(Bloomberg) -- Sweden could borrow 300 billion Swedish kronor ($28.5 billion) to help finance a new fleet of nuclear reactors in the coming decades.
A government study released Monday in Stockholm highlighted several features of its preferred model in order provide certainty for investors. Funding instruments include government borrowing to support construction, and 40 years of guaranteed revenues through a so-called contract-for-difference or CfD.
The Nordic nation is in dire need of new power capacity as demand is projected to double with the greater electrification of the economy. The country currently has six reactors, providing about a third of its power, with hydro and wind turbines accounting for most of the remainder.
Financing is one of the biggest hurdles for nuclear energy, with reactors costing multiple billions of dollars and taking years to build — often compounding the price. The model presented on Monday is focused on financing a program of as much as 6,000 megawatts, or four large-scale reactors, and has taken inspiration from the Czech Republic’s plans for financing new units at the Dukovany complex.
“We have looked quite a lot at the Czech model,” Mats Dillen, who led a government-appointed inquiry, said at a press conference in Stockholm. “It was recently approved by the European Commission, which makes it interesting to us, as it allows us to take a support model that we know has the commission’s blessing.”
The proposals will be sent for consultation to various institutions, companies and government agencies before they may be adopted by the government.
One feature is the CfD model, used for both Electricite de France SA’s Hinkley Point C in the UK and Dukovany. Under this mechanism, developers and the government agree a fixed price for electricity for a certain period of time, providing certainty of future revenue. If market prices fall too low, the generator receives a top-up from the state. On the flip side, the plant operator must pay back the difference if the market rate is higher.
In contrast with the financing scheme for Hinkley Point, which has a total cost estimate of about £47.9 billion ($61.2 billion) in today’s prices, the suggested model for Sweden also involves public borrowing to finance construction. According to the proposal, the government would borrow as much as 75% of investment costs, which Dillen expects could increase public debt by some 300 billion Swedish kronor ($28.5 billion).
Swedish state-owned Vattenfall AB and Finland’s Fortum are among the utilities studying new reactors.
“When the owner, the state and customers collectively share both profits and risks - financing costs will drop significantly,” said Jesper Marklund, manager for new nuclear development at Fortum Oyj. “That will favor both households, the industry as well as strengthen Sweden’s competitiveness.”
In a comment on its website, Vattenfall said it agreed with a lot of the points made by Dillen, but that it was unclear how the state will ensure that the first wave of new reactors actually will be built.
Sweden has had a love-hate relationship with atomic energy since the first commercial reactor began operations in 1972. Mounting grassroots opposition in subsequent years culminated in a 1980 referendum calling for the dismantling of all reactors — an effort that ultimately failed. The winning center-right coalition in the 2022 election made a nuclear renaissance a pillar of its election campaign.
The government’s road map calls for at least 2,500 megawatts to be operational by 2035, enough to power about 2.5 million European homes. Vattenfall has said that the earliest a new reactor could come online is in the first half of the 2030s.
The utility has purchased land adjacent to its Ringhals plant on the nation’s west coast as one area of focus. The government is seeking to pave the way for new units, through legislation and more than 10 studies similar to the one on financing.
(Updates with quotes and details from 5th paragraph.)
©2024 Bloomberg L.P.