Hungary hopeful of Paks II approval within weeks

20 September 2016

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The European Commission is expected to issue a decision "within weeks" on Hungary's plan to build two additional reactors at Paks, Attila Aszódi, the government commissioner responsible for Paks II, said last week. The submission of the site licence application for the new Russian-built VVER-1200 units to Hungary's regulator is scheduled for the end of October, Aszódi told delegates at the World Nuclear Association's 41st Annual Symposium in London on 16 September.

Aszódi speaking at the Annual Symposium (Image: World Nuclear Association)

Paks currently comprises four Russian-supplied VVER-440 pressurized water reactors, which started up between 1982 and 1987. An inter-governmental agreement signed in early 2014 would see Russian enterprises and their international sub-contractors supply two VVER-1200 reactors at Paks, as well as a Russian state loan of up to €10.0 billion ($11.2 billion) to finance 80% of the project.

The European Commission has been examining until recently two matters related to Paks II - procurement and whether funding of the project amounts to state aid.

Aszódi said: "We hope to get permission from the Commission within the next few weeks, which is extremely important in order to be able to switch to full speed with all the engineering works. In parallel with the European negotiations, we have been working on licensing and some design activities for the last two years. We've completed the environmental licensing [work] and hope to get the environmental licence pretty soon, within a few weeks as well. The site investigation work is finished and we are working on the documentation for that. We hope to submit the site licence application at the end of October with the target of obtaining the licence in the spring of next year."

Once the site and environmental licences have been issued, the construction licence application can be prepared, he said. Construction work would start in 2018, but when exactly depends, he said, on the conditions the European Commission attaches to its approval of the project. Hungary has had the Commission's approval to spend the last two years working on licensing, he added.

Positive signals

The European Commission and the Hungarian government held a ministerial meeting in Budapest two weeks ago to discuss energy policy issues related to south-east Europe's natural gas market. During his attendance of that event, Maros Sevcovic, vice president of the European Commission, told reporters that an agreement on Paks II is close to completion, Aszódi said.

"Procurement and state aid are the two elements that are left," he said, "while the others have already been concluded successfully."

The Euratom Supply Agency approved a contract between Hungary and Russia on nuclear fuel supply for the project in April 2015. Then in September of that year Hungary received confirmation from the European Commission that the project meets the objectives of the Euratom Treaty. That approval relates to Article 41 of the Euratom treaty - the requirement that persons and undertakings engaged in certain industrial activities communicate to the European Commission investment projects relating to new installations and also to replacements or conversions.

While the two other questions were still open - the kind of procurement rules that should be applied during realisation of the project and the so-called 'no state aid versus state-aid' issue - Hungary worked on environmental licensing for the project, which includes adhering to the processes of the Espoo Convention.

The Hungarian government has said the Hungarian-Russian intergovernmental agreement signed in January 2014, and the engineering, procurement and construction contract signed in December 2014 comply with EU regulations.

Long process

Hungary first notified the European Commission of the Paks II project in late 2013. Asked why the approval process had taken so long, Aszódi said last week, "The first thing to understand is we have a system of contracts, including intergovernmental agreements on the project and on financing, both of which were notified to the Commission prior to signing."

He added: "On the basis of those we developed the implementation agreements - the EPC contract, the fuel supply contract and the operation and maintenance support contract. The Commission was notified of all these agreements prior to signing. We initiated a discussion with the Commission to see the position Brussels had towards the project. We needed to negotiate the fuel supply contract with the Euratom Supply Agency and notified it that the project was in line with Article 41 of the Euratom Treaty. So there have been many different steps.

"In addition to those official notifications by the government, the Commission started three investigations, one led by DG-Environment directed to the Paks II project law, one regarding procurement and one regarding possible state aid. All these steps involved negotiations in parallel and that's why it has taken quite a long time."

Maintaining nuclear's share

Paks II will enable Hungary to keep the share of nuclear power in the country's electricity mix at nearly 40%.

The four units in operation at the Paks site account for 36% of Hungary's electricity production, but these are old VVER-440 units with the original design lifetime of 30 years. The lifetime extension with an additional 20 years has been successfully licensed for unit 1 and unit 2, and Paks Nuclear Power Plant Ltd is currently working on the licensing for lifetime extensions for units 3 and 4. After the lifetime extension program, they have to be shut down between 2032 and 2037.

Aszódi said: "Hungary is a small country, with just ten million inhabitants, and the objective of Paks II is to have the same production capacity when those units are withdrawn. That's why we started the Paks II project in a timely manner in order to have some reserve in the scheduling of the program. If we have the two new units in operation in 2025 and 2026 we will have six operational units at the site for approximately six years. In 2032, we will have to shut down the first old unit and by 2037 all the old units will be out of the system. In the late 2030s we will have in fact the same share of power from nuclear as today."

Electricity demand in Hungary is increasing by about 1% a year, he noted.

The country is "fully in line" with the World Nuclear Association's target under its Harmony initiative - to have 1000 GWe of new nuclear capacity globally by 2050, "because we are maintaining capacity with two 1200 MWe units on the existing Paks site", Aszódi said.

Making a profit

To be a stand-alone project and be profitable, Paks II would need a wholesale market price of more than €55 per megawatt hour, he said. "Our deep analysis indicates that the cost of electricity production in the new units will be about €55 per megawatt hour. In 2025, the wholesale electricity price is expected to be between €60 and €65 per megawatt hour, which shows that even from the very first year the plant will be profitable."

Imre Mártha, the former chief executive of Hungarian grid operator MVM, told local media recently that the country should wait until the Paks I reactors complete operations before putting Paks II on the grid, because the parallel operation of the old and new units would create additional costs.

Aszódi said he totally disagreed with this suggestion. "All big power plant projects are complex and nuclear projects more so because of the licensing issues. You've seen how long it has taken with the Commission," he told delegates. "I don’t see any problem with having six units in operation simultaneously at the Paks site for several years. It's important to note that currently Hungary imports more than 30% of its electricity and we will need to shut down half of our conventional power plants by 2030. There are at least 7000 megawatts of new capacity needed in the next 15 years and, of those, 2400 megawatts will be the two new units at the Paks site. So we will need even more power plants in the next 15 years."

Science and politics

Prior to his role as government commissioner, Aszódi was professor of Budapest University of Technology and Economics Institute of Nuclear Techniques for 17 years.

Asked how he adjusted from his time in academia to a role which can at times be politically sensitive, Aszódi said: "I have experience of how to work with politicians and how to coordinate between the different stakeholders - the licensee, the authorities and the government."

Aszódi was responsible for the university's training reactor and was a ministerial commissioner when, in 2003, there was an accident at unit 2 of the Paks plant. Thirty fuel assemblies were damaged inside a cleaning tank due to insufficient cooling. The reactor was out of service until the end of 2006 and in 2014 the damaged fuel was sent to Mayak in Russia for reprocessing.

Researched and written

by World Nuclear News

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