This article is a translation of a Hungarian article published by Narancs.hu.

Hungary's flagship Paks II nuclear project has entered a decisive phase. The new government has launched a review of its financial parameters and security risks while taking into account the changing geopolitical landscape. Yet caught between the need for energy security and its close ties to Russia, Budapest has very little room to manoeuvre.

Nuclear power has been the cornerstone of Hungary's energy system since the 1980s. Although its importance has not diminished, the share of electricity generated by the Paks Nuclear Power Plant has fallen from 53.6 percent to 45.2 percent over the past decade. This decline was not caused by a reduction in nuclear output, but by the rapid expansion of solar power.

Even so, Paks still supplies more than one-third of Hungary's total electricity consumption. The gap between domestic generation and actual demand exposes the country's main vulnerability: Hungary remains heavily dependent on electricity imports. Although imports have fallen to around one-fifth of total consumption, there are still periods when more than half of the country's electricity demand must be covered by foreign supplies.

This vulnerability is compounded by the lack of large-scale battery storage and pumped-storage hydropower facilities. Without the ability to store surplus renewable electricity, Hungary cannot effectively balance fluctuations in generation, reinforcing the need for a stable nuclear baseload.

The Limits of Ageing Reactors

Nuclear energy also carries its own risks. The Paks Nuclear Power Plant depends on the Danube River for cooling, meaning that extreme heat and low water levels can significantly disrupt operations during the summer. The issue of radioactive waste remains only partially resolved: spent fuel is stored temporarily at the plant, while lower-level radioactive waste is disposed of at the Bátaapáti repository.

Time is also running out. The plant's four Soviet-era reactors have already exceeded their original design lifetime. Even after life-extension programmes, all are due to retire by 2037. To avoid jeopardising the stability of the electricity system, Hungary is considering extending their operation even further, as this remains cheaper than building replacement capacity. Given the uncertainty surrounding new nuclear construction, maintaining the existing reactors has become the only realistic short-term option.

Hungarian taxpayers know better than anyone how risky new nuclear investments can be. For years, the Paks II project has been plagued by soaring costs, repeated delays and growing uncertainty over whether it will ever be completed.

A Russian Loan and Geopolitical Risks

Building a new nuclear plant has proved far more complicated than originally anticipated. Paks II took shape in 2014 following an agreement between Viktor Orbán and Vladimir Putin, which was subsequently approved by the Hungarian Parliament.

Under the agreement, Russia's Rosatom is to construct two modern reactors with a combined capacity of 2,400 MW. The estimated cost stands at €12 billion, excluding additional spending on supporting infrastructure and radioactive waste management. The project is financed through a Russian state loan covering up to 80 percent of the investment, leaving Hungary heavily dependent on Russian financing. Beyond its financial burden, however, the project has also attracted criticism over the way it was awarded.

From the outset, Paks II has been controversial. Rosatom received the contract without a competitive tender, while the details of the agreement have been classified for 30 years. Although the European Commission approved the project in 2017, concerns over transparency, the true cost of the investment and its geopolitical implications have never disappeared.

Those concerns have only intensified as Hungary's energy dependence on Moscow remains largely unchanged. Reliance on Russian oil and gas has become an increasingly significant political liability in the context of Russia's war against Ukraine and strained relations with both the EU and NATO.

Meanwhile, the project itself continues to struggle. Construction has made only limited progress, completion remains nowhere in sight, and even Viktor Orbán admitted after his electoral defeat that the project should have advanced much faster.

Magyar's Nuclear Dilemma

The political landscape shifted dramatically after the victory of the Tisza Party. The new government has reopened the debate over whether Paks II should continue at all. Prime Minister Péter Magyar has so far refused to reveal his final position. While he considers nuclear energy essential, he has openly described Paks II as overpriced and announced a comprehensive review of all contracts before making a final decision.

Public opinion has undergone a similarly complex evolution. The Fukushima disaster significantly weakened support for nuclear power, but the energy crisis and the war in Ukraine have restored much of that confidence. Even so, nuclear energy alone cannot replace fossil fuels, which remain indispensable both for industry and for flexible gas-fired power plants that help stabilise the electricity grid.

The project's technological complexity and escalating costs have strengthened the arguments of its critics, who believe that further investment in Paks II is no longer justifiable. Some propose freezing the project, limiting further losses and redirecting resources towards more modern technologies. Others argue that Rosatom has failed both technically and legally, potentially giving Hungary grounds to seek compensation and reduce its financial losses.

The new government's decision will therefore have far-reaching consequences. Continuing with the project remains a realistic scenario, not least because Péter Magyar has never questioned the role of nuclear energy itself or called for its immediate phase-out.

That pragmatic position, however, faces major institutional and political constraints. Strict regulations require the existing Paks I plant and the partially completed Paks II project to operate as separate entities, complicating the governance of Hungary's nuclear sector.

At the same time, the Orbán government's years of close cooperation with Moscow have left behind a deeply divisive political legacy. Continuing to rely on Russia would likely face strong opposition not only within Hungary but also among the country's international partners.

Terminating the project, however, would be far from a simple political decision. The government would first need to demonstrate that the Russian side had failed to fulfil its contractual obligations in order to avoid potentially crippling financial penalties. Such a move would also require an immediate shift towards an alternative energy strategy based on a rapid expansion of renewable energy and battery storage, bringing additional legal and financial challenges.

The debate comes at a time when the global nuclear industry is increasingly moving away from large-scale megaprojects. Small modular reactors (SMRs) are gaining momentum, while projects such as Paks II face growing scepticism because of their complexity, lengthy construction times and rising costs.

Hungary is therefore likely to remain bound by the fate of Paks II for many years to come—whether it chooses to continue with the increasingly expensive project or embarks on a difficult legal battle to seek compensation for its cancellation.