Westinghouse urges EU to break dependency on Russian nuclear fuel

Thursday, August 21, 2014

Westinghouse, the Japanese-US atomic group, is pressing the EU to introduce competition rules that will break eastern Europe’s dependence on Russian nuclear fuel.

While the crisis in Ukraine has focused attention on Europe’s vulnerability to a cut in supplies of gas from Russia, Westinghouse argues that Brussels must also respond to similar security risks posed by Moscow’s control of nuclear fuel in the eastern EU.

Westinghouse, the world’s biggest supplier of nuclear fuel, could stand to gain if the eastern European market was opened up but the company said it wished to highlight another aspect of the EU’s energy dependency on Russia.

Overall, Russia provides 36 per cent of the EU’s uranium enrichment needs – but these services could be carried out elsewhere in an emergency. Europe’s more pressing strategic concern, according to Westinghouse, is that many reactors in eastern Europe are entirely reliant on tailor-made sets of fuel rods from Russia.

Hungary, Slovakia, Bulgaria and the Czech Republic are wholly dependent on Russian atomic fuel and all rely heavily on reactors for their domestic electricity. Finland is also a major consumer of Russian fuel.

Westinghouse says the EU’s weak spot lies in Russian VVER reactors across the former communist bloc and Finland, for which the Russian company TVEL is the only supplier.

“There is a clear security of supply issue . . . you do not have a second supplier,” said Michael Kirst, Westinghouse’s vice-president for strategy. “The utilities that are entirely dependent on Russia are playing a game of gambling here.” He added that a second supplier was needed in the case of technical failures in the fuel supply as well as any political sanctions.

Mr Kirst said Westinghouse was pushing for Brussels to introduce a “security of supply mandate” that would force eastern European power companies to diversify sources. He stressed there was a precedent for this because the EU forced France to open its nuclear fuel market in 2000.

The European Commission said it was encouraging the diversification of EU nuclear fuel supplies in an open market and added that an alternative supplier would be desirable “for all stages of the fuel cycle”. However, the commission added that it was not considering the use of quotas to achieve this.

But Westinghouse said the EU needed to do more because there was not a fully open market and many supply deals in eastern Europe were opaque. In many cases, Mr Kirst said government to government contracts “bundled” together a several different energy costs, sometimes even including gas prices from Russian pipelines.

Westinghouse has asked the commission to investigate whether Russia’s bundled fuel deals could count as anti-competitive dumping or loss leaders. Commission officials, however, have not pursued the cases beyond a preliminary stage as a full investigation would require raids on Russian facilities, which would be impossible.

Westinghouse is leading the call for diversification in eastern Europe because it is the only potential alternative supplier of nuclear fuel to VVER-440 reactors. Westinghouse produced this fuel until 2007, when it was no longer able to compete with the bundled Russian deals.

The Japanese-US company says it can reprise the production of the VVER-440 fuel with an investment of $20m. However, it warned that the process of providing alternative fuel would probably take more than two years.

Mr Kirch said that, after the fall of communism, Brussels had given eastern European states permission to stick with Russia nuclear fuel and send the atomic waste back to Russia over the lifetime of the reactors. However, he said that arrangement was contingent on the understanding that no western companies could manufacture the fuel.

Mr Kirch said it was “ironic” that Westinghouse had fared better in supplying nuclear fuel to Ukraine, even before the latest conflict with Russia, than in the eastern EU.

“The Ukrainians and Russians have interdependent economies but the Ukrainians are the ones who have diversified their fuel, not the EU states.”

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