The European Commission (EC) has said it has opened an in-depth investigation to assess whether public support that the Czech government plans to grant for the construction of a new NPP in Dukovany is in line with European Union (EU) state aid rules.

The beneficiary of the measure would be the Elektrárna Dukovany II (‘EDU II'), the company set up to carry out the project, which is fully owned by the CEZ Group (in which the Czech government holds about 70% of the shares).

In March 2022, Czechia notified the Commission of its plan to support the construction and operation of a new nuclear power plant in Dukovany, with an electricity generation capacity of up to 1200MWe. Dukovany is already the site of an existing nuclear power plant comprising four Soviet-supplied VVER-440 units.

The EC said the new plant, which is scheduled to start operating in 2036, should increase the security of electricity supply for Czechia and for neighbouring countries, helping the decarbonisation of the energy sector and diversifying the Czech energy mix.

Czechia plans to support the construction of the new nuclear power plant through three measures:

a low-interest repayable state loan expected to cover 100% of the construction costs (approximately €7.5 billion - $7.8bn);a power purchase agreement between EDU II and a state-owned company for the lifetime of the project (60 years) - according to the Czech authorities, this would lower the power purchase price and allow for price adaptations every 5 years; anda mechanism to protect the CEZ Group and the State in case certain unforeseen events occur (e.g. if the Czech law changes and makes the realisation of the project impossible). The CEZ Group contribution to the project will be approximately of €0.18 billion.

The EC said: “At this stage, based on its preliminary assessment, the Commission has found the project necessary and considers that the aid facilitates the development of an economic activity. Nevertheless, there are doubts on whether the measure is fully in line with EU state aid rules.” For this reason, the Commission decided to open an in-depth investigation in relation to:

The appropriateness and proportionality of the three components of the measure. Given there are three different aid channels that together can limit the risk for the beneficiary, it is important to ensure that overall no more aid than what is necessary is ultimately granted. In particular, whether the duration of the power purchase agreement is justified taking into account the other two measures;The impact of the measures on competition in the market and whether this is kept to the minimum. In particular, the Commission has doubts on whether there could have been other companies interested in acting as project promoter instead of CEZ.The market impact of the decision to set up a specific State-owned company for the resale of the nuclear electricity, in particular considering that it is unclear if this future entity will aim at maximising its profit.The Commission said it will now investigate further to determine whether its initial concerns are confirmed. “The opening of an in-depth inquiry also gives Czechia and interested third parties an opportunity to submit comments. It does not prejudge the outcome of the investigation.” The non-confidential version of the decision will be made available under the case number SA.58207 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved.

Václav Novácek, the attaché for competition and state aid at the Czech Permanent Representation in Brussels, tweeted that the decision to investigate is good news for the Czech Republic because formal investigations are necessary in such complex cases. CEZ Group launched the tender for building a new nuclear plant unit in March. The construction is to begin in 2029, and its trial operation will be launched in 2036.

The three bidders are the US-based Westinghouse, French EDF and South Korean Korea Hydro and Nuclear power. Citing security risks, Czechia excluded Chinese contractors from the bid in early 2021 and subsequently barred Russian energy group Rosatom from tendering alleging Russian involvement in explosions at a Czech ammunition depot in 2014. The bidders have until November to submit their initial bids, with CEZ expecting to have evaluated the bids and submitted its report for state approval in time for finalisation of contracts in 2024.

Nuclear energy remains one of the key parts of the Czech energy mix. The Czech Republic currently has six nuclear power reactors in operation – the four at Dukovany and two VVER-1000 units at Temelin NPP. These accounted for 37.3% of electricity production in 2020.

Image: The Dukovany nuclear power plant (photo courtesy of CEZ)