Poland’s New Nuclear Ambitions

Polish Foreign Minister Radoslaw Sikorski arrived in the United States on Monday for a six-day visit including meetings with U.S. Secretary of State Hillary Clinton on Wednesday and with Deputy Secretary of Energy Daniel B. Poneman and other officials. The visit is meant to promote the U.S.-Polish alliance and reaffirm Warsaw’s commitment to a close relationship with Washington after lukewarm visits from Polish President Bronislaw Komorowski in December 2010 and Defense Minister Bogdan Klich in October 2010, during which Washington refused to give concrete military commitments to Poland.

Aside from clearing any negative air left by the Komorowski and Klich visits, Sikorski’s stay in the United States has practical economic purposes. Poland is seeking investments and technical expertise in the energy field, specifically in nuclear power and shale natural gas extraction. U.S. investment in either sector would signal a long-term, concrete commitment to Warsaw from Washington. The sheer size of the investment needed — the estimated construction costs for the two power plants Poland wants to build are 18 billion to 21 billion euros ($24.7 billion to $28.9 billion) — would be a significant boon to Poland’s economy and stability.
Nuclear Power in Poland

During the Cold War, Poland’s plentiful coal deposits, which currently provide 94 percent of Poland’s electricity, meant it had no dire need for nuclear technology. The Soviet-planned Zarnowiec nuclear power plant project 50 kilometers (30 miles) northwest of Gdansk was ultimately abandoned in 1990 due to a combination of lack of necessity, lingering fears about the Chernobyl disaster and a general anti-Soviet sentiment paired with the early environmentalist movements in Poland. With the Polish public convinced that nuclear power plants were landmarks of Soviet power over Iron Curtain satellites, the half-completed Zarnowiec plant was scrapped after half a billion dollars had been spent on its construction. The plant’s abandoned, incomplete buildings still stand.

However, the European Union’s concerted push to curb greenhouse gases makes Poland’s overdependence on coal a potential liability, and this is forcing Poland to examine alternative energy sources. One such alternative is the construction of natural gas-burning power plants, which create fewer greenhouse gas emissions than coal-burning plants. Polish state-owned natural gas company PGNiG has plans for at least three new natural gas power plants, one of which will be jointly built with Russia’s Gazprom by 2017. In anticipation of a shift toward natural gas for electricity generation, Warsaw penned an increased natural gas supply contract with Gazprom in February 2010.

Although the EU emphasis on environmental concerns means Poland must look at cleaner energy sources, there are two issues with natural gas-powered energy production. The first is that Poland already imports 52 percent of its natural gas from Russia — along with 92 percent of its oil — and natural gas consumption is expected to increase over time, especially as more is used for electricity generation. The second issue is that Russia intends to build a nuclear power plant in Kaliningrad to export electricity to Poland and the Baltic states. This would mean that Poland, formerly completely independent in electricity generation, would become increasingly dependent on Russia for electricity and for the energy needed for transportation, industry and heating.

Natural gas is no longer Poland’s only option, however. The Polish government amended laws Feb. 22 that would allow nuclear power plants to be constructed in Poland. The change will take effect July 1. Although opposition to nuclear power in Poland was heavily influenced by opposition to Soviet political dominance rather than environmental concerns, public opposition to the idea is not expected to be a problem now. In fact, nuclear power is seen as a tool to maintain freedom from the new Russian yoke of energy supplies, specifically natural gas.
Finding a Partner

Poland hopes to find a foreign partner by 2013 to help build a 3,000-megawatt (MW) nuclear power plant, probably near the old Zarnowiec facility to be operational in 2022 and a second 3,000-MW plant to be built by 2030. Poland does not have the technology to do this on its own; few countries in the world do. Polska Grupa Energetyczna (PGE) is the main domestic investor and has opened up public contract awards for the two projects. Polish media have reported that the company selected will take a 49 percent stake in PGE’s nuclear power plant construction consortium.

PGE is looking for most of the investments to come from abroad, the idea being that a nuclear power plant in a Central European country with a growing economy and a population of 40 million would be a lucrative investment — but this is also the plan’s biggest drawback, as the scope of the investment is huge. However, Poland’s advantage over similar projects in Central Europe is its market size and stability, along with an expected increase in the use of electricity in upcoming decades.

The contractors under consideration hail from the United States, France, South Korea and Japan. The largest and best-known firms competing to secure a contract are French firms Areva and EDF, the joint General Electric and Hitachi venture GE Hitachi, and Toshiba’s U.S.-based unit Westinghouse. By developing its nuclear industry, Poland would achieve its geopolitical goal of becoming more energy independent from Russia; but the choice of who helps Poland in its nuclear power plant development depends on more than who makes the best offer.

Choosing Areva would mean close collaboration with a European power, which would be in line with Warsaw’s goal of becoming part of the European elite. France is also known to lobby for its companies vociferously at the government level — lobbying that U.S. firms and government officials might not be willing to do. Paris could offer additional political and economic incentives to win the contract for Areva, which suffered a major setback recently when it lost a contract in the United Arab Emirates to a South Korean firm.

The choice of a U.S. contractor would reinforce Polish-American ties in the non-military realm, where it has particularly lagged in recent years. In 2009, according to official investment statistics, U.S. foreign direct investment in Poland was less than that of tiny — and bankrupt — Iceland. While Polish and U.S. military and political cooperation has been sustained, though not to a level of Poland’s liking, private sector links have been completely superseded by investments from wider Europe, especially Germany. A major push by the U.S. nuclear energy private sector into Poland would revitalize the private sector links between the two countries and therefore help reinforce their strategic relationship. This would go a long way in reassuring Warsaw that U.S. interests in Poland are long-term and diverse and that the United States does not only see Poland as a chess piece in a wider geopolitical game against Moscow.

Poland also has domestic issues to consider, namely, the October parliamentary elections. The ruling Civic Platform party and the opposition both value a strong relationship with Washington. The ruling government is looking to score points and reverse the disappointments of 2010, including the horse-trading between the United States and Russia over Poland’s security, and get the United States recommitted to Poland ahead of the parliamentary elections. The opposition has latched on to the sense that Warsaw and Washington are drifting apart and has criticized the government for this. Sikorski’s visit and appeal for energy investment can therefore also be seen as an attempt to deflect criticism that Warsaw is not actively pursuing an alliance with Washington in both strategic and economic terms.