SMRs only for the richest. The staggering costs of building reactors in Poland

Poland should define a clear and stable framework for public support for investments in SMR nuclear reactors, which will enable their implementation while maintaining compliance with EU public aid rules, PIE experts recommend. In their opinion, due to costs, this technology remains beyond the reach of companies operating in Poland, with the exception of a few of the largest companies.

“The profitability of a nuclear power plant is largely determined by the effectiveness of its financing. The first Polish nuclear power plant, Lubiatowo-Kopalino, will be financed with state participation, with the consent of the European Commission, in the contract for difference model, and the financing of other investments – especially SMR – remains an open matter,” wrote PIE analysts.

In their opinion, it is necessary in Poland to establish a repeatable financing framework for projects going beyond the construction of the first large-scale nuclear power plant – in particular for the first commercial SMR projects.

“Financing conditions significantly shape the economics of nuclear projects, which is particularly important in the context of stakeholder concerns regarding first-of-a-kind (FOAK) investments. In relation to SMR, Poland should define a clear and stable public support framework – such as co-financing, state guarantees or other risk-sharing mechanisms that will enable the implementation of the investment, while maintaining compliance with EU state aid rules,” they wrote in the key recommendations.

They added that in practice, priority should be given to instruments such as loan guarantees, revenue stabilization mechanisms (including contracts for difference (CfD), where they are justified, and cooperative financing models tailored to the needs of industrial recipients).

“Appropriate design of support schemes for coalitions of enterprises, such as special economic zones, could ensure that participation in SMR projects is not limited only to a few of the largest enterprises,” they pointed out.

In their opinion, SMRs should be treated as a strategic option and not as a solution to the problem of the available capacity gap in the short term.

They added that SMR projects at the current stage remain a solution with very limited availability – in practice, they are still mainly at the stage of pilots and demonstration implementations.

“As SMR technology enters the commercial availability phase, this solution will be available primarily to the largest business entities. For example, the cost of building four BWRX reactors in Ontario is estimated at approximately CAD 21 billion (PLN 56 billion). The construction of even one such reactor remains beyond the reach of companies operating in Poland – with the exception of a few of the largest companies (also in the case of lower-power units),” they wrote.

They noted that a similar attitude can also be seen in the attitude of Polish energy-intensive industries towards SMR in the PIE study.

They assessed that the high – compared to other solutions – unit costs of SMR reactors indicate the important role of state support in their financing.

“It may take the form of project co-financing (e.g. within industrial zones) or loan guarantees. Most likely, even in such a case, most companies would be interested in a PPA contract with the SMR operator rather than their own direct investment,” they added.

In their opinion, an obstacle to the state's involvement in the construction of SMR for industry may be the risk of inappropriately designed mechanisms being considered prohibited state aid.

“In the case of financing models, two possible models seem most likely. The first is the contract for difference, relatively simple and widely used so far in the energy industry. However, it is – in the opinion of many of our interlocutors – burdening public finances. An alternative may be cooperative models, which in the case of larger energy investments (with the exception of the Mankala model in Finland) are less tested in practice,” PIE analysts wrote.

In their opinion, coordination of activities at the EU level could help investors improve the implementation of nuclear projects and component suppliers to better plan long-term production processes.

On the other hand, they assessed that joint purchases may also be problematic due to the lack of synchronization of schedules of already planned and initiated nuclear projects. They also noticed the lack of coordination in other segments of the energy market and the growing competition between European entities in recent years, e.g. when purchasing turbines for CCGT units.

“At the same time, however, in-depth interviews indicated the possibility of successful coordination of order portfolios (especially in the case of SMRs) at the national level – by selecting the SMR technologies preferred for public support and encouraging enterprises to combine orders in order to reduce their unit prices,” they concluded. (PAP Business)

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