Author: Nicholas Hirst and Kalina Oroschakoff

Posted: March 6 2017

In a European Union beset by crises, a decision Monday to approve a new nuclear power plant for Hungary showed the Commission’s limited appetite for tangling with Prime Minister Viktor Orbán.

The EU justified its blessing of a new nuclear power plant in Hungary by saying it imposed stringent competition conditions unusual for projects of this type.

“The Commission’s role is to ensure that the distortion of competition on the energy market as a result of the state support is limited to a minimum,” said Margrethe Vestager, the European commissioner for competition, who said she wrested “substantial commitments” from the Hungarians in exchange for approval. She pointed out that EU countries have the right to determine their own energy mix.

That means it is difficult for the Commission to block power projects.

Critics pounced, saying the €12 billion Paks II project undermines efforts to wean the bloc off energy dependence on Russia and widens Russian nuclear champion Rosatom’s foothold in Hungary — while other EU capitals strain to maintain sanctions against Russia for its annexation of parts of Ukraine. Budapest will borrow €10 billion from Moscow for the project and use Russian expertise to build two nuclear reactors on the banks of the Danube, boosting technology some say is unsafe.

Despite Orbán’s cavalier approach to complying with EU rules on public procurement and state aid, avoiding a blowout with Hungary could dampen rising Euroskepticism in other EU countries.

“The Commission’s decision also has political reasons,” said a European source briefed on the case — pointing to Brussels’ acrimonious relation s with Orbán and his nationalist government, which has resisted EU migration policy, denounced sanctions against Russia and come under fire for violating EU democratic principles.

Lawsuits and other challenges of the Commission’s decision are almost certain, but Monday’s decision was the last significant obstacle for Paks II and ends a probe that began in 2015.

Rosatom said it aims to begin construction in 2018.

Brussels waves Paks through

In mid-February, an irritated János Lázár, the powerful minister who heads Orbán’s private office, said he would travel to Brussels to meet Commissioners and to ram through Brussels approval for two new nuclear reactors.

Barely three weeks, later he has that approval.

Whether Lázár’s visit made a difference to the review is contested by EU officials. He did not meet Vestager but instead Commissioner Günther Oettinger, widely suspected of lobbying for Brussels to adopt a softer stance on Hungary’s authoritarian turn.

“The Commission originally was quite decided, and strict, and committed when they announced the different procedures against Paks,” said Benedek Jávor, a Hungarian MEP and long-standing critic of Paks II. “Finally the Commission came up with completely the opposite, and I think this is questioning [their] credibility.”

Commission officials were out in force to illustrate how watertight the reasoning behind the approval was. They hit the briefing room in large numbers, in a show of transparency and faith in the reasoning underpinning the approval.

That approval of Hungarian state aid for the project comes with three conditions.

Any profits have to be spent on Paks II and not used to invest in additional power capacity. The company operating Paks II will have to be legally separated from the one running the existing Paks plant. Finally, at least 30 percent of the electricity generated will have to be sold on an open power exchange. That last condition could be problematic if Budapest’s prediction that future electricity prices will be high fails to come true.

Hungary argued the reactors are needed to ensure the security of electricity supply over the next two decades, as it prepares to phase out the four existing Paks reactors that supply half the country’s power in the 2030s.

In November, the Commission closed a probe into the way Hungary handed the contract to Rosatom. Budapest argued only Rosatom was able to undertake the work — despite U.S-based nuclear technology company Westinghouse saying in the wake of the decision that regulators never checked that claim with them.

Because the existing reactors are Russian built, it made sense to contract Rosatom to build the new ones, the government said. Hungary insisted only Rosatom’s newest VVER-1200 reactors could fulfill all of its requirements for the project — an argument the Commission accepted.

Under EU rules, competitive tenders can be skipped when “for technical reasons the contract may be executed only by a particular economic operator.” Hungary wouldn’t be the first country to make use of that loophole. France’s EDF handed the contract to build a reactor at the Flamanville nuclear power plant to state-owned Areva in 2007, saying only it could meet the technical requirements.

Challenges to come

The nuclear-skeptic Austrian government, whose border is some 200 kilometers from Paks, is considering appealing the Commission decision. Reinhold Mitterlehner, the deputy chancellor and economy minister, called the verdict a “completely false signal.”

“This is still not the end of the story, as I expect some further court cases” — Benedek Jávor

“We will therefore examine legal steps and, if necessary, call on the European Court of Justice,” he said.

A lawyer acting for German energy firms also said her clients would consider appealing.

NGOs were also angry at Monday’s decision, saying it showed the project depended on public subsidies.

“The Commission is being spectacularly irresponsible,” throwing “massive subsidies” at the project, said Andrea Carta, EU legal adviser with Greenpeace. The worry is that by giving nuclear an “unfair advantage,” the decision will make it harder for renewables to compete.

That’s echoed by Jávor.

“From a financial point of view, this is a disaster,” he said, adding that the Hungarian taxpayer will end up covering some of the costs and subsidizing lower power prices for Hungary’s neighbors. That means that Hungary’s state aid for the project will distort the regional electricity market likely upsetting Austria and other EU members, he said.

“This is still not the end of the story, as I expect some further court cases,” Jávor said.

János Lázár, Orbán’s chief of staff, told the Hungarian parliament after the decision that Budapest succeeded in getting Commission approval because Hungary and the EU “conducted constructive, fair, non-political but economic negotiations.”

“We all need cheap energy,” he added.

Lili Bayer contributed reporting.




Source: article/commission-gives- orban-his-nuclear-deal/