to unprecedented electricity generation capacity oversupply. With no commercially viable use for such reckless redundancy in sight, the project could increase electricity price of each megawatt-hour by €8.6 to the end consumer, which is a hike comparable to the much chastised mark-up due to subsidised renewables.

Slovakia ranks second in the world in terms of the amount of energy derived from nuclear reactors as measured by the percentage on overall consumption. It has two operational reactors in ‘V2‘ power plant in Jaslovské Bohunice, a power plant in Mochovce, with two reactors running at full capacity, another two nearing their completion, and blueprints on the table for a New Nuclear Source, which should again be located within the municipal bounds of Jaslovské Bohunice and Radošovce locale.

The objective of this analysis is to probe the economic necessity for a third nuclear power plant in Slovakia, along with its potential repercussions for the end energy consumer.

Nuclear power plants are flagged up as the most expensive endeavours known to the human society. Partaking of public resources in the construction of a new nuclear energy source can result in considerable costs for the taxpayer and energy consumers alike due to high risk of overpriced construction cost and economically unsound operational costs. These risks ought to be borne in full by a private investor as opposed to the state. Slovak commercial electricity consumers already pay one of the highest prices in Europe, which is directly attributable to the misguided nature of past political decisions. Further energy price hikes could seriously undermine Slovakia’s competitiveness.

Slovakia boasts vast electro-energetic industry that can provide sufficient supplies of energy today and into the future. The current trend evinces that the previously envisaged increases in electric energy consumption were misconstrued. Conversely, Slovakia’s energy consumption has been stagnating for the past 20 years and still has not reached record 1989 levels. There is no reason to believe that augmenting future production capacity by dint of reactivation or reconstruction of the existing capacities or, potentially, erecting smaller sources via private capital ventures without further straining the budged or the consumer will not meet future needs.

The energy sector will do without socialist central planning practices, too. The market is not reliant upon a solo participant – the state, borders are not hermetically sealed off and technological innovation spreads fast. The government strategy should leave the door ajar to seize the opportunities the future holds. The decades to come present a plethora of open scenarios – a continuous, marked decrease in the price and technological advancement of renewables, gas price reductions, improved energy efficiency, ergo a fall in demand for electricity, modernisation of existing capacities, but also cutting-edge and cheaper new nuclear energy sources. The pursuit of the best and most desirable solution is the prerogative of private investors, who will risk their own resources, not the government who puts taxpayers’ money at stake.

The sum Slovak citizens have already contributed towards the completion of the second part of Mochovce nuclear power plant is €500m and rising. Economically speaking, constructing a third nuclear power plant eludes all sense. It will not enhance consumer satisfaction, on the contrary – it is highly likely to generate losses to be covered with the consumer’s tap. The government should allow the private sphere to devise initiatives to generate new sources of energy, including the construction of nuclear power plants, but it should steer clear of delegating the burden of business risk to its citizens’ shoulders. Diverting public resources towards propping up the project of a new nuclear energy source will not boost Slovakia’s prosperity. Instead, it will jeopardize the competitiveness of Slovak industry and many a strained purse of Slovak households.

Key findings of the study:

• Per-annum electricity consumption in Slovakia in 2012 was lower than in 1989.
• The 2010-2012 economic rebound brought by growing industry was not accompanied by growth in electricity consumption.
• Slovak household energy consumption has kept dropping steadily and irrespectively of business cycles since 2000; it had decreased by a margin of more than 20 per cent by 2011.
• Should the past investment initiatives to new electricity sources have strictly adhered to the official demand projections, Slovakia would have had considerably overblown electric energy power sources that would represent the sunk costs in billions of euros.
• The 2013-2030 framework of reference anticipates 1.2 per cent annual increments in the electricity consumption. By contrast, the highest hitherto recorded growth in electricity consumption in Slovakia in 2000-2008 did not exceed 0.98 per cent pace per year.
• An additional nuclear power plant energy output would cause supply to exceed demand by nearly 40% in 2030 according to the official forecasts.
• End-user electricity costs for businesses are among the highest in Continental Europe.
• Slovakia is already energy-independent by dint of the generating power of the installed units.
• It is safe to assume that the Central Europe region will have sufficient supplies of electric energy generating capacity in the years to come.
• Empirical evidence from such projects as Mochovce or Olkiluoto nuclear power plants suggests that the eventual construction costs of a nuclear power plant exceed the estimates by an order of magnitude several times greater than the plans.
• Slovak households have already contributed €500m towards the construction of the second part of the Mochovce nuclear power plant, €90 per capita.
• The construction of a new nuclear power source would crowd out most of the new investment in the sector.
• GDP growth attributable to the construction of a new nuclear energy source would in all likelihood be lower than the decrease, due to the unrealised purchases and investment of businesses facing higher electricity costs.
• New nuclear power source with a guaranteed purchase price could spiral up the electricity price by roughly €8.6/megawatt-hour. A household with low consumption would end up paying €19.8 more on a yearly basis, medium consumption family €68.8 and high consumption €160.8.

The study is available for download here (in the Slovak language only).