Atomic game of hide and seek (giant atom) or old bear (SMR) …
After a great (marketing) acceleration, the nuclear project is back on the old beaten path (i.e., decisions in the next quarter). Large nuclear projects have stalled and, as always, have the problem of financing—we know we want to build, and it’s more or less clear how much we want to develop; it’s just not clear where the money comes from.
The Differential Contract model, which has been preferred in the EU for some time, is already somewhat frowned upon by France despite its earlier agreement. The issue is obvious – wholesale prices across Europe have fallen significantly, and nothing in Gen III+ reactors can be built at such a price. A possible contract for difference (CfD) in Poland, in my opinion, would be at the level of 700-1000 PLN/MWh (such a future price of power generation would be accepted by financial institutions taking into account the risk of construction delays) – and today energy on the POLPX is 433 PLN/MWh. Given this, the nuclear power industry (globally) is beginning to enter a perturbation phase, and in Poland, it has started a “game of hide and seek.” Although the localization decision and all environmental permits for the first unit’s construction have been issued, it suddenly began to hide and disappear in political statements – there are vague announcements about some new analysis.
Evidently, there is a problem with fine-tuning the financing model (with the Differential Contract too high, they are probably working on lowering it with, for example, some methods of guaranteeing the assumption of financing costs by consumer fees (RAB model). In that case, a new monthly item of several zlotys would appear on our bills – “atomic”. The year of entry into operation is unlikely to be 2033 rather than 2035 (and once upon a time, let me remind you, it was supposed to be even 2020) – so everything stays the same – i.e., the nuclear power plant will be. Still, it needs to be discovered when (maybe 2035), where (it’s being analysed), and for what money (the model in preparation).
Suppliers from every corner of the world (USA, Korea, France) are again looking anxiously at the turmoil but appear in Poland and make optimistic announcements about cooperation. A new iteration… once another plenipotentiary is appointed or it is determined which ministry will be in charge of nuclear power. In addition, small modular nuclear reactors (SMRs), which were supposed to give “cheap electricity in every municipality”, suddenly went into hibernated winter sleep. The old bear is sleeping heavily, and we are not waking it up because the industrial corporations that were supposed to build 2-3-7-21 or more reactors are busy with something else for now. The SMR reactors are not there because one of the major suppliers has entered the fast track toward bankruptcy or at least a significant postponement of deadlines. For all intents and purposes, like a Venezuelan TV series, the same plot, the same actors and the same dialogues, but more episodes can be shot. So far, there is no strong turnaround in sight.
How much does a ton of coal cost – the answer depends on… your point of view.
Coal – as usual – needs to find out how much it costs. In world markets (ARA index – Amsterdam – Rotterdam-Antwerp – European price benchmark), it is $107 per ton. In the Polish power industry, the approximate price for thermal coal today is about 530 PLN per ton (negotiations mines – power plants is a separate topic for economic analysis or standup speeches). Coal for individual consumers (they use much better coal grades than power plants) is also getting cheaper, and there are places with prices below PLN 1000 per ton, although the usual offers are around PLN 1500 per ton. So, how much does coal cost, according to miners? Here, magic changes reality because it turns out that the current average price of mining a ton of coal oscillates around PLN 930 per ton (i.e. mines add quite a lot to sales), mainly due to extreme cost increases in the last 2 years (more than 50%) – the main one of which was the increase in wages.
In any market-oriented enterprise, the business model of producing at a loss would instead cause concern and herald swift bankruptcy, but obviously not in this Polish sector, which is waiting quietly for the planned subsidy of 7 billion zlotys budgeted.
In addition, employees also make an exciting example of further losses – the mining industry still has the so-called coal deputation – an archaic system of increasing wages by a periodic (annual) bonus in the form of an appropriate amount of coal (JSW and PGG are 8 tons per head). Of course, you don’t carry coal in briefcases or on trucks out of work but convert it into a cash equivalent. Leaving aside the utterly absurd in the 21st-century system of such additional benefits (should dairy workers get milk and distillery workers get a corresponding number of bottles of vodka? Here programmers are in a weak position because I can get a piece of code…), it’s worth looking at how miners price the cost of a ton of coal in equivalent for the allowance – in PGG it will be PLN 1470 per ton (in JSW it’s probably even higher). No matter how you look at it, logically or economically, it doesn’t add up, but as long as the unions control mining policy, we will subsidise it. During the mining crisis eight years ago, it took 700 million a year to subsidise (to stabilise the situation), now 7 billion (to stabilise the situation), so it looks like in 8 years it will probably be 70 billion (to… stabilize the situation).
The most interesting (actually both funny and scary) part is that no one is surprised by this, and the price of coal (two—three times the market price) in the delegation is taken with deadly seriousness after union-employer negotiations. I think where the mining industry will get to while standing on the precipice is already known.