Is the Commercialization of Nuclear Power Plants in Ukraine a near future?

Whereas the experts have been actively discussing the transition of nuclear power generation to new technologies for several years, now the discussions have gone beyond narrow professional communities and they can be traced even in the media, where loud statements from representatives of large private companies appear from time to time on their wish to invest in implementing small modular reactor (SMR) designs. 

What should be expected if a private company suddenly announces its intentions to compete with the only NPP operator in Ukraine NNEGC “Energoatom”? Is the country ready for such a development of events? How will this impact consumers? An expert of the State Scientific and Technical Center for Nuclear and Radiation Safety Maksym Pyshnyi helped us to get insight on these and other issues. 

An expert of the State Scientific and Technical Center for Nuclear and Radiation Safety Maksym Pyshnyi

The media has repeatedly reported on the possibility of construction of small modular reactors (SMRs) in Ukraine by private companies. Mr. Pyshnyi, what do you think about this?  

First, it is necessary to clearly understand how serious the intentions of private or state companies to implement the latest SMR technologies are. Are these real intentions or just a desire to be in a trend and cause a public outcry? 

The construction of new generating capacities is regulated by the Law of Ukraine “On the Electricity Market”. In short, the new planned capacity should be included in the Report on the Assessment of Compliance (Sufficiency) of Generating Capacities for the Next 10 Years. So, in previous Reports there were several references to the possibility/feasibility of introducing SMR technologies in the near future, in particular, to replace power units to be decommissioned, and in the draft Report for 2023-2032 published in early November 2021, mentioning of SMR remained only in the context of one of the possible options for load following capacities of the system. Taking into account the fact that all participants in the energy market (including the nuclear industry) take part in the Report development, it can be concluded that there are no plans to construct SMR in Ukraine in the next 10 years. However, this is only a draft Report, perhaps after COP26 (UN Conference on Climate Change – ed.), the parties to the process will make relevant changes. 

The state policy on this issue is also important. Almost every day, there are reports in the media about the allocation of funds by the governments of different countries to introduce SMRs in particular, and to develop the atomic generation in general, which they hope will allow getting closer to decarbonization of the planet. For private companies, of course, the risks are high, but their involvement can be reduced by relevant reaction of the state, if we are talking about a real interest and a demand for such designs. 

The current legislation of Ukraine does not contain obstacles for SMR construction by private companies; nuclear installation may be in private, state or even municipal ownership. A private company only needs to meet necessary conditions and obtain permits. The same procedure is provided for other types of ownership, there are no exceptions. 

If we are talking about SMR construction by private companies, how will the state influence the process? Will there be a tender for the right to construct SMR, select a technology?  

The state regulates the need to hold a tender for the construction of a new power generation capacity by the relevant law. If nothing changes in the legislation, then a private investor will have to win a construction tender, in which a state company or even a company engaged in the construction of capacities for generation of a different type can become a participant. Without a tender, a newly constructed facility cannot be connected to the system. Moreover, a private company can initiate a public-private partnership (PPP) with a state company and construct a facility under the PPP procedure: for example, to replace state thermal power plants. It is necessary to consider each case separately and find optimal solutions. 

And what about the economic feasibility of such construction for the state? 

During the construction of new power facilities, in addition to safety assessment, which is the main prerequisite, economic feasibility should also be considered. Actually, this issue requires an integrated approach.  

In short, in my opinion, the main factor will be the creation, firstly, of new high-tech production facilities (or large-scale modernization of outdated production means) and, secondly, provision of robust competition both in the nuclear industry and in the energy sector as a whole. Other benefits of introducing new technologies will be derived from the above ones. However, it should be noted separately that due to the replacement of thermal power plants with small modular reactors, measures could be implemented for the coal industry transformation, which are on the agenda. 

Let us suppose that a private operating company has constructed a nuclear power plant, generates and sells electricity for export. How will this affect the state’s economy, if it affects at all?  

If by that time all technological and legislative tools for full-fledged electricity export will be in place, why not? Market mechanisms and integration into the European energy system will allow both private and state participants of the energy market making additional profits by exporting end products. At least, the state will benefit from taxes and customs payments. However, governmental authorities will need to analyze and possibly adjust policy/rules to implement such actions. 

If we assess prospects, how many private companies can be involved in the construction/operation of SMR in Ukraine in your opinion,? 

The number of operating organizations is not legally regulated. Theoretically, there can be many of them. However, to acquire the status of an operating organization and obtain licenses for certain life stages of a nuclear facility, applicants should meet a number of requirements. This is financial capacity, availability of material and other resources, organizational structure, personnel, etc. All these requirements are clearly specified in the legislation, therefore, before “entering” the nuclear industry, private companies can review them and make a preliminary conclusion: will they be able to fulfill the licensing requirements or not. Therefore, I believe that not every “willing company” will be able to become a nuclear power plant operator.  

In order to start a full-fledged operation of the facility, you should first construct it. That is where certain difficulties may arise. Now in Ukraine and, most likely, in the world, there is no single contracting company that could construct such facility as a nuclear power plant on its own. Many specialized companies are usually involved in construction to perform a specific type of activity. In addition, it is necessary to remember what kind of facility is under construction and involve companies with work experience. I see a separate opportunity in participation of Ukrainian machine-building enterprises for the nuclear industry, which can be involved in the production of equipment for SMR, but this requires a clear position of technology developers and private sponsors of projects. 

The state should also take this into account and develop relevant tools to promote and support such initiatives. In implementation of such projects, a private owner will have a significant advantage over a state enterprise: absence of the need to purchase activities/goods/services in accordance with the Ukrainian legislation through tenders. Unfortunately, we see how dishonest procurement participants (customers and participants) use the liberality of the provisions of the Law of Ukraine “On Public Procurement”. Therefore, a private investor will be able to purchase high-quality equipment and high-quality materials at an acceptable price for him that is necessary for such an object as a nuclear facility. When I hear about tenders for such projects, I immediately remember the answer of an American astronaut who just returned from space. To the question of a journalist about the biggest fear in space, he answered: “Most of all I was afraid that I was flying on a rocket constructed of the cheapest materials based on tender results.” 

By the way, taking into account the stunning plans of the state atomic monopolist, in the next 20 years, Ukraine will definitely face the risks in the supply of materials for the construction of nuclear facilities. Respectively, the question will arise: “Who will offer the best conditions: a state company or a private one?” 

Imagine that a nuclear power plant was constructed based on the SMR technology. How will nuclear materials be supplied? How this is stipulated by the law now, what changes will be required? 

As for nuclear materials, there is some uncertainty to be resolved before starting construction of private nuclear power plants. In contrast to the ownership form of nuclear facilities (which can be private, state and communal), the law on nuclear materials provides only state ownership. This rule is also a great obstacle to the corporatization of the state nuclear monopolist, which the legislative body is trying to resolve by amending the above provision, namely: to establish an exception for nuclear fuel loaded in the reactor. In my opinion, it is also advisable to study the experience of other countries and, as an option, single out a state enterprise that will own all nuclear materials in Ukraine and will lease them both for state and private nuclear generation. Why not use the example of Energy Company of Ukraine and not “revive” the Nuclear Fuel concern giving it the status of the “Owner of Nuclear Materials”? This, by the way, would solve the issue of the Eastern Mining and Processing Plant (SkhidGZK). 

What about the radioactive waste and spent nuclear fuel management, when we are talking about SMR operation by a private company? Who will be responsible for the RAW and SNF management? Will SNF from SMR also be considered a “valuable resource” and will the deferred decision strategy be applied to it? 

In Ukraine, the organization dealing with radioactive waste management is legally defined: State Agency of Ukraine on Exclusion Zone Management (SAUEZM). A private enterprise, like a state one, will pay an environmental tax, which is the source of forming the State Fund for Radioactive Waste Management. This Fund is used to finance radioactive waste management activities. However, I do not exclude that during evolution of the form of ownership for nuclear facilities, the evolution of the form of ownership for radioactive waste management facilities will take place over time. Unfortunately, right now we observe the situation with the construction of an interim high-level radwaste storage facility: the tender (it seems) will be canceled for the third time and the facility will not be constructed within the required period. However, this is a topic for a separate discussion… 

What, in your opinion, should the deduction procedure to the Decommissioning Fund (DF)? Who should be responsible for this? And when, for example, there are several companies, should each of them have its own fund, or, after all, is it better when it is a single one, say, State Fund, or another, third-party organization should be responsible for it? 

The issue is quite complex and requires adopting of state-level decisions today to protect the state in the future, not the operator, whatever form of ownership it has. Currently, it is legally established that the DF is replenished at the expense of contributions of the operating organization. Having gained the status of an operating organization, a private company, according to the existing procedure, will also deduct funds to a single DF, from which the state will later reimburse the decommissioning costs of a private facility. However, that is theoretically so far… 

By the way, the DF issue appears in the terms and conditions of EBRD loans for NNEGC “Energoatom”. It should be noted that the state is obliged to comply with a number of clauses of the Guarantee Agreement, which has been ratified by the Law of Ukraine and has the status of an international agreement. Under the above Guarantee Agreement, the state shall (until the complete loan redemption) properly maintain the DF. In addition, at the expense of the EBRD loan funds, an analysis of the DF functioning was carried out and relevant recommendations for changes in this area were provided. 

Without reforming the DF, Ukraine may find itself in a situation where it will be forced to seek funds for the decommissioning of private nuclear facilities, at the same time financing the decommissioning of state-owned nuclear power plants. 

Based on the above, I believe that it is necessary to establish order in the DF as soon as possible. Probably, the emergence of private NPP operators will push to do so in the near future. 

Probably the most pressing issue concerning new nuclear facilities, that is the matter of concern for eco-warriors today, is their environmental component. In general, how will the construction of SMR in Ukraine affect the ecology? What aspects should be paid attention to by the regulatory body, technical support organizations, and public organizations of environmental orientation? 

SMRs are attractive in the context of combating the climate change, because if we talk about the scenario of replacing thermal power plants with them, the impact on the environment of both Ukraine and the world will be significant, and will result in a significant reduction in COemissions. The  pursuance of decarbonizing the planet is the driving force behind the return of almost all the world economies to nuclear energy and the focus on SMR. 

For example, neighboring Bulgaria and Poland made the statements on the intention to replace coal generation with SMRs. In addition, the global course on renewable energy requires availability of load following tools in the power system, and therefore, introduction of SMRs will actually increase the scope of renewable generation in Ukraine, which will clearly have positive impact on the Ukrainian and world ecology. 

By the way, I would like to appeal to environmental NGOs and encourage them to join this issue as soon as possible, apparently this will help them and technology developers/investors to jointly address all future challenges that will arise in the public at the stage of actual implementation of projects. 

How will a private company ensure compliance with the Aarhus Convention and the Espoo Convention when selecting a site for NPP construction, during the design development? 

A private investor is the same business entity as a state-owned company, i.e. the procedure is identical and envisages involvement of governmental authorities, including the Ministry of Environmental Protection and Natural Resources of Ukraine and (if necessary) specialized contractors. 

Since SMR is a fundamentally new type of a nuclear installation, does the design provide for a control area around such NPP and will the public benefit from living in a high-risk area? 

SMR is a nuclear installation, which is subject to the same standards and regulations as high-capacity reactors. In particular, it is envisaged that control and an observation areas will be established at the location of the nuclear installation. The size and boundaries of these areas are determined in the design in accordance with the rules, standards and regulations in the field of nuclear energy use, as well as agreed with the state nuclear and radiation safety regulatory authority. Therefore, during development of a specific design based on a specific technology, specific dimensions will be set. As for the benefits, I think that they will be established by a private investor in accordance with the agreements with local authorities, which is a world practice. 

How will the physical protection be provided? Who will ensure it and what is needed to obtain the appropriate permits? 

The issue of physical protection of nuclear facilities is regulated in Ukraine by the Law “On Physical Protection of Nuclear Facilities, Nuclear Materials, Radioactive Waste, other Radiation Sources”, which defines basic activity principles of physical and legal entities for physical protection of nuclear facilities. This Law, like all nuclear legislation of Ukraine, complies with international standards in the nuclear field. Therefore, I believe this issue is fully regulated in Ukraine. A private investor will only have to fulfill all the requirements.  

As for the protection entity of a nuclear facility, according to the legislation, it will be carried out on a contractual basis by the Ukrainian National Guard units. 

Will there be public involvement in the decision-making on the SMR construction? 

That is the mandatory law requirement. I think that private investors will be able to better and more effectively involve the public and the media in discussions on construction of nuclear power units in Ukraine, what will slowly change the attitude of our fellow citizens to nuclear power generation as such. 

Finally, what benefits will the end consumer get from the SMR construction in Ukraine? 

First, the consumers should be divided into categories: households, communities and business entities. Each of them will obtain a stable source of electricity. As for the price, certain categories will even affect the pricing, as they will be able to become co-owners of the power generating unit. Everything depends on the business model offered by a private SMR owner, because already at the stage of the design development, any assets (material, intellectual, etc.) can be involved in exchange for a share in the SMR ownership. This, firstly, will reduce the amount of capital invested by the owner and affect the construction cost, and secondly, will allow the consumer to influence the pricing and distribution of the end product. 

Potential initiators of construction designs need to consider all possible options and choose the best ones for each particular case. 

Interview prepared with help of editorial board

*The authors of the texts are solely responsible for the materials in the Blogs section. The editorial board may not share the opinion of the authors in the Blogs section.