On July 28 the UK Government stunned the energy industry when it announced a further review of the proposed Hinkley Point nuclear power station just a few hours after EDF's Board meeting in Paris agreed to approve the 'Final Investment Decision'. Executives at EDF had been expecting the Government to sign a subsidy deal for the £18 billion (US$23.4b) plant the following day. Greg Clark, the UK Business and Energy secretary, said that he needed until September to study the subsidy contract.
150 VIPs had been invited to Hinkley Point in Somerset in the West of England on Friday to celebrate the go-ahead for a third nuclear power station on the site. But on Friday morning the marquee was being packed away and the guests were nowhere to be seen. A delegation from the China General Nuclear Power Corporation (CGN) which had already flown into Britain expecting to sign the finalised documents to allow them to invest around one third of the project's cost, turned around and went straight back to China.
We may never know exactly what has gone on behind the scenes but it is clear that EDF had moved its final investment decision forward from September in order to bounce the new UK Government into giving its approval quickly before mounting problems become even more obvious to everyone.1
Stop Hinkley spokesperson Roy Pumfrey said: "Much of the media seems to think this is just a temporary pause and that Hinkley Point C will eventually go ahead, but if Theresa May gives this scheme just a cursory glance she will see that we are being asked to buy a pig in a poke."
According to the Financial Times2 the head of EDF, Jean-Bernard Lévy gave his fellow board members only two days to read 2,500 pages of contracts for a deal which one investment analyst described as "verging on insanity".3
The decision to review the project has been attributed by some to security concerns about Chinese involvement in the sector expressed by Mrs May's chief of staff, Nick Timothy. The Stop Hinkley Campaign has itself expressed concerns in the past about making nuclear deals with a country with such a poor health and safety record.4
Writing on the Conservative Home website last October, Timothy said the Hinkley deal could lead to the Chinese designing and constructing a third nuclear reactor at Bradwell in Essex. Security experts – reportedly inside as well as outside government – are worried that the Chinese could use their role to build weaknesses into computer systems which will allow them to shut down Britain's energy production at will.5 For those who believe that such an eventuality is unlikely, the Chinese National Nuclear Corporation – one of the state-owned companies involved in the plans for the British nuclear plants – says on its website that it is responsible not just for "increasing the value of state assets and developing the society" but the "building of national defence." MI5 believes that "the intelligence services of … China … continue to work against UK interests at home and abroad."
Mandiant, a US company that investigates computer security breaches around the world, looked into the operations of just one Chinese cyber espionage group, believed to be the Second Bureau of the People's Liberation Army of China, or 'Unit 61398'. Mandiant found that Unit 61398 has compromised 141 different companies in 20 major industries. There were 115 victims in the United States and five in the UK. The intellectual property stolen included technology blueprints, manufacturing processes, test results, business plans, pricing documents, partnership agreements, and emails and contact information.6
Timothy said "evidence like this makes it all the more baffling that the British Government has been so welcoming to Chinese state-owned companies in sensitive sectors. The Government, however, seems intent on ignoring the evidence and presumably the advice of the security and intelligence agencies. But no amount of trade and investment should justify allowing a hostile state easy access to the country's critical national infrastructure. Of course we should seek to trade with countries right across the world – but not when doing business comes at the expense of Britain's own national security."6
EDF's future threatened
Perhaps of more immediate concern is that a go-ahead for Hinkley could threaten the future of the company itself. EDF is a company in a very precarious financial situation. The ratings agency, S&P, postponed a decision to downgrade its credit rating when the UK Government announced the review.7 EDF has €37 billion (US$41b) of debt. The collapse in energy prices pushed earnings down 68% in 2015. The company needs to spend €50 billion (US$55.4b) upgrading its network of 58 aging reactors by 2025. It is scrambling to sell €4 billion (US$4.4b) of new shares and €10 billion (US$11.1b) of assets to strengthen its balance sheet. EDF is also expected to participate in the €5 billion (US$5.5b) bailout of Areva, the bankrupt developer of EPR technology, by taking a 75% stake.8 About the last thing it needs is a new €15 billion (US$16.6b) millstone around its neck.9
Roy Pumfrey said: "The EDF Board should take the opportunity presented by this pause to see that its Nuclear SatNav has taken the Company down a dead end; it's only a matter of time before we hear that voice saying "At the next opportunity, turn around!"'
He continues: "Perhaps most disappointing if not unexpected has been the reaction of the big UK Union leaders. Whilst confessing themselves 'baffled' by the government's 'bonkers' decision, they should ask why the French union leaders representing EDF's own workers were (and are) solidly and vocally opposed to HPC. This project involves a reactor which many of EDF's own staff regard as unconstructable, selling off the family silver to fund it and putting EDF and therefore their own livelihoods at risk."
Over recent months several different alternatives to building Hinkley Point C have been detailed.10 Most recently consultancy firm Utilitywise has described the proposed nuclear station as an "unnecessary expense". Energy efficiency measures could save the equivalent amount of electricity along with £12bn.11
Roy Pumfrey said: "This Government review of Hinkley Point C provides us with a wonderful opportunity to turn Somerset into a sustainable energy hub for England. The alternatives would be better for jobs, better for consumers, would reduce the mountain of dangerous waste we don't know how to deal with and save Somerset from a decade of disruption caused by one of the biggest construction projects in the world. The sooner EDF and the UK Government come to their senses the better."
Anti-Hinkley Tories
Perhaps most interesting amongst recent events has been the emergence of Conservative figures calling on the government to call time on the Hinkley proposals. The think-tank Bright Blue, whose advisory board includes former ministers Francis Maude and Nicky Morgan and former energy minister Greg Barker, has said the government needs a new "plan A". The group stresses that its position is not necessarily endorsed by all members of the organisation, which includes more than 100 parliamentarians. "The Government should abandon Hinkley C – pursuing it in light of all the evidence of cost reductions in other technologies would be deeply irresponsible," said Ben Caldecott, associate fellow, Bright Blue. "We need a new 'Plan A'. This must be focused on bringing forward sufficient renewables, electricity storage, and energy efficiency to more than close any gap left in the late 2020s by Hinkley not proceeding. This would be sensible, achievable, and cheap." Zac Goldsmith, also a Bright Blue member, has welcomed the government's rethink.12
Caldecott, writing on the Conservative Home website, said "we seem to be re-entering reality, there is an opportunity to develop a new 'Plan A' … A range of technologies can easily fill the envisioned capacity that Hinkley would have provided in the late 2020s had it been successfully delivered on the current (and already significantly delayed) construction schedule. They can also do this much more cheaply. Cancelling Hinkley would provide greater certainty for investors in other technologies thereby encouraging investment in new capacity today."13
He said the price of onshore wind is already much cheaper than nuclear (£85/MWh today and expected to fall to £60/MWh by 2020), with large-scale PV (expected to fall to £80/MWh by 2020) and offshore wind (expected to fall to £80/MWh by 2025) set to do the same – all well before Hinkley would start to receive its staggeringly high guaranteed and index-linked £92.50/MWh.
He goes on to say that Bright Blue will be publishing specific recommendations on energy efficiency soon, and that small modular nuclear reactors are very unlikely to be commercially available at all, let alone before the 2030s in any scalable, cost-competitive or politically acceptable way. They are too uncertain in terms of likelihood and cost for us to place too much faith in them yet, apart from perhaps investing in more R&D. "Blind faith in new nuclear and shale gas have yielded precisely zero for UK security of supply, despite constant rhetoric to the contrary, and yet more punts in high risk areas would not be prudent."
Take action
Friends of the Earth – Scotland is asking people to write to Theresa May to express opposition to Hinkley Point C going ahead: http://act.foe-scotland.org.uk/lobby/StopHinkley
Greenpeace UK is asking supporters to sign a petition to Chancellor Philip Hammond to help convince him to abandon the project and back renewable energy instead: https://secure.greenpeace.org.uk/page/s/osborne-dont-waste-billions-nuclear
This is an expanded version of an article published in nuClear News No.87, August 2016, www.no2nuclearpower.org.uk/nuclearnews/NuClearNewsNo87.pdf
References:
1. Times 30 July 2016 www.thetimes.co.uk/article/29a3176a-55c4-11e6-917c-b7a493d07de7
2. FT 1 Aug 2016 https://next.ft.com/content/5439a6d2-57fa-11e6-9f70-badea1b336d4
3. Guardian 7 March 2016 www.theguardian.com/business/2016/mar/07/hinkley-point-nuclear-plant-edf...
4. www.stophinkley.org/PressReleases/pr150922China_File.pdf
5. Times 16 October 2015 www.thetimes.co.uk/tto/news/politics/article4587446.ece
6. Conservative Home 20 October 2015 www.conservativehome.com/thecolumnists/2015/10/nick-timothy-the-governme...
7. Reuters 29 July 2016 http://af.reuters.com/article/commoditiesNews/idAFL8N1AF6W0
8. Times 7 May 2016 www.thetimes.co.uk/edition/business/sparks-to-fly-as-edf-board-faces-cri...
9. The Street 25 April 2016 www.thestreet.com/story/13542318/1/edf-can-t-affordhinkley.html
10. Stop Hinkley 16 May 2016 www.stophinkley.org/PressReleases/pr160516.pdf See also Environmental Research Web 6 Aug 2016 http://blog.environmentalresearchweb.org/2016/08/06/nuclear-prospects/
11. Edie 1 August 2016 www.edie.net/news/6/Energy-efficiency-would-be-cheaper-than-Hinkley/30645/
12. Solar Portal 29 July 2016 www.solarpowerportal.co.uk/news/conservative_think_tank_turns_back_on_hi...
13. Conservative Home 30 July 2016 www.conservativehome.com/platform/2016/07/ben-caldecott-lets-seize-this-...