chorshutdownreport

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BACKGROUND REPORT: CHORNOBYL SHUTDOWN

Prepared by Martin Kelly
Edited by Tamara Robinson
August 1997

INTRODUCTION

On 26 April 1986, Chornobyl-4 melted down in the worst accident in the history of nuclear power. Experts have attributed the accident to design problems inherent in the Soviet RBMK reactor and to mismanagement at the plant itself. Nearly five years later, in September 1991, a serious fire in the turbine hall of Chornobyl-2 prompted the Ukrainian government to pass legislation on decommissioning the Chornobyl Nuclear Power Plant (ChNPP).[1] On 29 October 1991, the Verkhovna Rada (Ukraine's parliament) passed Resolution No. 1726-XII, "On Urgent Measures in Connection with the Decommissioning of the Chornobyl Nuclear Power Plant," which called for operations at the plant to cease by 1993. Shortly thereafter, Ukrainian State Resolution No. 152 of 25 March 1992 outlined procedures for closing the plant. However, Ukraine failed to implement these measures due to serious energy shortages and, in fact, considered restarting Unit 2 in 1994 for the same reason.[2]

Closing the Chornobyl nuclear power plant became a matter of focused international concern in July 1994, when the Group of Seven (G-7) met in Naples and placed the issue of Chornobyl shutdown high on its agenda at the insistence of France and Germany. The G-7 sought the closure of Chornobyl-1 and Chornobyl-3, as well as Ukraine's agreement not to restart Unit 2. In return, the G-7 proposed funding the completion of certain reactors, thereby guaranteeing Ukraine no net loss in nuclear power generating capacity. One initial proposal recommended building two new reactors in Slavutych, a town near Chornobyl, which would enable the employment of former Chornobyl workers without relocation and infrastructure costs. A second, more viable proposal to complete three unfinished reactors -- Khmelnytskyy-2, Rivne-4, and Zaporizhzhya-6 -- soon replaced this proposal. A 1991 Ukrainian moratorium on the development of its nuclear industrial sector had previously halted construction of the three reactors. In 1994, the G-7 granted $200 million for the plan that included the completion of the reactors. Together with $600 million in loans and grants from the European Union (EU), Ukraine had $800 million available to finance shutdown.[3] Yet, as of mid-1997, despite Ukrainian pledges to close ChNPP, the lack of a consistent consensus among Western funders and Ukrainian negotiators regarding power replacement options and closure details has prevented the plant's complete shutdown.

DISCREPANCIES OVER PRICE TAG FOR CHORNOBYL SHUTDOWN

The G-7 proposal sparked a robust response from Ukraine, especially regarding finances. Ukraine pointed out that the G-7 plan did not account for the costs of replacing the Unit 4 sarcophagus, compensation for Chornobyl employees, and/or foregone revenue from Units 1-3, which were potentially operable until 2011. Comprehensive estimates of Chornobyl shutdown, a key aspect to these negotiations, have therefore varied widely depending on the scope of activities included. Between July 1994 and December 1995, the date when Ukraine and the G-7 signed a tentative Memorandum of Understanding (MoU) on Chornobyl shutdown and its financing, various sources recommended at least a dozen plans for decommissioning the plant. Costs ranged between $1.4 billion and hundreds of billions of dollars, with a median of approximately $4 billion. (See table below.)

From October 1995 to December 1995, the period leading up to the signing of the MoU, Ukraine sharpened its position on shutdown. Mikhailo Umanets, Chairman of Derzhkomatom (Ukraine's State Committee for the Use of Atomic Energy), reportedly said in October 1995 that whether or not Chornobyl closed in 2000 depended entirely on Western financing.[4] The leadership in Kiev, including President Leonid Kuchma, Prime Minister Yevhen Marchuk, and Chairman of the Rada Standing Commission for Nuclear Policy and Safety Mikhailo Pavlovsky echoed this position and predicated Chornobyl shutdown upon increased Western backing.[5, 6, 7] Ukraine tried strengthening its position by reiterating that the plant had 16 years of operating life left and would generate between $2.72 and $4.4 billion during that period.[4, 8, 9] Chornobyl Plant Manager Serhiy Parashin even announced in November 1995 his intention to continue modernizing the plant until the moment it would close.[10]

Meanwhile, Western and G-7 negotiators made few statements regarding shutdown throughout 1995. By June 1995, a consensus in the G-7 had developed, estimating the comprehensive cost of closing Chornobyl at $3.8 billion.[11] At their 15-17 June 1995 meeting in Halifax, Canada, however, G-7 leaders voted not to provide any money for the project additional to the $200 million granted earlier. Instead, they called on the World Bank and the European Bank for Reconstruction and Development (EBRD) to help finance the closure.[12, 13, 14] Through 1995, the Western position was often uncoordinated [10, 15], given the difficulty of balancing varying viewpoints and the array of influential actors that had become involved in addressing Chornobyl shutdown -- including the G-7, the EU, the European Commission (EC), the EBRD, the World Bank, the United States, and the Russian Federation, with the latter exhibiting a keen interest in Ukraine's energy market.

DECEMBER 1995: G-7, UKRAINE SIGN MOU TO CLOSE CHORNOBYL

Ukraine and the G-7 at last signed an MoU regarding Chornobyl shutdown in December 1995. The MoU was not legally binding, and it neither fixed a concrete deadline for closure nor dealt effectively with rebuilding the Unit-4 sarcophagus. Instead, it served as a substantive basis for the ongoing negotiations. Both sides agreed to set the target date for closure at 2000. After that time, the removal and storage of spent nuclear fuel would require 10 years, and the upgrade of the sarcophagus would take nine years.[16, 17, 18, 19] The Ukrainian Government reportedly cited economic pressure as its reason for signing the agreement. Soon after signing, Ukrainian Minister of Environmental Protection and Nuclear Safety Yuriy Kostenko said that the aid package probably will not cover all the costs of closing Chornobyl, such as radioactive waste management, environmental cleanup, or sarcophagus reconstruction. Nevertheless, he immediately suggested holding special bilateral talks with G-7 countries to implement the MoU.[20, 21]

According to the MoU, the G-7 earmarked $498 million in grants and $1.8 billion in low interest loans, bringing the total amount of funds allocated for decommissioning Chornobyl to $3.1 billion. Of the $498 million grant, $349 million was slated for improving short-term safety at Unit 3 and subsequent decommissioning, $43 million is allocated to power sector restructuring, $102 million will go towards an energy investment program, and $4 million is delineated for the social safety net. The $1.809 billion in loans includes $480 million from Euratom and is designated for completing the Rivne-4 and Khmelnystkyy-2 reactors, rehabilitating thermal and hydroelectric plants, building storage facilities, and increasing energy efficiency.[16, 18, 19] By this time, Ukraine had completed Zaporizhzhya-6 with funds from the state budget and, therefore, dropped the matter from the negotiations.

1996: BOTH SIDES HAGGLE OVER CHORNOBYL, PROGRESS LIMITED

Some progress in the negotiations occurred at the April 1996 Nuclear Safety Summit in Moscow. At the gathering, Kuchma announced Ukraine's intention to shut down Unit 1 by November 1996. For its part, the G-7 reiterated support for the MoU and agreed to conduct a feasibility study on how to replace the sarcophagus at Unit 4.[22, 23] The G-7 also clearly outlined its objectives with respect to Chornobyl:: 1. reform the Ukrainian energy sector to create a national electricity market;

Limited progress notwithstanding, disagreement between the two sides over funding continued throughout 1996. Ukraine sought to obtain money quickly to begin decommissioning work at Chornobyl and to complete Rivne-4 and Khmelnytskyy-2.[26] During negotiations on 6 June 1996, Ukraine claimed it needed $840 million immediately to finish construction of the two reactors.[27] Without receiving G-7 funding soon, Yuriy Kostenko warned at the time, Ukraine would have to revise the schedule for Chornobyl shutdown and possibly restart Unit 2.[28] Later, Ukrainian Foreign Minister Hennadiy Udovenko stated his country's frustration more pointedly, saying "there has not been a penny given to us for assistance" despite the December 1995 MoU.[29]

The G-7 opted to consider the project from all angles and did not release any funds for the Chornobyl project in 1996. In particular, completion of Khmelnystkyy-2 and Rivne-4 became a sticking point. The G-7 pressed the EBRD to take the lead in financing the completion of the reactors, but in order to meet the "least-cost" criteria for meeting Ukraine's power requirements, the EBRD needed to conduct an independent study of Ukraine's energy sector. Kiev strongly criticized this move, which ultimately delayed decommissioning. In September 1996, the EBRD initiated its study, which it hoped to finish in early 1997.[30, 31, 32]

Meanwhile, at the 11-14 October 1996 G-7 meeting in Paris, both sides signed a draft agreement stipulating that the EBRD grant Ukraine $147 million (ECU 118 million) to finance preparatory work for Chornobyl shutdown, specifically to build spent fuel and solid waste storage facilities at the site.[33] The money is in addition to the $3.1 billion aid package designated in the December 1995 MoU. The funds will come from the Nuclear Safety Account (NSA), administered by the EBRD on behalf of 14 Western donor countries and the EU. At the Paris meeting, both delegations also drew up the schedule for completing Rivne-4 and Khmelnytskyy-2 and discussed reconstruction of the damaged sarcophagus.[33, 34, 35] The EBRD and representatives of Ukraine approved the $147 million grant on 12 November 1996 at EBRD headquarters in London, allowing disbursement of the funds to begin by January 1997, provided that the Verkhovna Rada ratifies the agreement.[36]

In accordance with his good will vow at the April 1996 Moscow Nuclear Safety Summit, President Kuchma shut down Unit 1 on 30 November 1996 [37] and made no plans to restart the reactor due to financial constraints.[38] Hedging their bets for future nuclear power, however, Ukrainian authorities issued a regulation, prior to Unit 1 closure, sanctioning the restart of Chornobyl-2 at an estimated cost of between $85 and $280 million.[39, 40, 41] At this time, Kuchma also issued a decree to create Ukrenergoatom, a company established to act as the identified borrower of Western funds, distinct from the state nuclear ministry, Derzhkomatom. The latter move had been a lending requirement on the part of Western financial institutions.[42]

According to a respected analyst, the December 1996 talks between Ukraine and the G-7 "ended on a note of mutual confidence, with Ukraine finally believing Western promises to finance energy infrastructure projects and the West believing Ukrainian pledges" to shut down the ill-fated Chornobyl NPP by 2000.[43] During the meeting, Yuriy Kostenko continued touting a hard-line position, asserting that closure by 2000 depended on the receipt of monies for Khmelnytskyy-2 and Rivne-4 by June 1997.[44] Nevertheless, the discussions were focused. Both sides agreed to set up an expert team of 14 international engineering groups to study solutions for the damaged sarcophagus at Chornobyl-4. The U.S. government and TACIS (the EU's Technical Assistance to the CIS Programme) will finance the work of the expert team. Ukraine and the G-7 also discussed the reactors at Khmelnytskyy and Rivne but made little progress pending the EBRD independent report on the subject.[43]

EBRD STUDY ON FINANCING NEW REACTORS IN UKRAINE

On 19 February 1997, the EBRD released the results of its independent study regarding completion of Khmelnytskyy-2 and Rivne-4. The main report concluded that financing the completion of the two reactors did not meet the EBRD's "least-cost" criteria.[45, 46, 47] The main report also asserted that Ukraine's energy problems were not related to the quantity of energy resources but were the result of not using given resources in an efficient and economic manner. According to Sussex University Professor John Surrey, who headed the commission, "In order to produce 1,000 Pounds Sterling (approximately $1,600 at the report's date of publication, 19 February 1997) worth of GDP, Ukraine uses more energy than any other EBRD country."[47] The EBRD independent commission proposed directing funds toward long-term energy conservation programs, improving safety conditions at Ukrainian nuclear power plants, and investment in the Ukrainian energy sector.[47, 48] Of the six member commission, five endorsed the findings of the main report, while Swedish Professor Lennart Hjalmarsson strongly dissented, saying, "I regard [financing Khmelnytskyy-2 and Rivne-4] as the only well-identified alternative to Chernobyl."[49]

Both sides have criticized the EBRD's independent study. The G-7's nuclear safety working group unanimously rejected the proposal and called for a rewrite [50, 51], while a G-7 spokesman said the EBRD's report had caused a "crisis of confidence" between Kiev and the West.[51] Yuriy Kostenko said that Ukraine will complete the reactors "under any circumstances."[52] Kostenko labeled the conclusions of the commission "wrong and too superficial" [53] and reiterated that the G-7 has an obligation "to fulfill its political commitments," referring to the December 1995 MoU.[48] He has also said that the EBRD expert study fails to take into account the true state of Ukraine's energy sector.[54] In a surprise statement following publication of the EBRD report, Chairman of Ukraine's Derzhkomatom Viktor Chebrov stated that Ukraine could commission the two reactors at a safety level higher than European standards without Western funding [55]; Chebrov's statement, however, contradicts previous official statements regarding financing for the two reactors. In general, criticism of the report remained mild since the study is a recommendation to higher EBRD officials, who will make the final decision in regard to financing the two reactors in question. According to one source, though, the EBRD's delay in accepting the commission's report is attributable to the G-7's unanimous criticism.[51]

Despite difficulty in reaching a plan to fund Khmelnytskyy-2 and Rivne-4, Chornobyl shutdown negotiations have recently registered some successes. On 18 March 1997, the Verkhovna Rada ratified the NSA grant agreement for safety and waste management at Chornobyl, thereby allowing for the disbursement of funds and for work to begin on the project.[56] Then, at their April 1997 meeting, the G-7 and Ukraine solidified a growing consensus that the Unit 4 sarcophagus needs stabilization, which involves the removal of nuclear fuel.[57] In other words, the two sides have abandoned plans suggested over the past few years by many different sources for sinking Unit 4 deep in the ground, for encasing the structure in concrete, or for constructing a second sarcophagus over the first. At the talks, the G-7 also agreed to begin extending $900 million (from the December 1995 MoU package) in loans and grants to Ukraine as early as May 1997. G-7 experts estimate that Chornobyl will be completely shut down by 2005.[58]

Recent optimism regarding the closure date notwithstanding, shutting down the Chornobyl NPP remains tricky. The crux of the matter relates to alternative sources of energy for Ukraine. The G-7, the EU, and the EBRD must approve and advance funds more quickly for closure work to proceed. Aside from decommissioning the plant, however, Western funders have not come to a consensus on the costs and types of energy sources needed to replace Chornobyl's power generating capacity. Without a firm Western commitment to fund Khmelnytskyy-2 and Rivne-4, Ukraine has said it is unwilling to close Chornobyl. However, the credibility of Ukraine's statements in this regard does not appear very strong, given that Ukraine can barely afford to fuel Chornobyl-3 as it stands. The Chornobyl NPP is currently $30 million in debt to Russian nuclear fuel suppliers [59, 60], while consumer debt to the plant measures $108 million.[61] These figures, indicative of hard times in Ukraine's energy sector, seem to weaken Ukraine's position in negotiating with the West. As negotiations on shutdown are prolonged, Ukraine may be forced into a position to accept less favorable terms from the West, such as fewer dollars for replacement energy, since the plant's value decreases as its foreign debt grows. In the near term, both sides still await the EBRD's decision on whether or not to fund Khmelnytskyy-2 and Rivne-4, and final Chornobyl shutdown terms remain ambiguous.

PLANS FOR CHORNOBYL SHUTDOWN, 6/94-11/95

Sources:

Source, Date	Designation of Funds for Chornobyl Shutdown	Estimated Cost of Shutdown
Mikhailo Umanets, Derzhkomatom, 29 November 1995	$1.4 billion to close Units 1-3; $1.6 billion to replace sarcophagus; $400 million, Kiev power station	$3 billion + ^[62]
Ukrainian Minister of Nuclear Safety,Yuriy Kostenko, 20 June 1995	N/A	Hundreds of billions of U.S. dollars ^[63]
G-7, 1 June 1995	$1.1 billion for decommissioning Chornobyl; $2.7 billion for replacement energy expenses	$3.8 billion ^[64]
Ukrainian experts, 27 April 1995	N/A	$6-7 billion ^[65]
Ukrainian officials, including Leonid Kuchma, 14 April 1995	Finance gas-fired combined cycle power plant; new sarcophagus; social programs for 5,000 unemployed Chornobyl workers	$4.4 billion ^[66]
Chornobyl Plant Manager Serhiy Parashin, 13 April 1995	$2 billion for constructing steam gas power plant; $2.4 billion to stockpile natural gas	$4.4 billion ^[67]
Ukrainian government, 10 April 1995	Stabilize Ukraine's power supply; create spent fuel, rad-waste storage facilities; reconstruct Unit 4 sarcophagus; provide work for Chornobyl employees	$4 billion + revenue from plant operation until closure ^[68]
Electricite de France, 9 March 1995	$3 billion for new sarcophagus and clean-up at No. 4; Unit 1 closed by 1995; Unit 3 closed by 1997	$3 billion + cost of Units 1 and 3 to go off-line ^[69]
Ukrainian President Leonid Kuchma, 13 February 1995	Finance new, modern reactors to enable Chornobyl shutdown	$7 billion ^[70]
Ukrainian Economics Minister Roman Schpek, 24 December 1994	Chornobyl shutdown	$1.4 billion ^[71]
Ukrainian Nuclear Industry, 24 November 1994	Complete Chornobyl shutdown	$10 billion ^[72]
Ukrainian Foreign Minister Hennadiy Udovenko, 18 November 1994	Complete Chornobyl shutdown	$10-12 billion ^[63]
Study by U.S. DOE and Ukraine, October 1994	$1.396 billion to close Units 1-3; $410 million for preparatory work; $376 million for ten year maintenance; $610 million for retraining, social services	$1.792 billion ^[73]
Serhiy Parashin, 15 September 1994	$1.3 billion for plant closing; $700 million for workers compensation; $1.2-1.4 billion for new sarcophagus; $1.4 billion to complete Rivne-4, Khmelnytskyy-2, Zaporizhzhya-6	$4.6-4.8 billion ^[74]
Ukrainian Parliamentary Committee On Nuclear Policy and Safety, Mikhail Pavlovsky, June 1994	Chornobyl shutdown; $2 billion to build two new reactors in Slavutych and provide jobs for displaced workers	$2 billion + ^[75]