Deal at Czech nuclear power plant fuels US-Russia economic rivalry

Companies with ties to the US and Russia are battling for a contract to expand a Czech nuclear power plant, which analysts say may be the gateway to kickstarting other nuclear power projects in Eastern Europe.

The nuclear power plant that towers over the green fields outside the small Czech village of Temelin is quickly becoming a frontline in the economic rivalry between the United States and Russia.

Companies with ties to both countries are vying for a contract to build two new reactors at the site, a move that analysts say could open new nuclear energy markets across the region. 

"The energy equation has changed.... [Globally] nuclear energy is in decline,” says Michal Snobr, an energy analyst at the Czech J&T Bank. "The Temelin contract is not about nuclear energy in the Czech Republic, but about breaking into the European market.”

Competing for the tender are two energy companies: Russia’s Rosatom, and Westinghouse, which is owned by the Japanese Toshiba Group but based in the United States.  

For Prague, the proposed expansion of the Temelin plant will help it meet the European Union's guidelines on "diversifying" energy sources and lessening dependence on Russian gas and oil. It is also expected to create thousands of jobs at a time when the Czech economy has been particularly sluggish. At a cost of at least $10 billion, it will be the most costly public project ever in the country’s short history. 

For the nuclear industry, that's a bonanza. The tender in the Czech Republic is the most lucrative contract on offer anywhere in the world for the industry, which has suffered a popularity decline in recent years, particularly since  the March 2011 accident at Japan's Fukushima Daiichi nuclear power plant.

Opening markets in Europe

In Europe, only France and Finland are constructing reactors and Germany has decided to unplug all 17 of its nuclear reactors by 2022. But the Temelin deal could open new markets in Poland, Hungary, Slovenia, and Bulgaria, Mr. Snobr says.

And politically, it is of great interest to both Moscow and Washington.

"We're not shy about pressing the case for Westinghouse to expand the Temelin nuclear power plant, because we believe that company offers the best option in terms of safety and technology," said then-Secretary of State Hillary Rodham Clinton during a visit to Prague in December.  

"It would clearly enhance Czech energy security … and it would create job opportunities for Czechs and Americans [and] ensure the new facility would be built to the highest international standards."

Washington has urged the Czechs to do more to generate their own energy, pointing to the fact the country gets 60 percent of its gas and 70 percent of its oil from Russia.

Red flags and spies

The Czech Republic’s main security agency, Security Information Service, has raised red flags about doing business with Russia, warning in a 2009 report that the Kremlin was using Russian business to infiltrate NATO states with spies.

“If the Russian bid wins, there is no doubt Russian influence over the Czech energy sphere will increase,” Snobr says. “However, I’m not sure that will be bad for the Czech Republic.”

“In Europe, Germany is the leader in the energy sphere, and they have not shown any fears about working with the Russians,” he adds, highlighting the German-Russian cooperation on the Nord Stream pipeline project, which delivers Russian gas under the North Sea to European markets.

In pushing Temelin, however, Czech politicians not focused on security or energy needs, but rather have talked mostly about jobs. Martin Kuba, the minister of industry and trade, has stressed that whoever receives the contract, most of the positions it generates must go to Czechs.

“The investment must remain in the Czech Republic," Kuba told an energy forum in Prague on Feb. 18.

Westinghouse is promising to partner with a Czech engineering company, Vitkovice, to build most of the modules for the reactors at the company’s plant in the city of Ostrava. For its part, Rosatom is promising to dish out 70 percent of the work to subcontractors, and is sweetening the deal with offers of financing.

That, says Snobr, is a big plus for the Russians, because Westinghouse is not offering the option of financing.

But does the country need it?

As plans for the Temelin contract proceed, however, some are questioning if the country needs new nuclear reactors in the first place. 

“The Czech Republic simply does not need another 2.5 gigawatts of power and with demand falling all round Europe and not likely to bounce back soon, the export market is risky,” says Steve Thomas, a professor of energy policy at Greenwich University in England.

However, others argue only nuclear energy can replace “dirty” power sources like coal. 

“Between 3,000 and 4,000 megawatts of coal-derived power are to be taken offline by … 2022 that has to be replaced with something, despite the ill-founded belief that electricity consumption will continue downward,” says Pavel Solc, Czech deputy minister for industry and trade. “Even other European states are not planning for a drop in electricity usage.”