Surprise as Czechia picks S. Korea to power nuclear drive
July 23, 2024
The Czech Republic surprised many last week when it announced on July 17 that it will award South Korea the country's biggest-ever contract to build up to four new nuclear reactors.
Czech Prime Minister Petr Fiala announced that Korea Hydro & Nuclear Power (KHNP) beat France's EDF in a tender launched in 2022 to build a new reactor at the Dukovany power plant in the center of the country.
"The Korean bid was better in all criteria assessed," Fiala told reporters, adding that Prague has decided to build two units at Dukovany "for now."
Construction of the first unit is expected to start in 2029, with the reactor to go online by 2036.
Cost a key factor
Officials have stressed that the price of the Korean offer, which Fiala said amounts to around €8 billion per unit, helped tip the balance in KHNP's favor.
The cost of expanding the Czech Republic's fleet of nuclear power plants and the key question as to who should pick up the tab, has for over a decade delayed progress on what is the main plank of the country's long-term energy strategy to increase to 50% nuclear energy's contribution to the country's total power output.
Dukovany's four Soviet-era units, alongside a pair at Temelin near the Austrian border, currently produce around 30% of the country's output, but they are all getting on in years.
Yet despite broad support across the political spectrum for the policy to increase nuclear power, finances and geopolitics have so far stood in the way.
The objections of state-controlled energy company CEZ's minority shareholders to the company taking on such a massive and risky investment, and conflicting approaches among political players, stopped a tender to add two reactors at Temelin in 2014.
This time, CEZ will take on the investment, albeit with significant state support.
Other obstacles to nuclear progress
More recently, a tussle over whether nuclear power should qualify as a sustainable energy source under EU environmental regulations has clouded the issue.
But Fiala has upped the ante since Russia's invasion of Ukraine sparked an energy crunch two years ago. Last year he announced that his government wants to add up to four new reactors to the six currently serving the country.
Fiala said when announcing the result of the Dukovany tender that an option for adding a further two units at Temelin will be discussed with KHNP.
Russia and China not included in tender
Ten years ago, Russia's state nuclear agency Rosatom looked like a shoo-in for the contract to expand Temelin thanks to residual support for Moscow among Prague's political power brokers. However, relations with Russia have since broken down almost completely.
The discovery in 2021 that Russian intelligence had blown up an arms depot at Vrbetice in the east of the country in 2014, killing two, sparked fury in the Czech Republic. The ensuing diplomatic tit-for-tat saw embassies in Prague and Moscow all but emptied.
Russia's invasion of Ukraine and Czechia's keen support for Kyiv have only deepened the freeze in relations.
But even before that, Czech lawmakers backed legislation blocking Russia from taking part in the nuclear tender due to national security concerns.
China, which had also spent years lobbying for the job, was also excluded.
Why did the South Koreans win the bid?
Given Prague's financing concerns, the exclusion of Moscow and Beijing — whose nuclear exports are highly competitive on cost — may have given the South Koreans a distinct advantage.
KHNP enjoys a strong track record of efficiency in meeting delivery and cost parameters, and the announced pricing of its offer looks extremely competitive.
The Korean company is thought likely to have had extra motivation to make the price tempting for Prague. The Czech contract is a route for KHNP to a debut project in the EU, a market that is potentially lucrative but also challenging in terms of regulations.
Why did the French not get the deal?
The fact that France's EDF has a poor reputation on meeting delivery and cost parameters is also likely to have weighed on minds in Prague.
Nevertheless, the decision to go with South Korea was still unexpected by many because the French bid had long been considered the clear favorite.
"It was a surprise. Not from a technical or cost point of view, but from the geopolitical angle," Martin Jirusek, an assistant professor at Brno's Masaryk University, who specializes in energy geopolitics, told DW. "It was assumed that France was the natural choice because it's such a key state in the EU and potentially valuable partner for Czechia in those terms."
Nuclear power as a sustainable energy source for the EU?
Alongside a raft of (mostly Central and Eastern European) member states, the Czechs have spent recent years pushing the EU into accepting that nuclear power should have a role in decoupling from Russian energy and driving the energy transition.
But it was France's political heft that was key in securing a classification for nuclear power as a sustainable investment under the EU's Green Deal two years ago.
That allowed Prague to submit to Brussels a plan to supply a 30-year state loan to fund the first unit at Dukovany, as well as a contract for difference that would guarantee CEZ a minimum price for the electricity produced.
However, the debate remains lively, with Germany, Austria, Denmark, Italy, and Greece forming a strong anti-nuclear block.
Will the decision impact relations with France?
The Czechs will need to work their way past such obstacles as they launch a bid to secure agreement on funding and support for the second unit at Dukovany that KHNP has agreed to build.
But having snubbed Paris, the nuclear lobby's leading voice, Prague could find itself more isolated in that fight than it might have been.
"The snub seems likely to impact relations with France for now," Jirusek suggests.
The bottom line
Still, it seems that for Fiala, domestic politics trumped the international angle.
Having seen his government's support drained by the austerity drive he instituted in the middle of the cost-of-living crisis, the Czech PM will find it far easier to sell the savings offered by the South Korean bid to taxpayers than the uncertain and unquantifiable advantages of French friendship.
But at the same time, many suspect that the price announced by Fiala may be pie in the sky.
"It will be interesting to see what price is actually on the contract when it's signed next year," says Jirusek, who suggests that €12 billion — and not €8 billion — per unit is probably more realistic.
Edited by: Aingeal Flanagan