Poles are negotiating the final terms of cooperation with the U.S.A. on buliding an NPP in Pomerania. The government has prepared a resolution on financing the project and on 25 May Bechtel and Westinghouse signed an agreement. Construction is due to start in 2026, so the project partners are doing everything to keep up with the preparations – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.
It takes two
According to the supporters of the project, we are experiencing a renaissance of nuclear power and for the first time we are this close to the implementation of a nuclear program in Poland. Recently, Westinghouse and Bechtel have responded to Warsaw’s expectations and established a consortium that combines them into one team that will cooperate with Poles. Polish Nuclear Power Plants (PEJ) is to move its office to larger headquarters from Mokotowska Street, where the Westinghouse office in Poland is also located, to Aleje Jerozolimskie St. Bechtel is to open an office in Warsaw in July. The three documents that sanction Poland’s atomic project are Poland’s Energy Policy from 2040, the Polish Nuclear Energy Program (PPEJ) and the US-Poland intergovernmental agreement. This is the first such agreement in U.S. history. The Chinese and Russians are active in many countries. The US government has identified the need for such engagement and has done so for the first time in Poland. The US-Poland intergovernmental agreement provided for the drafting of a Concept and Execution Report (CER).
Westinghouse will build a nuclear island, ensure engineering preparation and nuclear fuel. The Americans have a uranium supplier in their portfolio, which is Canada’s CAMECO and are the only bidders that actually offered a reactor that is in operation. The fuel purchasing strategy it to be developed with adherence to the EURATOM treaty. No nuclear fuel contract will enter into force without the approval of the European Supply Agency (ESA). Bechtel will do the construction work and build the turbine island. Westinghouse will lead the design phase, and Bechtel will take responsibility for the construction when preliminary construction begins. The project experience offered by the Americans could make it possible to add hydrogen installations to the NPP or produce medical isotopes in Poland.
Poland is concerned that the biggest risk when it comes to delays lies in designing the plant at the stage of construction and not having a contractor from the start. Poland wants to have a design contract with a general contractor to avoid this. Poles and Americans wish to maximize the participation of Polish contractors in the project. The project of the fourth unit of the Vogtle power plant in the USA in AP1000 technology is currently undergoing a phase of hot testing. It had two separate contracts. From an investor’s perspective, it is more difficult to integrate two separate contracts, so the risk increases. Bechtel and Westinghouse will be one team under one contract. This is also the first such case in history. Each defect of the project is billions of zlotys in additional costs and delays. This was the case with substandard rods at Vogtle, which delayed the project by three months. Each component must obtain appropriate quality certificates. The Poles want to get a building permit in 2026-2027, but the detailed schedule will be determined with Bechtel and Westinghouse. Bechtel and Westinghouse have also agreed to a joint responsibility mechanism,
How to transport a 700-ton piece of metal?
Another challenge is the prolonged time of delivery of components and logistics. Some orders must be placed before the contract is signed due to a lead time of about five years. A detailed schedule is yet to be established. Other construction projects had problems with this. Some Westinghouse suppliers were not adequately prepared, which delayed Vogtle. The first components must be in place before the concrete is poured, and inflation and supply chain strain pose challenges.
The Americans have a portfolio of suppliers, but when it comes to critical components there aren’t any companies in Poland. However, they will be able to provide others so that they account for about 50 percent of the project value after appropriate certification. The Americans conducted an analysis of the labor market in Poland and across Europe. They hope to bring as many experts as possible to the project in Pomerania. It is worth adding that the structural elements of the nuclear power plant have large dimensions, which requires the expansion of roads and railways, as well as the construction of a pier for collection. The heaviest component weighs 700 tons, it is a steam transducer. The pressure vessel of the reactor is 7 m. The gasifier is 45 meters long. For this reason, according to the project partners, there is no better location than Lubiatowo-Kopalino and Żarnowiec. The former is preferred because of direct access to the Baltic Sea. This also means more power without the need to build a chimney cooler. Bechtel and Westinghouse will transfer expertise from the Front-End Engineering Design (FEED) study paid for by the Development Finance Corporation (DFC). They will do this in order to optimize orders. Delays that will be few-weeks long will be offset, so that the reactor could still be launched in 2033. The components with the longest production cycle will be ordered on time, so that there are no delays in the schedule. Bechtel had taken over the management of the Vogtle plant after problems to get the project off the ground. It optimized the process, so that the fourth reactor will be able to launch by the end of 2023. Interestingly, Bechtel and Combustion Engineering (later acquired by Westinghouse) built 11 reactors in South Korea.
A breakthrough year for the atom
PEJ submitted an information sheet on the project and the scope of the Environmental Impact Report was determined in August 2015. Then environmental and location studies were carried out. The Environmental Impact Report was submitted in March 2022. Now it is time for the General Directorate for Environmental Protection to issue the environmental decision. On top of that the Voivode needs to determine the location and issue a permit for preparatory works, then the National Atomic Energy Agency (PAA) and the Voivode have to issue separate construction permits in that order, and then the Voivodship Inspectorate for Construction Oversight has to grant a use permit. Then the PAA needs to allow the launch and exploitation. Finally, the Energy Regulatory Office will issue a concession for power generation. Changes to the nuclear island will only be made when necessary. The PAA cooperates with the Nuclear Regulatory Commission in the United States. Thanks to this, the regulator in Poland will be able to better evaluate the AP1000 technology.
PAA and Poland’s Office of Technical Inspection visited the Vogtle power plant. It has been hinted that the stakeholders are trying to find ways to speed some procedures up. They also had a six-month buffer for the submission of the Environmental Impact Report, which was ultimately delayed by a shorter period. The application for a location decision may be expedited by one year. PEJ also filed a motion for a key government decision, which could be made before the end of the process thanks to the Special Nuclear Act. The parties to the contracts believe this decision will formally take the political load off of the investment. It’s a green light and an abolishment of a legal barrier. States have a monopoly on nuclear power because they take responsibility for any possible problems.
Probably the last country out of several dozen participating in the cross-border consultations on the Polish nuclear power plant is Austria, unless two other eligible countries come forward. Poles hope to complete the procedure in June 2023. Polish Nuclear Power Plants are preparing to submit an application for a location decision. That decision may be made this year. The exact date for the start of construction, which was originally set for 2026, remains to be determined, but concrete pouring may start in 2027. It is expected that the construction works will start in 2026. However, they may be preliminary if appropriate regulations make it possible to treat this way the first excavation necessary to level the ground and prepare the earthwork for the next stage.
The year 2023 is crucial for the future of Poland’s first nuclear power plant, because that’s when the government is to make the decision-in-principle, PSE is to handle the submitted connection conditions, and PEJ, Bechtel and Westinghouse are to sign a project agreement in the 3rd quarter. The time it takes to launch an AP1000 block is shorter every year due to the learning curve principle. New blocks were expected to join the grid every three years, but this is happening every two years. Therefore, it is possible to update the Polish Nuclear Energy Program in 2024. The Westinghouse shared services center may become a hub for the entire region. Bechtel does a portion of construction work, but it has to order a steam turbine from someone. The first tender for the turbine will be announced after the signing of the Engineering Procurement Contract (EPC). It will take up to five years. This is a critical step in setting up the cooling systems in the project.
Waiting for funding
A Polish team is in the U.S. right now and is wrapping up the negotiations on cooperation with Americans for the project agreement. The talks on financing the project have not ended yet. The amounts are significant from the point of view of Poland, but remain a commercial secret and are still being negotiated. The US government agency EXIMBANK has signed a letter of intent for significant amounts, talks are underway for a loan for project work. Interestingly, EXIMBANK will conduct a feasibility study of the project before engaging, so it will be a litmus test of profitability. Discussions are ongoing with the Ministry of Finance and Bank Gospodarstwa Kajowego. EXIMBANK has proposed a potential loan for a company that could become involved in the Polish project. The Koreans and the Japanese had such a mechanism, but the Americans did not. Poles have such an option, also for the first time in history. One of the proposals involves a cost-overrun facility, i.e. additional financing in case of exceeding the project costs from the DFC.
The financial model is reportedly at an advanced stage, but it needs to be consulted with the market. It assumes financing from the state budget and credit from various institutions such as EXIMBANK or DFC with a certain percentage of state treasury involvement. All options are on the table. A BiznesAlert.pl source has told us that the financial model would not be revealed in 2023. However, the government has drafted a resolution on its preparation. „The Council of Ministers will take the necessary measures within the framework of the current legislation to ensure adequate financing for the construction of a nuclear power plant with an electrical capacity of up to 3750 MWe in the area of the municipalities of Choczewo or Gniewino and Krokowa based on the American AP1000 reactor technology, hereinafter referred to as: <the investment>,” reads the draft government resolution on the model of financing. The authors recall that „the implementation of any of the measures to ensure the financing of investments, in the event that these measures are considered to constitute state aid, will not occur before the decision of the European Commission referred to in art. 107 pt. 3 of the Treaty on the Functioning of the European Union, which will recognize the state aid granted to the company as compatible with the internal market. In connection with the urgent need to take the above actions, the resolution proposed that it enter into force on the day following the date of adoption.” The resolution is expected to be adopted in the second quarter of 2023. Poles want to notify the financing model to the European Commission as soon as possible. This model is to replace the financing by PEJ at the stage of the EPC contract, because that’s when the money will have to be paid to cover the cost of the NPP, which is to reach over PLN 100 billion.
Keeping an eye on the atom in the Baltic
The nuclear power plant will ensure Poland’s energy security, but it will be located on the Baltic coast, just like other critical infrastructure – the naftoport and the LNG terminal. It must be protected in the same way. Bechtel, Westinghouse and Polish Nuclear Power Plants must jointly implement safety standards. The project participants must also be protected from hostile, external interference. This is not just about threats to critical energy infrastructure diagnosed after the NS 1 and 2 sabotage. Westinghouse boasts a passive safety system that acts like a bucket of cold water in a sauna, flooding the reactor with water placed above it in case of overheating. Another risk that may delay the project are protests, which may or may not originate in Poland. The first nuclear power plant in Poland therefore needs to be protected by the relevant services.