Hungary’s Paks 2 nuclear project accepted by European Commission

14 March 2017

The European Commission (EC) on 6 March accepted Hungary’s plans to finance the planned Paks II NPP by way of state aid. The EC said Hungary’s state aid abides by EU rules because it has made commitments to limit distortions of competition. The EC found that the Hungarian state will accept a lower return on its investment than a private investor would. This means the investment would involve state aid under EU regulations. However, EU rules allow state aid if it is “limited and proportionate”.

According to the EC, Hungary has taken measures to avoid “undue distortions” of the domestic energy market. Those measures include avoiding overcompensation for the operator of Paks II, avoiding market concentration by legally separating the operation of the Paks and Paks II nuclear stations, and ensuring market liquidity by guaranteeing Paks II will sell 30% of its electricity on open power exchange auctions.

Earlier, in November 2016, the EC closed an infringement case against Hungary regarding the compatibility of the Paks II project with EU public procurement legislation. Under a 2014 agreement, Russian state nuclear corporation Rosatom is to supply two VVER-1200 reactors for Paks II, as well as a loan of up to €10bn ($10.6bn) to finance 80% of the of the €12bn project. Progress on Paks II had stalled because of the EC scrutiny. Last week, Hungarian foreign minister Peter Szijjarto said construction of the station is likely to begin in 2018. Project company MVM Paks II received an environmental licence in late September and in October submitted a site licence application for the two new units. The first Paks II unit is to be completed in 2025 and the second in 2026.

The two new reactors planned at Paks II will replace the four VVER-440 reactors currently operating at the original Paks site, which began operating between 1982 and 1986, and which account for approximately 50% of Hungary’s domestic electricity production. All four units have since been upgraded to 500-510MWe (470-473MWe net) and are undergoing 20-year  life extension programmes. In July 2015 Ukraine's Turboatom was contracted to upgrade low-pressure turbines and replace high-pressure turbines at all four units, the latter to yield an increase in power. GE has a contract over 2013-2021 to refurbish the eight generators.

“The Hungarian government has made substantial commitments, which has allowed the Commission to approve the investment under EU state aid rules,” EU Antitrust Commissioner Margrethe Vestager said. The Hungarian government says a failure to replace the four Soviet-built reactors at the Paks plant would increase Hungary’s dependence on Russian natural gas.

However, opposition parties and environmentalists have criticised the decision.

The Hungarian liberal opposition party Dialogue for Hungary plans to call for a referendum on Paks II, according to party member and member of European Parliament Benedek Jávor. His comments came a day after the green LMP, submitted questions for a referendum on Pak II to the National Election Office. According to Jávor, Dialogue will launch a campaign to ask the government to review Hungary’s national energy strategy. Austria may also legally challenge the EC decision. Deputy chancellor Reinhold Mitterlehner told local media that the EC’s ruling is a “completely false signal” and Austria will examine the legal options and “if necessary” appeal against the decision to the European Court of Justice

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