January 22, 2013 / 5:06 PM / 6 years ago

Czechs push atomic plant despite low power prices -minister

* Strategic issues override financial concerns for project

* ‘Contract for difference’ approach to back up CEZ returns

* Minister snipes at European support for renewables

By Robert Muller and Jan Lopatka

PRAGUE, Jan 22 (Reuters) - The Czech Republic will push on with nuclear expansion plans because its need for a stable power supply outweighs uncertain commercial prospects and growing opposition in Europe to atomic energy, its industry minister said.

Majority state-owned CEZ is running one of Europe’s biggest tenders in years to build two new units at its Temelin plant, each with a capacity of over 1,000 megawatts, at a cost estimated around $10 billion.

Low wholesale power prices, uncertain future demand and opposition to nuclear energy after Japan’s 2011 Fukushima disaster have raised doubts about whether the plan is viable, but Industry Minister Martin Kuba said strategic issues trump financial ones.

“I consider investment in Temelin to be an investment into family silver,” Kuba said in an interview. “You cannot always consider such investment only according to current market prices for electricity.”

Toshiba’s U.S. unit Westinghouse and Russia’s Atomstroyexport are vying for the deal to build the new reactors, following the unexpected exclusion of France’s Areva after CEZ said the company failed to meet tender conditions.

CEZ is expected to evaluate the bids in February and pick a winner by the end of the year. Plans call for the reactors to be built around 2025.

The Czech nuclear plan has raised concerns in Austria, whose border lies some 50 km (30 miles) from CEZ’s Temelin nuclear plant. Germany, a market for Czechs electricity exports, announced a retreat from nuclear following Japan’s 2011 Fukushima disaster.

Opponents cite Fukushima as evidence that nuclear power is unsafe while Czechs see nuclear as a key plank in ensuring future energy security for the former Soviet bloc nation, which gets most of its gas supplies from Russia.

“The Czech Republic must be very tough in defending this project and defend the concept of sustainable energy for reasonable prices. We have to defend our position today and every day,” Kuba said.

Wholesale energy prices have tumbled to multi-year lows due to the economic slowdown in Europe and plentiful renewable supplies from Germany. The Czech long-term power contract has fallen by more than half to around 42 euros per megawatt hour from a pre-crisis levels near 70 and a high of more than 90 euros.

Experts say prices need to rise for construction of new power stations to make economic sense, including gas- and coal-fired plants, which cost less to build than nuclear ones.

Kuba said the discussions about Temelin were based on a price of around 60 euros per megawatt-hour but stressed that was only a model number rather than an estimate.

The government is preparing a legal framework to allow power prices from the two new units to be set by a so-called “contract for difference” - a similar approach to one Britain has chosen for its new nuclear projects, he said.

That means CEZ would receive compensation if prices dropped below a certain level but would have to pay the state if prices rose above that target.

“The market distortion is due to a surge of renewable sources, which are subsidised,” Kuba said.

The Temelin plan has wide public and political support in the Czech Republic, which generates a third of its power from nuclear sources. (Writing by Jan Lopatka; Editing by Michael Kahn and Jane Baird)

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