Capital costs challenge: how to overcome the issue in CESA nuclear power projects

• The 28th UN Climate Change Conference in Dubai in 2023 launched the Declaration to Triple Nuclear Energy from approximately 390GW in 2023 to almost 1,200GW by 2050.

• This transition presents an opportunity for nations to achieve energy security, mitigate climate risks and enhance economic resilience through the adoption of nuclear energy.

• However, nuclear is a more difficult investment story to sell compared with solar and wind due to prohibitive costs, deployment timelines, technological hurdles, as well as safety and waste management issues.

Nuclear power is crucial to safeguarding secure electricity supplies in CESA. Eight countries — Armenia, Bulgaria, the Czech Republic, Hungary, Romania, Slovakia, Slovenia, and Ukraine — account for 7% of the global nuclear reactor fleet and generate nuclear power representing 22% of their electricity mix, which is double the global average.

The greatest shares are in Slovakia, Ukraine and Hungary, while the smallest, at less than 20%, is in Romania.

Almost all operating assets in the region are pressurized water type and Soviet-era design (Vodo-Vodyanoi Energetichesky Reactor or VVER). Only three reactors in the CESA region are based on alternative technologies. In Romania, two units utilize Canadian CANDU 6 pressurized heavy-water reactors. The unit in Slovenia, jointly owned with Croatia, operates the US-designed PWR with the two-loop primary cooling system.123

The average age of the active nuclear plants in the CESA region is slightly above the global average — 35.0 vs. 32.2 years — with the oldest reactors located in Armenia and Slovenia.4 The older Generation II nuclear reactors are the most common type of nuclear power plant in operation. Their advanced versions (Generation III) with improved efficiency and more safety features are active in Bulgaria, the Czech Republic and Ukraine, and use the VVER-1000 design.

The 28th UN Climate Change Conference in Dubai in 2023 launched the Declaration to Triple Nuclear Energy from approximately 390GW in 2023 to almost 1,200GW by 2050.  The CESA region is planning its own expansion. Countries with existing nuclear assets are exploring additions and are termed “first-in-a-while” markets, while “newcomers,” such as Türkiye, Poland, Kazakhstan, and Uzbekistan are planning to launch their first nuclear power plants (NPPs), both large-scale and small modular reactors (SMRs).

• Slovakia has one reactor with a capacity of 0.4GWe under construction at the Mochovce site and has proposed an additional reactor at the Bohunice site with a capacity of 1.2GWe, potentially expanding to 1.7GWe. The VVER at Mochovce is planned to start operations this year, while the full operation of the Bohunice unit is planned for 2040.567

• Bulgaria plans to build two additional reactors with a total gross capacity of 2.5GWe at its Kozloduy nuclear power plant, utilizing US-designed AP-1000 technology. The first unit is anticipated to achieve commercial operation in 2035, with the second unit expected to follow in 2037.8

• Romania plans to double its existing nuclear capacity at the Cernavodă nuclear power plant with two 720MWe reactors using the Canadian CANDU 6 technology. Recently, the project received a favorable opinion from the European Commission on its technical and nuclear safety aspects, and it is planned to be fully operational by 2031.9

• In Hungary, the construction of two new reactors of 2.4GWe total capacity based on Russian Vodo-Vodyanoi Energetichesky Reactor (VVER-1200) technology10 at the Paks nuclear power plant is projected to increase the country’s nuclear power capacity by 120% securing supply of between 60% and 70% of the country’s long-term electricity needs.1112 
  The units are planned to be commercial by 2032.13 Moreover, the country has informed the EU of its intention to extend the operational lifespan of its four operating VVER-440 units, aiming for a service period into the 2050s.14

• The Czech Republic plans to enhance the Dukovany NPP by adding two reactors based on South Korea's APR-1000 design. Additionally, there are considerations for two more units at the Temelin Nuclear Power Plant utilizing the same technology.1516

• Slovenia intends to boost the capacity of the Krško NPP, which is co-owned with neighboring Croatia, although this expansion is not expected to occur before 2040.17

• Türkiye is set to pioneer the CESA region's nuclear power "newcomers" with the establishment of its first nuclear power plant, the Akkuyu Nuclear Power Plant. The four Vodo-Vodyanoi Energetichesky Reactors (VVER-1200) are scheduled to be brought online gradually by 2028.18 Additionally, two other proposed sites in Turkey — Sinop (four reactors on the Black Sea coast) and İğneada (four reactors in Kirklareli province near the Bulgarian border) — are currently at a less advanced stage of development.

• In Central Europe, Poland is the only “newcomer,” with ambitious plans announced. The nation is working to raise its nuclear power share from the current zero to 20% of its electricity mix by 2045. The Polish government has approved plans for the first plant Lubiatowo-Kopalino, featuring three US-designed AP-1000 reactors, to be in Pomerania, a region in northern Poland, which to date lacks nuclear generating capacity.19 20The second plant is approved to be in the Patnów-Konin region in central Poland with two South Korean APR-1400 reactors of 1,400MWe each. The location of another plant is to be confirmed by 2028. There are also plans to develop small modular reactors in the country.2122

• Kazakhstan, a major uranium producer responsible for 43% of the global supply and a manufacturer of pumping equipment for nuclear power plants, is exploring the possibility of constructing two nuclear reactors, each with a capacity of 1,200 MWe, with the option to expand to three units.23 2425The shortlist of potential technologies includes Russia's VVER-1200 and VVER-1000, China's HPR-1000 reactor, Korea's APR-1400, and France's EPR-1200.26

• Uzbekistan, positioned among the top five uranium producers worldwide, has chosen to take the lead in utilizing SMRs to gain expertise in this emerging sector. The country aims to commence full operations of its six-unit modular plant by 2033 and maintains plans to develop a large nuclear power plant in the long term.2728

However, existing plants schedule to decommission by 2040—50. Replacing these reactors in time is critical to avoiding a shortfall in electricity supply, particularly as energy demand rises.

Economics of developing viable nuclear power generation are complex and risky. Typically, a long, difficult and capital-intensive design and construction phase is followed by a long economic lifetime of low fuel costs, relatively low operating costs and a high-capacity factor (70%–75% in Europe and 90% in the US). Success in such a venture depends heavily on the cost of capital, influenced by investor risk assessments, legal frameworks, national energy policies, and political contexts. EY estimates the weighted average cost of capital (WACC) for nuclear newbuilds at between 5% and 15%,29 compared with between 5% and 8% for solar and wind. Changes in WACC significantly impact electricity costs and project competitiveness.

Strong governmental commitment is critical to investor confidence and adequate financing of new nuclear power plants relies upon a combination of pricing and revenue guarantees plus de-risking mechanisms. Mechanisms such as power purchase agreements (PPAs), contracts for difference (CfDs) and regulated asset base (RAB) models can ensure stable and adequate cash inflows, while a robust de-risking mechanism can reduce or transfer the risk of unexpected cash outflows related to cost overruns, delays and regulatory changes.