Poland mulling funding options for nuclear plant as it dumps UK blueprint

Poland mulling funding options for nuclear plant as it dumps UK blueprint
Poland was just one of several CEE states to jump at CfD once the EU approved the UK's use of the model in 2014.
By bne IntelliNews September 12, 2016

Poland is looking at “various options” for financing the country’s first nuclear power plant, a government official said on September 12, stating that the previous plan to run the project via  the "contract for difference" (CfD) model would be too costly.

Poland continues to work on a framework to build a nuclear power plant as part of a series of “strategic decisions” to be made in the next few months to ensure the plant will go online between 2027 and 2029, Energy Minister Krzysztof Tchorzewski said, according to PAP. However, as problems in the UK show - the country's Hinkley Point C is the font of the model - CfD appears a red herring for the CEE states that had pinned their hopes on using it to push funding plans past EU regulators.

That leaves Poland still seeking a way to finance the mammoth project. The cost was estimated at €9.5bn-14bn in 2015. Warsaw had planned to hand state-controlled utility PGE a CfD deal - a mechanism in which the utility would be granted subsidies should it end up producing power above market price. The cash would go the other way should the difference be positive for PGE.

However, as power from the costly endeavour is likely to be more expensive than the current energy prices in the Polish energy system, the government is wary of the costs it would have to bear. To that end, Tchorzewski said, the cabinet is mulling other financing options. However, he declined to give examples.

On the other hand, Tchorzewski stated, there is a need for the Polish state to augment its role in the project. The long delayed effort to build Poland's first nuclear plant is led by listed PGE with involvement from state-controlled peers Tauron and Enea, as well as metals miner KGHM. However, all are under pressure to plough huge funds into new conventional capacity, as well as helping to bail out the struggling coal sector.

Before the current government of Law and Justice (PiS) took over in late 2015, Poland said it needed nuclear power to replace ageing coal-fired capacity and lower CO2 emissions from the power sector. The role of the nuclear facility appears somewhat less clear now; PiS has said several times that it sees coal - which provides close to 90% of Polish power - as the country's main energy source for years to come.

The UK has spent years trying to get Hinkley Point C up and running. The EU's approval of CfD in September 2014 was seen as a huge leap forward. The likes of the Czech Republic and Poland quickly suggested they could adopt the model. However, problems have compounded since.

London has agreed a “strike price” – the guaranteed price for the electricity generated – of £92.50 a megawatt hour for the next 35 years. That is more than twice the cost of existing wholesale electricity prices. Critics claim the deal could cost consumers as much as GBP3bn (€3.6bn).

However, the fuss could spill over to become a geo-political tangle. Unions at France's EDF, which leads the GBP18bn project, claim it could sink the company. Meanwhile, the new UK government has delayed a final decision as it frets about the national security implications of China's 33% stake in the new facility.