Hungary's nuclear drought reveals the cost of its energy gamble

WITHIN DAYS, Hungary's Paks nuclear power plant will shut down for the first time in its 44-year history. The cause is not a reactor malfunction or a political decision, but something far more mundane: there is not enough water in the Danube to cool it. For a country that relies on Paks for nearly half of its electricity, the shutdown is disquieting. The wider implication, however, has little to do with the weather. It is about what happens when a nation's energy strategy is built on a single, vulnerable, Soviet-era facility whose expansion has become a costly geopolitical liability.

Paks operates four Russian-built reactors with a combined capacity of 2,000-megawatt total capacity. Since late July, as Danube water levels have plunged to records not seen in half a century, output has been cut incrementally-254 megawatts on one unit, then 237 more on another. By July 30th the plant was running at roughly half capacity; by the following week, it was going dark entirely. The mechanism is specific: the river has fallen so low that the plant's suction pipes can no longer reach the water. Even if it could, Hungarian environmental law limits the discharge temperature of the Danube to 30°C, and a slow-moving, warm river cannot absorb waste heat as efficiently. As Paks operator MVM put it, a full shutdown has become "inevitable".

To be sure, the drought is regional, not uniquely Hungarian. The Danube has fallen to the lowest levels for 30 years across Central Europe, disrupting shipping from Bulgaria to Serbia. Romania has shut both of its two nuclear reactors at Cernavoda. Europe, which is heating up twice as fast as the global average according to the Copernicus climate service, is straining infrastructure designed for a cooler, wetter past. MVM plans to move suction pipes deeper in future, but the process would take years. For now, Hungary is flying blind.

The real story, though, is not the weather. It is that Paks has for decades been the ballast of the national grid and the cornerstone of MVM, the state-owned utility that dominates the country's energy market. MVM reported consolidated revenue of HUF 4,534bn in 2024 and holds more than a 40% share of domestic electricity sales. It is the firm around which the Hungarian energy system was built. And with Paks offline, the system is showing its age.

Prime Minister Péter Magyar, who took office in May after defeating Viktor Orbán, has responded with a three-tier emergency plan. The government has asked large industrial users-battery plants, cement factories, car manufacturers-to voluntarily reduce consumption during evening peak hours. State institutions have been ordered to turn off decorative lighting. Parliament's sessions were suspended for two days. If voluntary measures prove insufficient, the government is preparing legislation that would allow mandatory curtailment. As a last resort, rotational blackouts could be imposed, though hospitals and social care would be exempt.

These are the measures of a state that has not planned for the day the lights go out. The import capacity that Mr Magyar has promised-3,600 to 3,800 megawatts of cross-border transmission-is substantial in theory. But neighbouring countries are facing the same heatwave, and not all of that capacity will be available from sellers who need their own electricity. The price signal confirms the scarcity: the Hungarian week-ahead electricity contract, which was assessed at €218 per megawatt-hour on Wednesday, had climbed to €250-263/MWh by Thursday, according to Argus Media. For an economy already wrestling with post-Orbán institutional repair, the bill for imported power will be a painful one.

That pain points to the deeper problem. For the better part of a decade, Hungary's energy strategy was simple: expand Paks. The Orbán government awarded the €12.5 billion project to build two new reactors at the site to Russia's state nuclear corporation, Rosatom, without a public tender. The deal was 80% financed by a Russian loan and was, from the start, as much a symbol of political alignment as an energy plan. It has since become a cautionary tale. The project has accumulated a decade of delays. Unofficial estimates suggest costs could reach up to EUR 25 billion. The original instrumentation-and-control supplier, Siemens, withdrew. In September last year, the Court of Justice of the European Union annulled the European Commission's earlier approval of Hungary's financial support. Russia-Ukraine hostilities have added the perennial risk of sanctions.

Mr Magyar's new government has pledged to review the project's financing and contractual terms. "We need a transparent nuclear strategy," said the energy minister, István Kapitány. As of early February, Rosatom managed to pour the first concrete for the first of the two new units, giving the project formal "under construction" status under International Atomic Energy Agency rules. But that milestone does not mean the project is closer to completion. It means it is closer to being impossible to stop without paying penalties.

The drought at Paks is thus a stress test for two things. One is Hungary's physical energy infrastructure, which turns out to be more fragile than its operators assumed. The other is its political and financial exposure to a nuclear expansion project that few, including its current supporters, can defend on economic grounds.

It is tempting to think that the answer is to cancel Paks II, pivot to renewables, and declare the problem solved. The economics of solar and wind have indeed improved, but renewables cannot be switched on in a week, and Hungary's grid has no surplus capacity to cushion a full nuclear outage. Abandoning Paks II without a credible replacement plan would leave the country without its main domestic power source for a generation. Continuing it locks Hungary into a relationship with Russia at a time when the new government has pledged to mend ties with the European Union.

The better answer is to treat the problem as the government should have been treating it before the drought hit: a transition plan, not a binary choice. That means accelerating domestic renewable and storage capacity, deepening interconnection with the EU grid so that imported electricity is reliable rather than contingent, and using the current political opening to renegotiate-or orderly terminate-the Paks II arrangement. A negotiated exit would be expensive, but cheaper than a stranded asset that costs twice the budget and delivers nothing.

Hungary's nuclear drought will pass. The Danube will eventually refill. But the vulnerability it exposed will not. A country that relies on a single Soviet-era plant for half its power, and whose plan to replace it is tied to a pariah state, has an energy strategy that looks increasingly like a bet it can no longer afford to lose.

The weather was the catalyst. The real crisis was built into the system.