Nuclear Capability

Economic News

22 Jul 2010
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Ukraine is bringing in private firms to develop and supply fuel to the country's new generation of nuclear power plants (NPPs), yet a wholesale privatisation of the sector remains off the agenda for now.

On May 28, the Ukrainian ministry of fuels and energy inked a memorandum of understanding (MoU) with Atomic Energy of Canada[MSOffice2], to help develop NPPs in Ukraine. The President, Viktor Yushchenko, has praised the deal, which could involve the country using Canadian technology to reuse uranium recovered from its old water-water energetic (VVER) reactors.

Ukraine plans to construct up to 11[MSOffice4][MSOffice5] new nuclear reactors by 2030. These will be added to the four state-owned plants which currently have 15 operational[MSOffice6] reactors and a combined capacity of 14 gigawatts (GW).

Nuclear energy provided 48% of Ukraine's power needs in 2007. As the cheapest of Ukraine's three electricity sources - the others being thermal and hydro - the country's nuclear plants generally run near 100% capacity throughout the year. Hydro and thermal stations run at a lower capacity most of the time, but increase output to cover peaks in demand.

One of the aims for Ukraine's nuclear programme is to reduce energy dependence on Russia. Ukraine's relationship with Moscow has at times been strained, including a 'gas crisis' that reached its peak in January 2006, when Russia temporarily cut off gas exports to its southern neighbour.

Ukraine has ample uranium resources. Some 12 new uranium fields are currently under exploration, each of which the government says could provide 50 years worth of fuel. Last year, the government announced plans to increase Ukraine's annual uranium production to 1400 tonnes from 800 within three years - a 75% rise.

Nevertheless, the plan to expand nuclear power has its critics. Some NGOs (non-governmental organisations), particularly environmental campaigning groups such as the National Ecological Centre of Ukraine, have criticised the cost of the programme and argued that the need for energy diversification has eased since the gas crisis. They have also questioned whether it is realistic to overhaul the heating systems of Ukrainian homes. The majority use natural gas, thanks to an extensive pipe infrastructure and a legacy of cheap gas supplies.

The National Ecological Centre also questions whether the strategy will actually lead to greater energy independence for Ukraine. They assert that Russian technology will be required to power and run its NPPs and point out that a dominant share of Ukraine's nuclear fuel is currently supplied by Russian nuclear fuel cycle company TVEL.

Nevertheless, foreign companies have already started to become involved in aiding Ukraine's nuclear ambitions. In March 2008, the US-based Westinghouse was awarded a contract to supply the South Ukraine NPP with fuel for five years from 2011, effectively covering nearly a quarter of Ukraine's current nuclear fuel needs. The deal involves the construction of 42 fuel assembly units by the plant site, additional to the six the firm already has at the plant, built on a trial basis in 2005. Westinghouse's activity has the support of the US government, which has been encouraging Ukraine to diversify its energy supply.

A further challenge facing Ukraine's nuclear industry is to banish the 'ghost' of Chernobyl. The explosion of a reactor at the Chernobyl NPP in 1986 is the world's worst nuclear plant disaster.

Ukraine still has a large nuclear industry, yet unease remains. Ukrainian state nuclear energy company Energoatom admitted that a very small leak of water occurred from one of the reactors at its Rivne NPP on May 29. Despite appearing less serious than first feared, it caused alarm in the media. Such safety scares could spur the authorities to tighten standards, something that foreign companies bringing capital and expertise seem well placed to tackle.

While the privatisation of NPPs is not yet envisaged, the government seems bent on a policy of liberalisation, and successful projects with new Western partners could possibly see greater private involvement in management and ownership in the future. Ukraine's Black Sea neighbours Romania and Bulgaria are both tendering 49% stakes in reactors at the Kozloduy and Cernavoda NPPs respectively. Unfortunately, the legacy of Chernobyl could make it politically difficult for the government to pass assets into private hands, at least in the short-term. Ukraine's nuclear project should soon start to reap the benefits of new partnerships. In the future these partnerships may be taken to the next level.

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