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Nuclear power plants are never easy projects to get off the ground, but even by usual standards Bulgaria's planned second nuclear plant has been a particularly torturous affair. Recent events suggest things are moving in a constructive direction, though that hasn't stopped critics from continuing to question the rationale behind the project.

On November 13, Russian Prime Minister Vladimir Putin will be in Sofia for talks with his Bulgarian counterpart Boyko Borisov on issues that will include the fate of the country's second nuclear plant at Belene, for which Russia's state-owned nuclear engineering exporter Atomstroyexport was contracted in 2009 to build the two 1,000-megawatt (MW) reactors. The project ran into problems later that year in October as the German utility RWE, Bulgaria's strategic partner in the project with 49%, pulled out, citing delays, spiralling costs and government indecision.

The Russian state-owned nuclear holding Rosatom has since offered repeatedly to step in and replace RWE. But the Bulgarians, keen to lessen their dependence on Russia for energy, a move backed by the EU, have continued casting about for another European investor. And they may have found one: on October 24, PM Borisov was quoted by newswires as saying that his government is in talks with a Bavarian firm, prompting speculation that the German engineering group Siemens might be considering a stake in the project. "The addition of Siemens to the Belene project would represent a significant coup for Borisov. Following the departure of RWE, the Belene project was effectively unable to move forward without an investment partner with sufficient knowledge and experience in developing nuclear reactors," says Ivan Koutsarov of IHS Global Insight. "Siemens seems a plausible candidate to participate in Belene. Having walked away from a partnership with Areva to develop the European pressurised reactor in February 2009, Siemens struck an agreement with Rosatom a month later to develop third-generation nuclear reactors, and Belene would fit with this strategy."

The Bulgarian government has also put out feelers to its Balkan neighbours. Though Bulgaria's Minister of Economy, Energy and Tourism Traicho Traikov told reporters on November 10 that Croatia has turned down an offer to become a shareholder in Belene, Serbia has expressed interest in participating, and the government is now waiting for a reply from Macedonia.

Throughout this long-drawn-out process, Bulgarian politicians have stuck to a script in support of building Belene that it will produce cheap electricity; that it will satisfy Bulgaria's growing energy needs; that it will boost electricity exports; that it will guarantee Bulgaria's energy security; and because the state has already spent some €600m on the project, it would be a waste to stop now. However, a recent report by Candole Partners, a Prague-based advisory firm which counts several utilities operating in the region among its clients, seeks to dispel some myths about the Belene plant that its says have been created and spread by local politicians. "Discussion is limited to declaratory statements about energy security, while actual decisions are opaque and short-sighted," says the report's author, Ivan Kotev. "It is disturbing that a project with a value equal to one-quarter of Bulgaria's GDP pays such scant regard to basic economic reasoning."

Nuclear myths

While it is true that Bulgaria's existing nuclear power plant Kozloduy produces cheap electricity, this is only because the huge initial investment is excluded from the price composition, Kotev argues. Only variable costs are included; the main fixed cost of investment is not. This would not be the case for NPP Belene, so Candole calculates that Belene would have to sell electricity anywhere between its variable cost (€21/MWh) and its total cost (€51-80), which is 3-10x higher than the price that Kozloduy sells at today on the regulated market.

Candole also questions the idea that Belene will satisfy Bulgaria's growing energy needs and compensate for installed capacities that will soon have to be shut down. For one thing, no substantial growth in electricity consumption can be expected. Second, the hundreds of renewable energy projects are likely to substitute for the plants that are about to shut down. Furthermore, the plant is too big for the needs of the local market and so will have to rely upon exports to be sustainable, but again nobody can predict what regional demand for electricity will be when Belene is completed. "Building a 2-GW nuclear plant to solve fictitious energy problems is poor planning," says Kotev.

Then there is the much-hyped idea that the plant will increase Bulgaria's energy security - a touchy subject in a country that is almost entirely dependent on Russia for its gas and one of the first to suffer when Russia cuts off the gas during its periodic spats with Ukraine. "We are asked to accept that Bulgaria should assign a Russian contractor to build a nuclear power plant using Russian technology that will run on Russian fuel in order to reduce its exposure to another Russian gas crisis," argues Kotev.

Finally, it is estimated that between €600m and €1bn has already been spent on consultants and equipment, so that would be wasted if the project was dropped at this stage. However, Kotev points out that in economics this behaviour is known as "sunk cost fallacy," or throwing good money after bad. "Every rational investment requires periodical assessment of yields. If expected profits are negative, the project is cancelled and losses limited. In this case, the government is behaving like a gambler who bets his wife to win back the family home."

"It is not too late for Bulgaria to give up misguided plans to build NPP Belene," he concludes.