Swedish nuclear plant construction could cost state at least $28.5 billion: report

New reactors could cost the Swedish state more than SEK 300 billion ($28.5 billion), or 2.5% of gross national product, a government-appointed reviewer into potential new nuclear capacity in Sweden, Mats Dillen, said at a press conference Aug. 12.

Dillen, an economist who has held a number of jobs in the public sector, added said that building new units without state financial support is "impossible."

Dillen headed a group in charge of developing a financing and risk-sharing model that would enable the Swedish government to invest in new reactors.

At the press conference, Dillen said that if 5 GW of installed nuclear capacity were built under a financing and risk-sharing model, public debt would increase by about SEK 300 billion in 2023 prices, assuming there were no cost overruns. If costs were 50% over budget, debt could increase by SEK 450 billion, the review group's report said.

The review group proposed a three-pronged model involving state loans, price hedging in the form of contracts for difference and a mechanism to give commercial investors a minimum return on equity.

CFDs would cover periods when the market price of electricity is lower then an agreed price for electricity, known as the strike price. The CFDs would be financed by a tax paid by electricity consumers. The review group proposed a strike price of SEK 0.8 (7.6 US cents) per kilowatt hour.

Legal changes are needed in order to implement the model and those changes would have to be approved by parliament. The group recommended changes be put in place before May 6, 2025.

Approval is likely since the conservative coalition government, led by the Moderates, strongly favors nuclear power and is supported in parliament by the far-right, anti-immigrant Sweden Democrats. Together the government and the SD have a parliamentary majority.

The government wants at least 2.5 GW of new nuclear capacity to be operating by 2030 and capacity equivalent to 10 large reactors by 2045. Sweden currently has six operating units with total installed capacity of 7.15 GW.

The report said that a Swedish model for government financing should cover between 4 GW and 6 GW of installed capacity.

"After that, it is expected that the costs and risks associated with building new nuclear will decrease, and with that the need for government support," the report said.

The report noted that there are a variety of risks involved in building reactors. They include high construction costs and long construction times. In addition, the reviewers said they considered market, political and regulatory risks "particularly significant."

The reviewers said that uncertainty about whether economy of scale could be reached in developing a series of reactors was also a key risk factor.

Since no reactors have been built in Sweden since 1985, the report said that it is difficult to estimate construction costs and that estimates largely are based on projects in other countries.

However, the reviewers said that it is difficult to make detailed comparisons, partly because nuclear regulatory regimes in different countries have different requirements for construction and also because the cost of materials and components for reactors has increased in recent years.

Given the risks involved, the reviewers said that "investors in new nuclear power demand a significant risk premium, which in practice makes investment in nuclear power projects on commercial terms impossible. A model for financing and risk sharing is therefore required to facilitate investments in new nuclear power."

State-owned power company Vattenfall has done a study on the possibility of building new units and is considering building units at its Ringhals nuclear plant.

Vattenfall is considering both large units and small modular reactors. SMRs would be faster and less expensive to build and could be built on sites other than Ringhals.

Vattenfall permanently shut the 916-MW Ringhals-1 in 2020 and the 910-MW Ringhals-2 in 2019, earlier than planned, saying it was not economic to keep them operating. Although some politicians have called for restart of the units, Vattenfall management has said restart is not financially or technically feasible.

Company management has repeatedly said Vattenfall will not invest in new reactors without risk-sharing by the state. Vattenfall has also said that the SEK 400 billion in credit guarantees promised by the Swedish government annually between 2024 and 2026 alone are not sufficient to take the risks associated with new reactor construction.

In an Aug. 12 statement, Vattenfall said that the proposals of the group that developed the model for risk-sharing in building reactors were "reasonable" but added that the proposals need to be much more concrete.

Greenpeace blasts recommendations

"The government wants to impose a new tax that all electricity consumers would be forced to pay in order to realize [the government's] peculiar fixation with building new nuclear power ... this would be a historic step away from the broad political policy that Sweden has long had, that nuclear power should not be subsidized," Greenpeace energy and finance spokesman Rolf Lindahl said in a statement Aug. 12.

He added that "since nuclear power projects are plagued by chronic cost overruns, there is a great risk that this will become a financial black hole for taxpayers and electricity consumers."

In developing their model, the reviewers looked at types of financing for new reactors in those countries where units are planned, have been built or are under construction, including Finland, Poland and the UK.

They said that there is a trend in Europe toward governments taking more of the risk in order to make nuclear projects feasible and added that using a model which has state aid mechanisms already approved by the European Commission would speed up the commission's approval process for the Swedish model.

The group's proposal will be sent out for public comment before the government drafts a bill for the legal changes needed.