Nuclear power plant Krško 2 would ensure energy security for Slovenia, region

Implementing the energy transition and decarbonization while maintaining energy security is a challenge that nearly all countries, particularly state power utilities, are working to address. For Slovenian company GEN and its CEO, Dejan Paravan, the solution lies in nuclear energy combined with renewables. However, Slovenia’s decision to build a new nuclear power plant must receive the support of citizens, who will have their say in a referendum on November 24. This makes Slovenia one of the few countries to include citizens in decision-making on the future of the energy sector. In an interview with Balkan Green Energy News, GEN’s top man explains why he believes nuclear energy is the right solution and delivers his message to the citizens of Slovenia and other countries in the region ahead of the referendum.

In the interview, Dejan Paravan takes stock of his two years at the helm of GEN, analyzes Europe’s response to the energy crisis, and recommends ways to prevent solar cannibalization. Paravan also presents the recent changes in the calculation of network charges in Slovenia and explains what they mean for citizens and the economy.

Energy crisis cost Europe dearly, with consequences still being felt

Dejan Paravan, who took over as CEO of GEN during the energy crisis, in October 2022, says the task wasn’t easy, but that he is satisfied with what he and his team managed to achieve. In 2023, the company’s profit hit an all-time high of EUR 204.5 million.

“We achieved this despite bearing the cost of price regulation for households and small businesses, which reduced our revenue by EUR 200 million, and despite the longest unscheduled shutdown of the Krško nuclear power plant in history, which lasted 43 days and cost us EUR 50 million,” Paravan points out.

He says he expects this year’s profit to meet the target or even exceed it, while noting that price regulation will reduce the company’s revenue by EUR 100 million.

In October 2022, it was uncertain whether there would be enough electricity and gas for the winter

This was hardly expected when he took the helm of the company in the final quarter of 2022. “There was so much uncertainty about what would happen over the winter that it wasn’t even clear whether there would be enough electricity and gas in Europe,” recalls Paravan.

Although he is convinced that Europe weathered the crisis well, he also admits that it came at a great cost. When asked how this was achieved, he says that Europe managed to avoid the pitfall of each country acting alone, in its own interest, and that they all worked together instead.

“It was a kind of maturity test for the European Union, and it passed,” he asserts. Another reason was the EU’s success in quickly finding an alternative to Russian gas. However, in the end, there is a bitter taste given how much Europe paid for the crisis, despite having no fault of its own, he says.

Paravan also cites the EU competitiveness report by Mario Draghi, the former Prime Minister of Italy and President of the European Central Bank.

“It clearly states that the energy crisis has left Europe highly uncompetitive when it comes to electricity and gas prices for the economy. This is something that should concern everyone,” he points out.

Not building Krško 2 would require new gas-fired power plants and imports

As the energy crisis is now behind us, the company’s main priority is the Krško 2 nuclear power plant project (JEK 2). Why nuclear power?

Slovenia, he notes, has had a very good experience with nuclear energy over the past 40 years. The Krško power plant has been in operation since 1983, and last year, its output accounted for nearly 37% of domestic electricity production, with half of it supplied to the Croatian state power utility, Hrvatska elektroprivreda (HEP).

“Krško’s production and safety indicators are among the best in the world. With all this in mind, it was logical for GEN to start working on the Krško 2 project back in 2006. However, progress was slow because there was never enough support,” he says.

But things have changed in the meantime, he adds. The project has benefited from the energy and climate crises, decarbonization goals, and the global nuclear revival, according to him. Another important factor is the support provided by the Government of Slovenia, he stresses.

The price of electricity from the new nuclear power plant would depend on financing costs

Opponents of nuclear energy have many objections, including the lengthy construction time of nuclear power plants and concerns that the total cost can rise significantly by the time the project is completed. Of course, they often cite the example of Britain’s Hinkley Point C nuclear power plant, which was originally planned to be operational by 2025, at a cost of GBP 18 billion, but is now not expected to be online until 2030, with the total cost estimated at between GBP 31 billion and GBP 34 billion.

Paravan believes this is because very few nuclear power plants have been built in the Western world in recent years, resulting in contractors lacking sufficient experience. In contrast, Russia and China have built a large number of nuclear power plants, completing them on time and without increased costs.

“That’s why we believe the nuclear energy revival will improve the performance of Western contractors. Slovenia, as a relatively small country, does not have the capacity to offset construction delays with other projects. That’s why we must take this project as seriously as possible. This will ensure that we do not compromise on the terms and price of construction,” he says, adding that Slovenia intends to select projects that have already been built somewhere.

When it comes to the price of electricity from the future nuclear power plant, Paravan says that it would largely depend on the financing costs. According to him, anyone who wants a competitive price must ensure low financing costs, and this can only be achieved if the state plays an active role in financing.

Slovenia is considering five projects from three companies

“Five projects, ranging from 1,000 MW to 1,650 MW, are currently in play. Two are from EDF, one from Westinghouse, and two from Korea Hydro & Nuclear Power (KHNP). The chosen capacity will determine the choice of both the project and the contractor,” explains Paravan.

Financing, which is also cited as one of the challenges, has not yet been finalized. The financing closure, he says, is expected by 2028, by which time the final investment decision should also be made.

Paravan stresses that there is interest in financing the project, and that it is growing. “Several countries have also shown interest in participating as co-investors. Nothing has been agreed on so far, but it remains one of the options,” says Paravan.

Slovenia has used up its hydropower potential

Critics claim Slovenia doesn’t need nuclear energy because it has renewable energy sources. Paravan replies that forecasts predict electricity consumption in Slovenia will double by 2050, while the planned coal phaseout involves shutting down the Šoštanj thermal power plant.

“To secure enough electricity, Slovenia has only nuclear and renewable energy at its disposal,” he says. Of the renewable sources, the only viable option is solar, as the hydro potential has been exhausted and wind power projects face serious challenges in finding suitable locations, according to him.

When asked what will happen if citizens do not back Krško 2 in the upcoming referendum, he says that backup options must be activated. “This would mean relying on renewable energy sources, adding gas-fired power plants, and importing electricity,” says Paravan.

This is why, he says, it is important to reiterate that nuclear energy is carbon-free, reliable, and has little impact on biodiversity and land use.

New network charges will revolutionize the relationship between suppliers and consumers

Alongside the development of the Krško 2 nuclear power plant project, GEN is implementing a EUR 1 billion investment plan until 2030. Paravan says the plan includes the construction of solar power plants in Slovenia, but also other countries, mostly through GEN. Two years ago, a 17 MW photovoltaic power plant was built in North Macedonia, and a few days ago, another 12 MW power plant was completed. Last year, the company built solar power plants for households and businesses with a total capacity of 70 MW.

“We are also working on battery projects, from small ones for prosumers to those with larger capacity. We expect to install the first larger batteries next year in Slovenia, with a total capacity of 10 MW/20 MWh,” he says.

In the solar energy segment, GEN-I provides a full range of services. It has established two energy cooperatives in partnership with local authorities. The municipalities provided the space, the company installed the solar panels, and households that lacked the conditions to install their own panels were given the opportunity to join the cooperatives and secure electricity for self-consumption.

“It’s a model where we see a lot of potential because there are a lot of people who can’t put solar panels on their roofs,” says Paravan.

Contracts for difference and batteries can help tackle solar cannibalization

Solar seems unstoppable at the moment, so we asked Paravan if the cannibalization effect could potentially hinder its growth. GEN’s top man sees two challenges there.

One of them is space – Slovenia has no problem installing power plants on roofs, but there are still very few large ground-mounted power plants. He believes that the main culprit is the permitting procedure.

The other challenge is cannibalization and negative prices, which reduce the profitability of solar investments and pose a risk for investors. There are two solutions for that.

“The first solution is administrative: the state should assume part of the risk through, for example, a contract for difference (CfD). The second is a market solution, namely the installation of batteries.” The former is short-term, while the latter is long-term, and they can be combined,” says Paravan.

Solar will make up a significant part of the power system of the future, in which smart grids will be indispensable. With smart grids, GEN’s focus is on the end consumer and ways to support the grid. Slovenia is poised for major changes as the new methodology for calculating network charges came into force on October 1. He is convinced the new methodology will respond much better to current grid challenges and provide an incentive for consumers to offer different services to the system.

Changing the methodology means shifting the focus from energy to power

“The methodology also opens up opportunities for suppliers, such as GEN-I, to offer new services to consumers to optimize consumption. This includes, for example, time-of-use tariffs,” says Paravan.

These tariffs allow consumers to lower their bills if they consume electricity at certain times of the day. This applies to existing devices they own, but also those they will use in the future, such as solar power plants, electric vehicles, batteries, or heat pumps.

Paravan explains that the network has its limitations, and that the first goal must be to optimize the consumption and production of electricity at a certain location, so as to reduce interaction with the grid to a minimum.

“Changing the methodology also means shifting the focus from energy to power. And all that is a prerequisite for a smart grid,” concludes Paravan.

Krško 2 can ensure energy security for the region

However, smart grids, solar, and nuclear power plants will not help if they fail to meet one key standard: energy security, which is indispensable to the energy sector today.

According to Paravan, one must keep in mind that the whole world, especially the West, has developed on energy from fossil fuels. “It is reliable, straightforward, cheap, and easy to supply, but there is one problem: we could soon end up destroying the planet,” he points out.

Today, he says, the world is shifting to other energy sources, which are different, and security is no longer a given.

“We will face more frequent situations where the security of supply is threatened, as was the case last summer when a major power outage affected Albania, Bosnia and Herzegovina, Montenegro, and Croatia. Ensuring energy security will require effort, and that’s why the prices will go up,” claims Paravan.

He believes that nuclear power plants can ensure that security, not only in Slovenia but also in the region. According to him, Krško 2 is a regional project.

“All countries in the region, except for Hungary, are planning their energy independence based on renewable energy sources and gas, without nuclear energy. Krško 2 could provide the necessary stability, helping regional systems ensure a reliable energy supply,” asserts Paravan.