Poland: Europe’s Next Nuclear Powerhouse?
Today Poland runs on coal and has the dirtiest grid in the EU, but driven by climate and geopolitical concerns, Poland has set out bold and ambitious nuclear goals.
No European country is more reliant on coal right now than Poland. Currently more than a third of families still heat with it, despite health risks. With the energy crunch, some have even taken to digging it out of their own backyards. It’s no surprise that Poland, a rising star in the EU when it comes to economic growth and influence, is determined to kick the coal habit…by going atomic.
It will have a long way to go. Today, the Baltic state is only home to a small research reactor named “Maria.” Previously attempts to construct nuclear power plants have stalled. But Poland has renewed its commitments to nuclear this year on the backs of increased energy security threats from Russia, and that commitment is supported by the whole political spectrum from left to right. If everything goes as planned, nuclear power could be providing up to 40% of Poland’s energy use by the 2040s, according to the Polish Institute of Economics.
Let’s take a look at Poland’s ambitious plans and innovative ideas about how to finance them.
The Big Six
The backbone of the Polish atomic plan is to build 6 nuclear nuclear reactors for a total of up to 9GW by the 2040s. These would be meat-and-potatoes Light Water Reactors (LWRs) from 1GW to 1.5GW in size. A bidding process in late 2022 attracted EDF from France, Westinghouse from the US and South Korea’s state-run KHNP.
Westinghouse Electric announced first that it has snagged the Polish contract for its AP1000 technology, a choice that was widely seen as a geopolitical move on Poland’s part as well as a commercial one. Westinghouse is on the home stretch for finishing Georgia’s Vogtle reactors after years of delays and cost overrun. Unit 3 loaded fuel in October. Alas, there are no domestic plans to build more AP1000 units, with US nuclear efforts focused more on life extensions for existing reactors and on new-build SMRs. Instead Westinghouse is marketing the AP1000 for export. If the Polish units are a success, they could be building the supply-chain backbone for an European fleet.
But wait…there’s more!
Hot on the heels of the Westinghouse announcement, South Korea’s Korea Hydro and Nuclear Power Co. (KHNP) announced it has inked its own deal with Poland, with the APR-1400. The Polish, who had played their cards close to their chests throughout the bidding process, had split the order! Reports differ slightly but it looks like both deals will go ahead in parallel, with the Koreans and the Americans each getting one plant with three reactors. Ground breaking will take place in 2026 and the plants will start to operate in 2033, if all goes well.
The Koreans are coming off the success of exporting to the United Arab Emirates, of course. The success of the Barakah Nuclear Power Plant, which took the UAE from Zero to APR-1400 in ten years proves that the KHNP have the chops to bring a project in on time and on budget, a skill that appears to have faded into the mists of time for Western nuclear projects.
The IP of the APR-1400 has been a long-running dispute, with Westinghouse suing the Koreans right before the bid to keep them out of the Polish market. At the time of writing it’s uncertain whether Westinghouse is happy with half the pie or it will be continuing to go after the Koreans in court.
Beyond the Big Six
If the Big Six is the main course, Poland is certainly not going to skip on SMR for desserts. While plans are not quite as concrete and state-driven, Poland has been hotly investigating quite a few SMR technologies. What is perhaps most intriguing is the collaboration between NuScale Power and Polish copper and silver producer KGHM to use NuScale’s 77MW VOYGR modules as a source of heat for industrial processes as well as electricity.
GE-Hitachi’s BWRX-300 is also in the running, with a potential deal that will see ten SMRs replacing coal-fired power plants, with the possibility of repurposing existing infrastructure such as switchyards and grid connection points. Canada’s BWXT Canada will be in the mix to actually build the plants for Poland.
Both are smart uses of SMRs that can overcome their higher cost of energy relative to the big boys by providing additional value: industrial heat in the case of the NuScale deal, and cost-cutting coal retrofits in the case of the BWRX-300 deal. Poland is also looking into Last Energy’s SMRs and I’ve been told Polish regulators are continuing to visit new concepts. It’s unclear right now how many of these early-stage projects will actually make it, but the tentative schedule appears to be for the first SMRs in Poland to be complete by 2029, an ambitious schedule.
I was lucky enough to catch a presentation by Lukasz Sawicki, Chief Expert at the Ministry of Climate and Environment at the 2022 World Nuclear Symposium. He presented his “SaHo” model for financing a nuclear power plant. It made too much sense. We all know one of the biggest hurdles to building nuclear is how to finance them: they are capital-intensive beasts with high risk of cost overruns and a long payback horizon. Private capital often becomes too expensive, but few states are willing to take on the burden of a full nuclear buildout.
The SaHo model begins by forming a Special Project Vehicle (SPV) for the nuclear plant. The state takes full ownership of the SPV at the start, when it is at the riskiest. Then it divests over time, selling shares to investors, who gain confidence in the project as it progresses. By the time the nuclear plant connects to the grid, it has become a valuable asset that is low in risk and ready to be 100% private owned. This allows the state to recover the capital as quickly as possible while still minimizing the financing cost of the project, as governments can borrow at better terms than the private sector.
It’s great to see Poland thinking outside of the box to involve both the public and private sector fully in the appropriate phase of the project.
THE ELEMENTAL TAKE
Poland has all the right ingredients to create a successful nuclear sector from scratch, and it is making all the right moves. Without neglecting the rich possibilities offered by SMRs, it has centered its policy on gigawatt-scale reactors, a proven technology that will offer the lowest cost per kilowatt-hour. The state is ready to be fully-involved, but only where it needs to be. It’s a both/and approach that realizes we need government AND private enterprise, big reactors AND small reactors.
Poland is also creating an interesting head-to-head competition by splitting its order for large reactors between Westinghouse and Korea’s KHNP. It will be very interesting to observe how the two companies do in parallel. Westinghouse is going to have to work hard to keep up with KHNP…the world will be watching. While the conventional wisdom is that you should stick with one kind of reactor to maximize economy of scale and accumulate learning, there’s something to be said in not putting all of one’s egg in one basket also.
Countries all around the world who are thinking of establishing their nuclear power plants should look at Poland as a object lesson in what they should do: establish a clear and ambitious policy objective that attracts top-notch international suppliers and make them compete hard for your business. I’m sure ample amounts of localization and technology transfer have been negotiated.
Of course, it helps if you have a populace, like Poland, that is getting more and more pro-nuclear energy every year! Maybe the nearby threat coming from its neighbor to the East focuses Polish minds on the real threats: energy instability (as well as climate change). I hope that more countries in the EU and around the world will be inspired by Poland’s bold approach and embrace nuclear energy to decarbonize, achieve energy stability and boost growth.
The thing about the SaHo model is interesting, but doesn't it expose the government to a lot of downside risk from possible cost overruns? It would be nice to develop a financing model that lets investors bet on the probability of cost overruns ahead of time, and then allowing policy makers to use the resulting market-based risk estimation in policy making. Has anybody worked on something like that? From what I know currently, the cost overrun issue seems like a much more plausible argument against betting the farm on nuclear energy, much more so than safety or waste management concerns.
Minor bit of feedback: I had to look up SMR, would've been worth defining on first usage.
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