Poland is working towards developing a contracts for difference (CfD) scheme to finance its first nuclear power station in the northern Pomerania province, a ministerial spokesperson told local energy portal BiznesAlert.
The ministry of climate and the environment said that a CfD arrangement is the “only form of price support” provided in the recent proposal to reform the European Union electricity market design regulation.
The CfDs will make it possible to “efficiently” develop a business and financing model with the European Commission, the ministry told BiznesAlert.
“However, it should be borne in mind that the Commission will still conduct a detailed analysis of the compatibility of the measures, as part of a wider aid package, with the principles of permissible public aid,” said the ministry. EU rules require European Commission scrutiny for any form of state support in industry or agriculture in order to maintain fair competition on the bloc's internal market.
In October 2023, the EU’s energy ministers reached an agreement on reforming the electricity market design, the way the bloc’s power-related markets and price setting operate. As part of the proposed EU rules, countries will be allowed to use two-way CfDs to finance new reactors or the lifetime extensions of existing ones.
Before finalising the reform, negotiations are still to take place between the European Parliament and Council.
A CfD is a subsidy model where deviations, whether positive or negative, from a predetermined reference (strike) price result in payments to one of the contractual partners – the utility or the power consumer – in the case of nuclear plants. CfDs mean a developer will need to finance the entire construction cost of a nuclear project up front, and only begin receiving revenue when the station starts generating electricity.
The CfD financing model has been used to support nuclear energy projects including Hinkley Point C in southwest England, but has been replaced by the RAB (regulated asset based) model for the proposed Sizewell C project.
Poland’s ministry of climate and the environment told BiznesAlert that the use of a CfD scheme “does not preclude the use of other forms of support, e.g. government guarantees for debt financing.”
Financing Remains Unclear As Westinghouse Ready To Build AP1000 PWRs
In November 2022, Warsaw chose Westinghouse Electric to supply its AP1000 reactor technology for a three-unit facility near the villages of Lubiatowo and Kopalino to the northwest of Gdansk on the Baltic coast.
Last year, a consortium was formed between Westinghouse and US-based construction company Bechtel in order to serve as the main developer for the project. Construction start is earmarked for 2026, with a first unit online in 2033, though experts say some delay in the schedule is now a possibility.
The financing for the nuclear project has not been agreed, with the price tag for the first station seen at least $20bn (€18.3bn). The former government of the conservative Law and Justice party was involved in discussions with US-based partners and export financing institutions on a possible capital stake in Poland’s first nuclear station, but public information has been scarce.
According to Wojciech Jakóbik, an energy expert and editor-in-chief of BiznesAlert, Poland had been on the lookout for various financing schemes for new nuclear.
“One of them, called Sa-Ho, includes direct energy supplies to co-owners of the nuclear operator and would not end up with additional charges to the energy bill of the final consumers which can be the case with CfDs,” said Jakóbik.
Under the Sa-Ho model, electricity offtake would be the duty of shareholders and proportional to their share in the ownership. The shareholders would be electricity consumers, including companies in the manufacturing and transport sectors, large cities, municipalities, government entities. In essence, it is a cooperative model where the new-build project is initially bankrolled by the state and then sold to energy consumers.
According to a 2020 nuclear programme, the Polish state would initially have 100% of shares in a company set up to invest in nuclear energy (Polskie Elektrownie Jadrowe), but once a co-investor is chosen the state will maintain 51% of shares in the company and the co-investor will take 49%. The co-investor must be “related to the technology provider”.
An opposition coalition formed a new government led by Donald Tusk in December and officials have said work on Poland’s nuclear programme would continue despite pledges of a need to review contracts related to the new-build project.
