Warsaw sees construction of three reactors funded by equity and state guarantees
The European Commission announced an investigation into whether Poland's proposed plan to support its €45bn ($47bn) first nuclear power station project falls in line with the European Union’s competition rules.
Warsaw wants to build its first commercial nuclear power station near the villages of Lubiatowo and Kopalino on its northern Baltic Sea coast in the province of Pomerania.
In 2022, the country chose US-based Westinghouse to supply its AP1000 pressurised water reactor technology for the project. Three AP1000 units are to be deployed at Lubiatowo-Kopalino starting 2028, with the first in-service date planned for 2036 at the earliest.
The Polish government has announced plans to finance the plants, expected to cost between €35bn and €45bn, with an initial €14bn equity injection into the public company charged with the project, state guarantees covering all project debt, and a two-way contract for difference (CfD) scheme after operation begins.
The ministry of industry said the adopted financing structure for the nuclear power project proposes a 70% share of debt financing and a 30% share of ownership financing, up to the amount of about €14bn. Poland has been actively seeking external debt financing with several announcements made recently of received interest for potential loans from US, Canadian, and French export credit agencies.
The European Commission said its preliminary assessment recognises the necessity of public support for the project's viability, but questions the proportionality and competitive implications of the aid package. The commission said, however, that state-owned company Polskie Elektrownie Jadrowe (PEJ) as the beneficiary "would not carry out the project" without public support.
Polish deputy minister of industry Wojciech Wrochna said the review marks a significant step forward for the strategic project.
“We have a common goal with the European Commission, which is to work out a solution that will allow for financing the project and ensuring low electricity prices for recipients,” said Wrochna in a press release.
Commission’s Key Areas Of Investigation
According to the commission, key areas of the investigation will include whether a proposed 60-year CfD duration is justified given the other support measures and if alternative companies interested in leading the project could have reduced the aid amount. This refers to PEJ's selection as beneficiary, a source familiar with the matter said.
The commission said in its press release it will also seek to ensure the CfD provides incentives for efficient electricity market operations, minimises market distortions and integrates with renewable energy sources.
The EC said it “cannot exclude that the aid will not be passed on to electricity consumers through direct contracts”.
Asked to provide more details on its communication with Polish authorities, the commission refused to comment at this stage due to confidentiality obligations.
Poland and other stakeholders are invited to comment during the process, said the commission.
Warsaw notified the EC about its support measures with a formal letter in September.
Over the past decade, the commission approved all state aid request for reactor new-build. Projects included Hinkley Point C in the UK, which was an EU member at the time, the Paks expansion project in Hungary, the Czech Republic’s Dukovany new-build project and the Pallas research reactor project in the Netherlands.
The EU carries out state aid investigations to ensure that government support for businesses does not distort competition or unfairly disadvantage others in the bloc’s single market.
These investigations help verify that aid is necessary, proportionate, and aligned with EU rules in a bid to maintain a level playing field the bloc’s 27 member states.
A CfD scheme guarantees stable revenues for energy producers by paying the difference between a government-set strike price and the market price for electricity.
The commission said it will assess compliance with CfD design principles introduced in the EU’s new electricity market design rules published in June 2024.
“The public support that Poland plans to grant for its first nuclear power plant needs to be assessed by the Commission to make sure that it is in line with State aid rules, which aim to preserve competition within the internal market,” Teresa Ribera, executive vice-president for clean, just and competitive transition, said.
*The article was updated on 20 December 2024
