REPORT

Update on Nuclear Energy Projects and Plans in Meeting Report [Held via Webinar: May 12, 2021] NOTICE This report was prepared as an account of work sponsored by the Sandia National Laboratories (SNL). Neither Kraft-Contente, LLC, USA Nuclear LLC, nor any of their principles, employees, or consultants make any warranty, expressed or implied, or assume any legal liability or responsibility for the accuracy, completeness or usefulness of any information, apparatus, product, or process disclosed in this report, or represent that its use would not infringe privately-owned rights. REPORT

Update on Nuclear Energy Projects and Plans in Ukraine

USA Nuclear Report May 12, 2021

Developed and Authored by USA Nuclear for the NNSA’s Office of International Nuclear Security Engineering

Copyright © 2021 USA Nuclear, All Rights Reserved

Sandia National Laboratories is a multimission laboratory managed and operated by National Technology SAND#2021-7121 R and Engineering Solutions of Sandia LLC, a wholly owned subsidiary of Honeywell International Inc. for the U.S. Department of Energy’s National Nuclear Security Administration under contract DE-NA0003525. 1. Observations

Ukraine has developed a civilian nuclear enterprise based on IAEA standards of safety and security. Ukraine wants to expand its nuclear energy sector to further gain energy independence particularly from and as part of Europe’s goal to make its economy sustainable. Ukraine is surrounded by threats to its economy and security.

2. Overview

Following the 1986 disastrous accident at Chernobyl, gaining independence following the fall of the former , two revolutions, and on-going Russian intervention, Ukraineᵃ is seeking to expand its use of commercial nuclear energy and to further reduce its dependence on Russia for energy.

Nuclear has made a significant contribution toward achieving sustainable development and social goals.ᵇ Ukraine is very vulnerable to the effects of climate change1 and nuclear is a cornerstone of the country’s effort to combat the effects. With broad support from the U.S. government, Ukraine is cooperating with the U.S. on fresh supply, civilian nuclear security, outage optimization, spent fuel storage, and future nuclear technology. And is looking to tap U.S. expertise on plant management, and electric grid operations and expansion.

NEIᶜ hosted this virtual event to provide an update on nuclear energy projects and plans in Ukraine. Featured speakers included Yaroslav Demchenkov, Deputy Minister of Energy, Taras Kachka, Deputy Minister – Trade Representative, Petro Kotin, CEO, ,ᵈ and Ann K. Ganzer, Senior Bureau Official, Bureau of International Security and Nonproliferation, U.S. Dept. of State. Maria Korsnick, NEI CEO, moderated the discussion. About forty individuals attended representing the Ukraine and U.S. governments, and U.S. suppliers.

3. Ukraine and the EU

While not a member of the (EU), Ukraine has benefited from significant engagement between the two since the 2014 Ukrainian Revolution, which resulted in the overthrow of the government clearing the way for Ukraine signing an Association Agreement with the EU including a “Deep and Comprehensive Free Trade Area.” Since then, the EU and the Financial Institutionsᵉ have provided more than €16B in grants and loans to support reforms.2

ᵃУкраїна (Ukraina) is the second largest country in Europe covering 233,000 sq. mi. with a population of about 41.5 million. ᵇSuch as poverty reduction, health and well-being, education, decent work and economic growth, innovation, infrastructure, reduced inequities among population segments, sustainable cities and communities. ᶜNuclear Energy Institute (NEI) is the policy organization of the nuclear technologies industry, based in Washington, D.C. ᵈНаціональна атомна енергогенеруюча компанія (Енергоатом) National Nuclear Energy Generating Company (Energoatom), established in 1998, is the state enterprise that operates Ukraine’s plants. ᵉEuropean Central Bank, European Central Bank System, Economic and Financial Committee, Euro Group and Economic and Financial Affairs Council

Page 3 of 10 Ukraine has embarked on a pilot project known as the Ukraine-European Union Energy Bridge.3 The integration of the Ukraine energy system into the unified energy system of Europe is a key priority for Ukraine energy independence.4 Ukraine shares borders with four members of the EU.ᶠ This will require development of interstate electric network infrastructure to the EU. The Energy Bridge is the first step toward synchronization of the Ukraine transmission system and EU network of system operators.

Ukraine adopted a new Law on the Electricity Market in 2017ᵍ that, among other things, introduced non-discriminatory tariff setting, free supplier choice, independent regulation and transparency, and created a guaranteed buyer in the new electricity market.5 This resulted in a significant uptick in distributed renewable generation causing electricity grid instability, such as frequency fluctuations. Ukraine sees using small modular reactors (SMRs) strategically placed along transmission lines for voltage support.

Ukraine is committed to future nuclear energy growth but recognizes that the EU countries are divided on the question. Ukraine relies heavily on EU for financial support and market structure and agrees with the goals of the European “green deal.”6 In energy/environment policies, Ukraine is aligned with those European countries that see nuclear energy as a way to achieve those goals.

4. Nuclear Energy in Ukraine

Ukraine nuclear power plants produce 51% of its electricity at 15 units on four sites: Khmelnitsky, Rivne, South-Ukraine, and Zaporizhzhya, with a total installed generating capacity of 13,835 MWt.ʰ Two units are under construction at Khmelnitsky. All units are pressurized water reactors.7 As is well known, Chernobylⁱ Unit 4 was the site of the 1986 accident widely considered the worst nuclear disaster in history both in terms of cost and casualties.8 The three unaffected units continued to operate until 2000.

4.1 Looking Forward Energoatom is planning on spending about $6B in capital programs to improve and expand its facilities: complex safety upgrades,9 increasing capacity factors,ʲ,10 life extension,11 central interim spent fuel storage,12 construction of new units at Khmelnytska.13 Additional plans include completing the Tashlyk Pumped-Storage hydropower plant, which is located at South Ukraine , and developing a solar power plant (Sonechko-1).14 Energoatom is seeking international financial partners on top of internal funding.

Khmelnytska 3 & 4 began construction in 1986 and 1987, respectively. With completion at 75% and 28%, construction was halted in 1990. Following a series of decisions, tenders, and proposals beginning in 2008, Ukraine settled on an intergovernmental agreement with Russia to complete the plants, but the annexation of Crimea by Russia in 2014 put pain to that plan.

ᶠPoland, Slovakia, Hungary, and Romania ᵍConsistent with the requirements of the European Energy Community to which Ukraine acceded in 2011. ʰ8th largest capacity in the world; 3rd in Europe ⁱChernobyl Nuclear Power Plant (officially the Vladimir Ilyich Ulyanov Lenin Nuclear Power Plant) ʲFrom 62% in 2021 to 77% in 2025, which is the world fleet average for 2019. (See, https://pris.iaea.org/PRIS/WorldStatistics/WorldTrendinAverageLoadFactor.aspx)

Page 4 of 10 In 2016, Energoatom signed an agreement with Korea Hydro & Nuclear Power to complete the units. Skoda JSᵏ was signed in 2017 to modify designs, and provide engineering services and many components.7 The plan is to complete construction and place both in service by 2026. The current estimate is $2.6B.

In addition, Energoatom is investing about $1.8B, made up of internal funds as authorized by the Cabinet Ministers of Ukraine (₴26.9B)ˡ and a loan from EBRDᵐ and Euratom (€600M), in improving operational safety of all its nuclear plants.ⁿ,14

Plans are to expand nuclear energy to combat climate change, advance energy independence, replace the current reactor fleet as units reach their end-of-life, and to serve an expanding economy. As in many countries, including the U.S., the expectation of much greater market penetration by electric vehicles is altering views on future electricity demand. Ukraine is also considering developing hydrogen energy use, which could increase the use of nuclear.15

Energoatom has several ambitious goals to reach by 2025 that would continue to reduce Ukraine’s dependence on Russia for energy supplies while increasing its reliance on nuclear energy and improving company financial performance: optimize plant operations, improve supplier relationships, seek new suppliers, behave more like a private corporation than a state agency,ᵒ build new nuclear, expand into supply and export businesses, Ukrainian nuclear unit design, create its own “ecosystem,” including energy storage, electric vehicle charging network, hydrogen production, nuclear R&D, and nuclear medicine.

4.2 Small Modular Reactors Since 2019, the Ukrainian Module Consortium (Energoatom, Ukraine’s State Scientific and Technical Center for Nuclear and Radiation Safety, and Holtec) has been working to advance Holtec’s SMR-160 design for deployment in Ukraine. Energoatom announced plans to build six SMR-160 units at Rinve nuclear power station and is considering deploying such plants more widely.

4.3 Nuclear Fuel Supply Essential to any nuclear power program is a reliable, cost-competitive fuel supply. Agreements with Russia to build nuclear plants include access to a lifetime supply of fuel. Energoatom continued purchasing fuel from Rosatom subsidiary TVEL exclusively until 2000. Since, it has been diversifying away from Russia. As of 2021, Westinghouse supplies 53% of Energoatom’s fuel to TVEL’s 47%. Thus far, Westinghouse has provided full cores for five units and partial cores for two others.ᵖ This trend is expected to continue with, eventually, ending new fuel supply from Russia.

4.3.1 Uranium Miningq Uranium has been mined in Ukraine since 1946 with the uranium concentrate sent to Russia for fuel fabrication by TVEL.7 Ukraine also mines zirconium – a key element in nuclear fuel cladding.ʳ

ᵏLocated in the Czech Republic, Skoda JS is owned by OMZ a Russian mechanical engineering group ultimately owned by Russia’s state-owned Gazprombank. ˡгривня (hryvnya) ᵐEuropean Bank for Reconstruction and Development ⁿIn 2018 currencies ᵒIncluding access to international capital markets, private equity partners, and issuing an IPO for up to 30% of its ownership. ᵖRefueling cycles typically run every 12, 18, or 24 months depending on plant economics and grid needs. PWRs replace one third of the core each refueling outage. It would take a minimum of three refueling cycles for a core to change fully to a new supplier, but likely longer due to the term of fuel supply contracts. qNot discussed in webinar – information provided for completeness. ʳZirconium alloy is also sent to Russia for nuclear fuel fabrication.

Page 5 of 10 4.4 Spent Fuel Storage

4.4.1 On-Site Dry Storage Like many nuclear operating companies, Energoatom has added on-site (SNF) dry cask storage. Current fuel supply contracts with TVEL include shipping spent fuel to Russia for reprocessing at a cost of about $150- 200M/year. As a matter of both cost reduction and disengaging from Russia for fresh fuel, Energoatom retained Duke Engineering & Services and Sierra Nuclear to provide storage facilities at Zaporizhzhya, which entered service in 2005 with a 50-year design lifetime.

4.4.2 Central Dry Storage Recognizing the need for increased SNF storage at Khmelnitsky, Rivne, and South- Ukraine, Energoatom contracted with Holtec International to develop a central storage facility (CSF). In July 2021, a dry storage facility will commence initial operation in the Chernobyl exclusion zone with a shipment from Khmelnytska. The CSF will have a 100- year design lifetime. Total capital expenditures for the CSF are expected to be ₴37B ($1.3B) of which the Holtecˢ contract is about $300M. CSF is licensed by State Nuclear Regulatory Inspectorate of Ukraine (SNRIU).ᵗ

5. Security

5.1 Plant Security SNRIU is an independent agency that sets regulations, grants licenses, supervises compliance with requirements and license conditions, and provides enforcement when necessary.16 Ukraine is a party to all the international treaties, IAEAᵘ conventions, and bilateral agreements that relate to regulating a safe and secure civilian nuclear power program.17 The IAEA regularly reviews and inspects Ukraine’s nuclear regulatory programs and power plants.18

The NNSA/INSᵛ program has a working relationship with Ukraine and has reviewed its security program (legislation, regulations, programs, implementation, etc.). As a result, Energoatom is making upgrades to the physical protection systems at the South-Ukraine and Zaporizhzya plants scheduled for completion in April 2023 and September 2023, respectively. The upgrade at South-Ukraine is costing $1.1M and Zaporizhzya $1.8M with funding from both internal sources and the U.S. In response to a question, Energoatom CEO Kotin thought that review by U.S. nuclear utilities of both physical protection and cybersecurity might be worthwhile.

5.2 Strategic Importance of Ukraine With its central location and large coastline on both the Black Sea and Sea of Azoz,19 the strategic importance of Ukraine cannot be overstated. Ukraine has not had it easy over the centuries. As far back as the 8th century BC, the territory of modern Ukraine has been occupied by people and rulers from elsewhere. Other than a very brief period of independence (1918-20) following Ukraine becoming a separate country in 1917, beginning in 1320 with the Grand Duchy of Lithuania, the territory of modern Ukraine has been

ˢIn accordance with Holtec practice when developing facilities in international locations, it formed Holtec Ukraine, which is registered under Ukraine law and located in Kiev. ᵗДержавна інспекція ядерного регулювання України was established in 2000. ᵘInternational Atomic Energy Angency ᵛU.S. National Nuclear Security Administration/International Nuclear Security

Page 6 of 10 dominated by other powers.ʷ It has also been the site of many armed conflicts either involving the Ukrainian people directly or other adversaries battling across its territory and coastal waters.

The Crimean Warˣ (largely fought on the peninsula of the same name) was especially vicious pitting the against the Ottoman Empire in an alliance with the British Empire and France.20 Russia was defeated. During World War I and II, with its location between warring powers, numerous battles were fought on Ukraine’s territory. In each war, fought on both sides.

Following World War II, the western part of Ukraine became the Ukrainian Soviet Socialist Republic, one of the constituent republics of the Soviet Union. It remained so until it regained independence in 1991 following the dissolution of the Soviet Union. The United Nations considers Ukraine a developing country ranking 74th on the Human Development Index.

The contest for Crimea is ongoing. When the Soviet Union dissolved in 1991, Russia maintained that the region of Crimea became a federal district. Russia (and the Soviet Union) had a naval base at Sevastopol it was not willing to abandon due to its strategic location. When the pro-Russia Ukraine government fell as a result of the 2014 revolution, Russia forcibly annexed the peninsula21 (not for the first time in history), which is not recognized by most of the international community.ʸ The United Nations General Assembly adopted a non-binding resolution supporting Crimea and Sevastopol remaining part of Ukraine.22

At the same time, pro-Russian unrest led to armed conflict in Donetsk and Luhansk oblasts in eastern Ukraine. It is currently at a stalemate with regular outbursts of violence.23

5.2.1 Russian Transmission Through Ukraine Since the 1960s, Ukraine has been a major corridor for transit of Soviet (now Russian) natural gas to Europe. After the Soviet Union dissolved, Russia attempted to gain control of the considerable gas pipeline infrastructure in Ukraine. Failing to do so led Russia to construct pipelines around Ukraine. This diminished one of Ukraine’s tools in its multidimensional conflict with Russia24 and an international market opportunity.

In 2019, Ukraine and Russia agreed to a five-year, $7B deal that will keep gas flowing through Ukraine to Europe, but at a decreasing volume. Through 2019, about 40% of Russia gas sales to Europe flowed through Ukraine, by end 2021, it will drop to about 12%. The deal includes a “take-or-pay” arrangement committing Russia to payments even if the volume of gas falls below the contracted amount. However, once Russia completes a second underwater pipeline to Germany, Ukraine will not be needed to transmit Russian gas.25

Additionally, once Europe starts to rely on hydrogen for a portion of its energy supply as part of the “green deal,” Russia plans to compete with Ukraine on providing hydrogen to Europe.ᶻ,24

ʷPoland, Russia, Romanian, the former Czechoslovakia, and the former Soviet Union ˣ1853-56; the Crimean War is well known for the “Charge of the Light Brigade,” which was a horrible logistical, medical, tactical, and management failure during armed conflict. One good outcome was Florence Nightingale founding modern nursing. ʸMost nations in North America, Central America, Europe, Oceania, and Africa, as well as Asia outside of the former Soviet republics. ᶻHydrogen can replace a significant percentage of natural gas flowing in a pipeline.

Page 7 of 10 6. Conclusions

Ukraine is moving toward becoming part of western Europe in terms of its politics, economy, and energy. At the same time getting further away from depending on Russia. It appears, however, that Russia is not taking kindly to these trends.

Ukraine exists in a central location not just in terms of geography but politically, economically, strategically, and militarily. It is surrounded by threats of many types.

Ukraine has implemented a complete civilian nuclear energy safety and security program, including NNSA/INS recommended physical protection upgrades. But, with Russia on its southern border in Crimea and pro-Russian insurgents in its eastern regions, the question is whether there’s a related security threat to Ukraine’s four nuclear plants, new CSF, and SNF transportation. While above a certain level the threat is the responsibility of state security and military forces, it’s a question of whether nuclear plants’ physical protection is sufficient.

Page 8 of 10 References

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