Blog: Is Russian nuclear energy a silver bullet or a poisoned chalice for electricity demand growth?

Beneath the blanket of Western sanctions, Russia’s state-owned nuclear company, Rosatom, have accelerated their nuclear energy offensive across Africa. 600 million [1] Africans still have no access to electricity and population growth is forecast to increase by 70% by 2050. Does the clean and reliable energy Rosatom are offering, therefore, provide the solution?

The Build-Own-Operate Model

In 2017, Rosatom agreed to build a nuclear plant in Egypt and cover 85% of the upfront costs. This ‘build-own-operate (BOO)’ model enables the recipient to pay for the electricity generated but not for the construction costs. For Russia, this secures decades of political influence and cash flow. One energy researcher [2] suggested this is particularly poignant “in countries that proclaim neutrality when it comes to Ukraine.”

Prospects

Significant costs and knowledge barriers have long been cited as obstacles to nuclear energy proliferation across the African continent, but the BOO model takes the financial risk away from individual countries. Algeria [3] has been eager to build reactors under the same conditions offered to Egypt, but lengthy negotiations have yet to bear fruit. In fact, despite striking deals with Nigeria, Kenya, Ghana, Tanzania, Rwanda, Ethiopia, and Zambia amongst others, Rosatom has yet to complete a single project across the continent. The consensus [4] amongst commentators is that Russia knows its BOO model is unsustainable and is consequently stalling negotiations. Critics [5] suggest that even if plants are successfully constructed, the technology offered is ‘unsuitable and unlikely to benefit the continent’s poorest people.’

Lessons from history

Between 2009 and 2015, Bangladesh was forced to accept the cost of two Russian reactors had increased nine-fold [6] or the deal was off. In 2012, similar price increases forced Bulgaria to cancel its contracts with Rosatom but only after paying €600 million in fees. Concerning supply chains, India experienced vast price increases and poor overall quality [7] [9]. Rosatom’s lack of experience coping with the strict demands of an independent regulatory body was blamed for delays at Finland’s Hanhikivi site. Since the invasion of Ukraine, Finland has cancelled the contract altogether with Rosatom retaliating with a €3 billion lawsuit. In 2017, Rosatom agreed to a US$75 billion [6] with South Africa, but high-end corruption was unearthed leading the high courts to sever their atomic links with Russia delaying their nuclear ambitions by years.

Conclusions

Poor quality, vast price inflation and corruption offer Africa a lens into how the Kremlin operates in Africa but with energy supply still a major problem across the continent Russia’s atomic offer is hard to resist. The war in Ukraine is likely to exacerbate these issues while crippling the Russian economy and dramatically increasing global supply chain costs for Rosatom’s client nations. African states should exercise extreme caution when considering nuclear energy deals with Russia, given the significant risks involved and potential consequences for the continent's long-term energy and environmental security.

References

1. UNDESA (2022) World Population Prospects 2022. Available at: https://population.un.org/wpp/

2. Bloomberg (2023). Russia’s grip on nuclear power trade is only getting stronger, 14 February 2023. Available at: https://www.un.org/development/desa/pd/sites/www.un.org.development.desa.pd/files/wpp2022_summary _of_results.pdf

3. Al-Monitor (2022). Algeria forces Russia to make concessions, 15 November 2022. Available at: https://www.al-monitor.com/originals/2022/11/algeria-forces-russia-make-concessions

4. Riddle (2020). Russia’s atomic strategy in Africa, 20 February 2020. Available at: https://www.al-monitor.com/originals/2022/11/algeria-forces-russia-make-concessions

5. The Guardian (2019). Russia pushing ‘unsuitable’ nuclear power in Africa, critics claim, 28 August 2019. Available at: https://ridl.io/russia-s-atomic-strategy-in-africa/

6. Thomas (2018). Russia’s Nuclear Export Programme, Energy Policy 121. Available at: https://www.theguardian.com/world/2019/aug/28/russia-pushing-unsuitable-nuclear-power-in-africa-critics- claim

7. The Wire (2016). ‘Teething troubles’ at Kudankulam, 08 March 2016. Available at: https://www.sciencedirect.com/science/article/abs/pii/S0301421518304245#fn113

8. Bellona (2012). Rosatom-owned company accused of selling shoddy equipment to reactors at home and abroad, pocketing profits, 27 February 2022. Available at: https://bellona.org/news/nuclear-issues/nuclear-russia/2012-02-rosatom-owned-company-accused-of-selling-shoddy-equipment-to-reactors-at-home-and-abroad-pocketing-profits

9. Helsinki Times (2022). Russia’s Rosatom files claims worth €3bn against Finland’s Fennovoima, 24 August 2022. Available at: https://www.helsinkitimes.fi/business/22086-russia-s-rosatom-files-claims-worth-3bn-against-finland-s-fennovoima.html

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