EDF Energy

The French European Pressurized Reactor (a.k.a. Evolutionary Power Reactor) was the first Generation III design to win orders, first in Finland in 2003 (Olkiluoto 3 − the first reactor order in Western Europe in 15 years), France in 2006 (Flamanville) and China in 2007 (two EPRs at Taishan).

Since then, EPRs have faced one problem after another. All three EPR construction projects have suffered cost blowouts or delays or both.

Since the contract was signed in 2003 for a new EPR in Finland, the estimated cost has risen from €3.2 billion (US$3.6b) to €8.5 billion (US$9.5b). Areva has already made provision for a €2.7 billion (US$3.0b) writedown on the project, with further losses expected.¹ French and Finnish utilities have been locked in legal battles over the cost overruns for several years.^1,2 The project is nine years behind schedule − the start-up date has been pushed back from 2009 to 2018.³

The estimated cost of the Flamanville EPR in France has increased from €3.3 billion (US$3.7b) to at least €9 billion (US$10.1b).^4,5 The first concrete was poured in 2007 and commercial operation was expected in 2012, but that timeframe has been pushed back to 2017 (with further delays likely).⁶

The British Daily Mail characterised the Flamanville EPR project as one "beset by financial mismanagement with rocketing costs, the deaths of workers, an appalling inability to meet construction deadlines, industrial chaos, and huge environmental concerns", and notes that "it continues to be plagued by delays, soaring costs, and litigation in both the criminal and civil courts."⁷

The two EPRs under construction in China are 13–15 months behind schedule.⁸

Since the Fukushima disaster, a number of countries that might have considered EPRs pulled back from earlier interest in new reactors − the Netherlands, Sweden, and Switzerland, among others.⁸ In 2012, new-build tender processes in Finland and the Czech Republic rejected the EPR.

In the US, a total of seven EPRs were planned at six sites.⁹ Four EPR construction licence applications were submitted to the Nuclear Regulatory Commission (NRC) − Unistar's Nine Mile Point (New York), Ameren's Callaway (Missouri), PPL's Bell Bend (Pennsylvania) and Constellation's Calvert Cliffs (Maryland). All of those applications have been abandoned or suspended. In February 2015, Areva asked the NRC to suspend work on EPR design certification until further notice.¹⁰

EPRs were considered at various sites in Canada − including Alberta and Darlington, Ontario − but those plans were shelved and a generic licensing process by the Canadian Nuclear Safety Commission was terminated.¹¹

In 2009, Italian utility Enel and EDF planned to build four EPRs but that plan was scrapped after Italy's June 2011 referendum which rejected nuclear power. In 2012, Enel pulled out of the Flamanville EPR project.¹²

The United Arab Emirates chose South Korean reactor technology over EPRs. Reflecting on that decision, former EDF head Francois Roussely concluded that while the EPR is "one of the best" third-generation designs, the complexity of the design is a "handicap". Likewise, Cambridge University nuclear engineer Tony Roulstone said in an October 2014 lecture that the EPR design is very safe but extraordinarily difficult to build − he described it as "unconstructable".¹³

According to the US NRC, EPRs have four sets of active safety systems, each capable of cooling the reactor on its own, and other safety features including a double-walled containment and a "core catcher" for holding melted reactor core materials after a severe accident.¹⁴ But the safety of some EPR design choices has been questioned by the French government's Institute for Radiological Protection and Nuclear Safety¹⁵, and the EPR licensing process in the UK has been criticised.¹⁶

Pressure vessel problems

On 7 April 2015, the French Nuclear Safety Authority (ASN) announced that fabrication defects had been found in the reactor pressure vessel of the Flamanville EPR. Tests revealed areas with high carbon concentration resulting in "lower than expected mechanical toughness values".^17,18

Pierre-Franck Chevet, head of ASN, said: "It is a serious fault, even a very serious fault, because it involves a crucial part of the nuclear reactor."¹⁹

The results of further tests are expected by October 2015. In one scenario, ASN will not require any remedial action and there will be minimal consequences for Areva. But if remedial action is required, it could be extremely expensive and problematic for Areva, all the more so because the pressure vessel has already been installed in the Flamanville EPR. Asked what would happen if tests were negative, Chevet said: "Either EDF abandons the project or it takes out the vessel and starts building a new one ... this would be a very heavy operation in terms of cost and delay."²⁰

In a worst-case scenario for Areva, the pressure vessel problem would kill the Flamanville reactor project. A former senior nuclear safety official told Le Parisien: "If the weakness of the steel is proved, I don't hold out much hope for the survival of the [Flamanville] EPR project."¹⁹

Actually there are even worse scenarios for Areva − the latest problems could hasten the demise of EPR projects altogether, and might even tip Areva into bankruptcy. Areva posted a €4.83 billion (US$5.4b) loss for 2014 and is negotiating a rescue package with the French government. Areva's CEO Philippe Knoche said in response to the 2014 financial loss: "The scale of the net loss for 2014 illustrates the two-fold challenge confronting Areva: continuing stagnation of the nuclear operations, lack of competitiveness and difficulties in managing the risks inherent in large projects. The group understands how serious the situation is."²¹

Energy specialist Thomas Olivier Leautier from the Toulouse School of Economics said: "Areva's financial situation is critical, the EPR is as crucial to them as the iPhone was to Apple. Their failure in Finland and now the problem in Flamanville could prove fatal."²¹

French environmental minister Ségolène Royal congratulated ASN on its speedy reaction to the pressure vessel problem.⁴ Others are asking why the problem was not discovered before the vessel was installed. It is believed the problem involved an inaccurate material inspection device used between 2009 and 2014.²²

ASN's Pierre-Franck Chevet acknowledged that "mistakes had been made". He said: "It is more than 15 years since the last nuclear power stations were constructed in France. The expertise in some trades has not been sufficiently passed on from one generation to the next."¹⁹

Chevet said the two planned EPRs planned for Hinkley Point in the UK could be affected as identical safety casings have already been manufactured for those reactors using the same manufacturing techniques.¹⁹

The two EPRs under construction in China might also be affected since the pressure vessels for those reactors were forged by Areva subsidiary Creusot Forge, as was the Flamanville vessel.²³ China will not load fuel at the Taishan EPRs until safety issues have been resolved, China's environment ministry said.²⁴

A senior manager of a Chinese nuclear company, speaking anonymously to the South China Morning Post, said: "The people responsible for this need to be sacked. It shouldn't have happened. All materials must be checked thoroughly before use − that's a basic requirement. The urgent task is to launch a quality inspection in Taishan as soon as possible. Each batch of materials varies slightly. We will cross our fingers and pray for the best."²⁵

It is unlikely that the EPR under construction in Finland is at risk of a defective pressure vessel, as the vessel was forged by Japan Steel Works. Nevertheless, the Finnish Radiation and Nuclear Safety Authority (STUK) has instructed energy utility TVO carry out new tests of the durability of the pressure vessel.²⁶

A future for EPRs?

An immediate priority for Areva is to keep the UK Hinkley Point EPR project moving ahead. That project faces a legal challenge under EU regulations against the massive subsidies being offered by the UK government. Areva also has to sort out unresolved issues with its Chinese project partners. And it needs to find additional partners to cover capital costs.

Ironically, Areva itself may not have the resources for its expected 10% stake in Hinkley Point. Chief executive Philippe Knoche recently declined to
commit to the 10% figure, and the head of Areva's reactors and services division said: "Our current financial situation obviously will make things more difficult."

Bloomberg noted in an April 16 article that Areva's EPR export ambitions are now in "tatters". Bloomberg quoted former World Nuclear Association executive Steve Kidd, who said "everyone was laughing" at Areva's projections for EPR sales. Kidd blames the EPR saga in part on the French government's 80% ownership of Areva: "Everyone in the know could tell the chickens were going to come home to roost. I don't think that would have happened in a private business."⁵

According to trade union sources, Philippe Knoche said in February that the utility was likely to sell only about a dozen EPRs in the years up to 2030, down from 25 predicted previously.²⁷

If Areva is to secure a dozen orders by 2030, it will need further orders from China − which seems increasingly unlikely. Steve Thomas from Greenwich University says reactors built by Areva and Westinghouse "are just too expensive for the Chinese."⁵

Philippe Knoche says Areva will emphasise growth in China, which he described as the "new frontier" of global nuclear power.¹⁰ The two EPRs under construction at Taishan will likely be completed (unless the pressure vessel problem becomes a major obstacle). It is doubtful whether two additional EPRs planned for the same site will proceed, and still more doubtful that EPRs will be built at other sites.

An agreement (but not a binding contract) to build two EPRs at India's Jaitapur site was signed in 2010. The project has moved at snail's pace. Construction was to start in 2013 but unresolved issues (including financial arrangements) continue to delay the project.²⁸

Perhaps Areva will secure further orders in France. That will depend in part on debates over future reliance on nuclear power and other electricity sources, and a debate over permitted lifetimes for the current fleet of reactors.

Areva is involved in developing a 1.1 gigawatt pressurized water reactor called ATMEA. But in March 2015 Areva recognized an €80 million (US$89m) impairment for its share of ATMEA development costs "following the downward revision in the number and schedule of potential sales of this reactor outside Turkey, in the absence of tangible progress in the selection processes of the countries involved at the end of 2014."

The World Nuclear Industry Status Report 2014 states:

"The smaller PWR design, ATMEA, developed in collaboration with Mitsubishi, has been mentioned as an option for Jordan, Hungary, Argentina, and Turkey for the Sinop project. However, these are all, at best, long shots and unless ATMEA attracts interest in more prestigious markets and get comprehensive safety approval from a highly experienced regulator, it appears to have little future."⁸

Lessons from the EPR saga

What to make of the EPR saga? Areva is backing the wrong horse − the outcome of current political debates will result in a declining role for nuclear power in France, coupled to the growth of renewables.

Areva has also backed the wrong-sized wrong horse: a giant reactor with a giant price-tag.

Areva has backed the wrong-sized wrong horse at the wrong time − the Global Financial Crisis and its aftermath, stagnant energy demand, the liberalization of energy markets, the political fallout from the Fukushima disaster and other factors have dampened demand for new reactors and made it more difficult to secure finance (or government subsidies) for huge projects.

The EPR saga undermines the rhetoric of standardised, simplified reactors designs ushering in a new era of nuclear growth.

The EPR might have demonstrated the potential for mass production to drive down costs − but in reality it is demonstrating the opposite.

The EPR saga shows that developing modified versions of conventional reactors (in this case pressurized water reactors) can be complicated and protracted and can end in failure. How much more difficult will it be to develop radically new types of reactors?

The EPR saga shows that even countries with extensive nuclear expertise and experience can mess things up.

Even before the EPR fiasco, the large-scale, standardised French nuclear power program was subject to a negative economic learning curve − costs were increasing over time.²⁹ The EPR represents a negative learning curve on steroids. That point is emphasised by construction cost estimates of £16−24.5 billion (US$24.3−37.2b; €21.7−33.2b) for two planned EPRs (with combined capacity of 3.2 gigawatts) in the UK.³⁰ In the mid- to late-2000s, the estimated construction cost for an EPR was £2 billion³¹; current estimates are 4−6 times higher.

Private companies have pulled out of EPR projects in several countries (Italy, the US, the UK, etc.). Thus the EPR fiasco reinforces points made in the International Energy Agency's World Economic Outlook 2014 report − that nuclear growth will be "concentrated in markets where electricity is supplied at regulated prices, utilities have state backing or governments act to facilitate private investment," and conversely, "nuclear power faces major challenges in competitive markets where there are significant market and regulatory risks".³²

References:

1. World Nuclear Association, April 2015, 'Nuclear Power in Finland', www.world-nuclear.org/info/Country-Profiles/Countries-A-F/Finland/

2. World Nuclear News, 6 July 2012, 'Partial ruling on Olkiluoto 3', www.world-nuclear-news.org/-Arbitration_court_rules_on_Olkiluoto_3-06071...

3. Reuters, 1 Sept 2014, 'Finland's nuclear plant start delayed again; Areva, TVO trade blame', www.reuters.com/article/2014/09/01/finland-nuclear-olkiluoto-idUSL5N0R20...

4. 21 Apr 2015, France's nuclear calamity has UK worried, www.thelocal.fr/20150421/flamanville-frances-own-nuclear-nightmare

5. Carol Matlack, 16 April 2015, 'Areva Is Costing France Plenty', www.bloomberg.com/news/articles/2015-04-16/france-s-areva-falters-in-rea...

6. World Nuclear Association, March 2015, 'Nuclear Power in France', www.world-nuclear.org/info/Country-Profiles/Countries-A-F/France/

7. Steve Bird, 26 Oct 2013, 'Deaths, chilling safety lapses, lawsuits, huge cost over-runs and delays: Why we can't trust the French with Britain's nuclear future', www.dailymail.co.uk/news/article-2477202/Deaths-chilling-safety-lapses-l...

8. World Nuclear Industry Status Report 2014, www.worldnuclearreport.org/-2014-.html

9. Beyond Nuclear, Feb 2015, 'Epic Fail: Électricité de France and the "Evolutionary Power Reactor"', http://static1.1.sqspcdn.com/static/f/356082/25937356/1423508130603/Epic...

10. World Nuclear News, 6 March 2015, 'US EPR plans suspended', www.world-nuclear-news.org/RS-US-EPR-plans-suspended-0603157.html

11. World Nuclear Association, Feb 2015, 'Nuclear Power in Canada', www.world-nuclear.org/info/Country-Profiles/Countries-A-F/Canada--Nuclea...

12. World Nuclear Association, Nov 2014, 'Nuclear Power in Italy', www.world-nuclear.org/info/Country-Profiles/Countries-G-N/Italy/

13. Carbon Commentary, 22 Oct 2014, 'Cambridge nuclear engineer casts doubt on whether Hinkley Point EPR nuclear plant can be constructed', www.carboncommentary.com/blog/2014/10/22/cambridge-nuclear-engineer-cast...

14. US NRC, Aug 2014, 'New Nuclear Plant Designs', www.nrc.gov/reading-rm/doc-collections/fact-sheets/new-nuc-plant-des-bg.pdf

15. Louis Germain and Martin Leers, 21 Jan 2015, 'EDF's chaotic approach of French EPR reactor safety', http://journaldelenergie.com/nucleaire/edfs-chaotic-approach-french-epr-...

16. Emma Bateman, 26 Dec 2013, 'Hinkley C: the Generic Design Assessment has failed', www.theecologist.org/blogs_and_comments/commentators/2209776/hinkley_c_t...

17. Yves Marignac, WISE-­Paris, April 2015, 'Fabrication Flaws in the Pressure Vessel of the EPR Flamanville-3', http://bit.ly/EPR_WISE-Paris

Summary posted at: http://safeenergy.org/2015/04/13/the-epr-anamoly/

18. WNN, 20 April 2015, 'Flamanville construction continues while vessel tests due', www.world-nuclear-news.org/RS-Flamanville-construction-continues-while-v...

19. John Lichfield, 18 April 2015, 'UK nuclear strategy faces meltdown as faults are found in identical French project', www.independent.co.uk/news/uk/home-news/uk-nuclear-strategy-faces-meltdo...

20. Reuters, 17 April 2015, http://uk.reuters.com/article/2015/04/17/areva-nuclear-idUKL5N0XE1132015...

21. Liza Malykhina, 17 April 2015, 'France's nuclear power giant beset by setbacks', www.france24.com/en/20150417-french-nuclear-company-faces-major-setbacks/

22. Nadya Masidlover, 22 April 2015, 'Areva reassures on nuclear-reactor components', www.marketwatch.com/story/areva-reassures-on-nuclear-reactor-components-...

23. World Nuclear News, 22 April 2015, 'Areva reviews forging inspections', www.world-nuclear-news.org/C-Areva-reviews-forging-inspections-2204156.html

24. Reuters, 16 April 2015, 'China says no fuel loading at Areva-designed reactor until safety issues cleared', http://in.reuters.com/article/2015/04/16/china-nuclear-areva-idINL4N0XD3...

25. Stephen Chen, 10 April 2015, 'French warning on nuclear reactors being built in China's Guangdong', www.scmp.com/news/china/article/1762861/french-warning-nuclear-reactors-...

26. YLE, 18 April 2015, 'Nuclear watchdog seeks re-check of Olkiluoto 3 reactor', http://yle.fi/uutiset/nuclear_watchdog_seeks_re-check_of_olkiluoto_3_rea...

27. Reuters, 27 Feb 2015, www.reuters.com/article/2015/02/27/us-areva-strategy-idUSKBN0LV1IA20150227

28. World Nuclear Association, 17 April 2015, 'Nuclear Power in India', www.world-nuclear.org/info/Country-Profiles/Countries-G-N/India/

29. Arnulf Grubler, September 2010, 'The costs of the French nuclear scale-up: A case of negative learning by doing', Energy Policy, Vol.38, Issue 9, pp.5174–5188, www.sciencedirect.com/science/article/pii/S0301421510003526

30. The higher estimate is from the European Commission and includes finance costs. European Commission, 8 Oct 2014, http://europa.eu/rapid/press-release_IP-14-1093_en.htm

31. Steve Thomas, Mycle Schneider, and Antony Froggatt, 21 Aug 2014, 'The saga of Hinkley Point C: Europe's key nuclear decision', www.energypost.eu/saga-hinkley-point-c-europes-key-nuclear-decision/

32. International Energy Agency, 2014, 'World Economic Outlook 2014', www.worldenergyoutlook.org

UK Prime Minister David Cameron has threatened to retaliate over Austria's plans to mount a legal challenge to the Hinkley Point nuclear project, according to a document written by Vienna's ambassador to London. Britain's concerns are highlighted in Mr Eichtinger's account of a meeting with Vijay Rangarajan, a senior official at the Foreign Office. According to the letter, the UK has said that it could retaliate in several ways, with officials working on a "systematic creation of countermeasures" against the country.¹

Austria confirmed that it would launch a legal challenge against the European Union's (EU) decision to allow billions of pounds of subsidies for Hinkley on 21st January.²

The UK could retaliate by mounting a legal challenge to Austria's electricity (source) labelling on the basis that this breaches common market rules. It could also apply pressure on Austria to shoulder a higher burden in EU "internal effort-sharing" in the bloc's transition to a low-carbon economy. Britain could also begin an investigation into whether Austria's suit violated the Euratom treaty on nuclear power.

Doug Parr, chief scientist at Greenpeace, criticised the government for bullying the Austrians for daring to question the "huge and wasteful energy project", which would raise bills for British consumers. Thankfully the Austrian Government has said it won't be intimidated by threats.³

A spokeswoman for Mr Cameron said he believed that Britain had the right to choose its own energy mix. The UK government said it had no reason to believe that Austria was preparing a legal case that had any merit.⁴ On the other hand Dr Dörte Fouquet, a lawyer for the Brussels-based law firm Becker Büttner, which specialises in energy and competition law, said she thought that Austria's chances of success were "pretty high."⁵ And as the Nuclear Free Local Authorities pointed out in letters to the Guardian and Independent, if Hinkley Point goes ahead, with a £17 billion state aid package between the UK Government and EDF Energy, it could see other EU states like the Czech Republic, Poland and Slovakia − all close to Austria − seek to replicate such contractual operations for their own new nuclear ambitions.

It is important to note in 2006 the then Chancellor Alasdair Darling said it will be up to the private sector to "initiate, fund, construct and operate" the nuclear plants. And the UK Coalition Agreement between the Tories and Liberal Democrats allowed the Government to promote the construction of new nuclear reactors provided they receive "no public subsidy".

Councillor Mark Hackett for the NFLA says the UK Government's churlish response is mainly due to it knowing that the writing is on the wall − Hinkley Point will be subject to another long delay, and this makes it ever less likely to be built. Austria should be commended for bringing us to our senses and forcing us to see the necessity of a quite different low carbon strategy; where renewables, energy efficiency and decentralised energy can become the norm.

Investment decision delayed

The Times reported on February 7 that an investment decision would be delayed until several months after the general election because the project's Chinese backers have demanded that the French government protect them if it goes bust.⁶ The Chinese were reported to have serious concerns about the EPR reactor design and are refusing to invest unless the French government promises to bail out Areva, if necessary, and cover their share of any cost overruns.

Complex negotiations involving British ministers, their opposite numbers in Paris, EDF Energy and the Chinese have been complicated still further by the legal challenge brought by Austria against Hinkley Point. Now EDF Energy is seeking assurances from the UK Government that if Austria wins the case and the project has to be abandoned halfway through, the company will receive compensation for the money invested up to that point.

At first, according to the Burnham-on-sea.com website, EDF Energy denied reports that an investment decision would be delayed until the Autumn. And the Stop Hinkley Campaign pointed out that if EDF Energy or the Chinese demanded any new financial guarantees these would require approval from the European Competition Commissioner.⁷

Just two days later, The Telegraph reported that EDF Energy appears to have abandoned its March 2015 deadline for making an investment decision and has warned that talks on the project may still take a "considerable" time. EDF described finalising agreement on Hinkley as a "major challenge" facing the company in 2015. EDF said that before it could take a decision it needed to sign deals with co-investors, gain European Commission and UK government approval of waste transfer contract arrangements, finalise a £10 billion loan guarantee from the Treasury and finalise a subsidy contract that was provisionally agreed with the UK Government in 2013.⁸

Earlier the Financial Times reported that several potential investors have backed away from the project despite the promise of a 35-year index-linked price guarantee backed by the UK taxpayer.⁹ The Kuwaitis, the Qataris, the Saudi Electric Company and even Hermes, the UK based investment fund, have all been mentioned as possible investors but none has signed up.

On top of all this Areva, the French, mainly State-owned company which would be the main equipment supplier, will have difficulty funding its expected 10% share of the project. Areva is struggling to survive the ongoing mess of the Olkiluoto nuclear plant in Finland, which is years behind schedule and billions over budget. Areva's losses in Finland are currently estimated at €3.9bn. The loss of Areva's share of Nuclear Management Partners Consortium's contract to decommission the Sellafield will not have helped.

Areva's share price has collapsed. It ended its market year with a decline of 52% as a result of financial difficulties caused by mismanagement, hazardous speculations and acquisitions, repeated technical fiascos (i.e. the EPRs in Finland and France), the regression of global nuclear market, and especially the cessation of the Japanese market since the Fukushima nuclear disaster.¹⁰

Chinese investment

Meanwhile, the government is refusing to say whether it has followed its own rules in allowing the Chinese to invest in Hinkley, citing questions of national security. Chinese involvement in UK energy schemes remains controversial, not least because of the historical links between its industry and the military. The National Security Council (NSC) is supposed to review critical projects. But ministers have consistently refused to say whether this has been the case. The BBC requested information, under Freedom of Information laws, about whether the NSC had discussed China's investment in Hinkley and if it had, whether it had been approved.

In a delayed response, the government confirmed the information was held by the Cabinet Office but refused to say whether the NSC had approved or even discussed China's expected 30−40% stake. Labour MP Dr Alan Whitehead, a member of the Energy and Climate Change Committee, said the government's refusal to say whether it had followed its own rules was "not acceptable".¹¹

Abridged from NuClear News, No.71, February 2015, www.no2nuclearpower.org.uk/nuclearnews/NuClearNewsNo71.pdf

References:

1. FT, 11 Feb 2015, www.ft.com/cms/s/0/905342fa-b214-11e4-80af-00144feab7de.html
2. Guardian, 21 Jan 2015, www.theguardian.com/environment/2015/jan/21/austria-to-launch-lawsuit-hi...
3. Bloomberg 12 Feb 2015 www.bloomberg.com/news/articles/2015-02-12/austria-says-it-won-t-be-inti...
4. FT 11 Feb 2015 www.ft.com/cms/s/0/905342fa-b214-11e4-80af-00144feab7de.html
5. Guardian, 22 Jan 2015, www.theguardian.com/environment/2015/jan/22/uk-nuclear-ambitions-dealt-f...
6. Times, 7 Feb 2015, www.thetimes.co.uk/tto/business/industries/utilities/article4346816.ece
7. Burnham-on-sea.com, 10 Feb 2015, www.burnham-on-sea.com/news/2015/hinkley-point-delay-10-02-15.php
8. Telegraph, 12 Feb 2015, www.telegraph.co.uk/finance/newsbysector/energy/11407745/Hinkley-Point-n...
9. FT, 11 Jan 2015, http://blogs.ft.com/nick-butler/2015/01/11/new-nuclear-2015-is-the-criti...
10. Co-ordination Antinucleaire Sudest, 1 Jan 2015, http://coordination-antinucleaire-sudest.net/2012/index.php?post/2015/01...
11. BBC, 15 Jan 2015, www.bbc.co.uk/news/uk-politics-30778427

The UK Government and French utility EDF have reached initial agreement on terms of a proposed contract for the Hinkley Point C (HPC) nuclear power station in Somerset, paving the way for the construction of the first new nuclear plant in the UK since Sizewell B began operation in 1995. Operation of the first of two 1.6 gigawatt (GW) HPC reactors is scheduled to commence in 2023. The government's October 21 announcement says HPC will "begin the process of replacing the existing fleet of nuclear stations, most of which are due to close in the 2020s."[1]

However the HPC project faces many hurdles and potential delays. The government said the agreement with EDF is not legally binding.[1] EDF said it will not give the go-ahead for construction until and unless the European Commission clears the government/EDF agreement under state aid rules designed to prevent the distortion of Europe's electricity market. EDF said it would make its final investment decision by July 2014, but the European Commission examination may take longer.

Stop Hinkley spokesperson Nikki Clark said the "announcement was much ado over nothing and despite all the fanfare and visits of the rich and famous to Hinkley, there is no legally binding agreement, nor will there be until the government get their plans past the European Commission which, according to various media outlets, would be summer 2014 at the earliest."[2]

Labour MP Alan Whitehead said "it's not much of a deal, more a kind of semi crayoned-in statement of intent and a very expensive one at that. ... At the moment there seem to be a lot more things that we don't know than things we do know about this deal." Whitehead notes that in 2009, EDF said it planned to start producing power at Hinkley C in 2017.[3] So with the current 2023 start-up date, the project is already six years behind schedule.

It may be that economics, along with the myriad implications of the Fukushima disaster, kill off the current HPC project just as Margaret Thatcher's plans for HPC were killed off by economics and Chernobyl.[4]

The government's October 21 announcement states that project partners would be required to start putting money into a fund from the first day of electricity generation to pay for decommissioning and waste management costs associated with HPC.[1] However it is silent on where the waste might be disposed of. Martin Forwood from Cumbrians Opposed to a Radioactive Environment said: "The Government's fetish for nuclear power, which has seen Ministers scraping the world's barrel for investors to support its craving, is only matched by its determination to see the industry's nuclear wastes dumped in suspect geology in Cumbria."[5]

EPRs

EDF plans to build EPRs (European Pressurized Reactor) at Hinkley and Sizewell. No EPRs are operating − or have ever operated − anywhere in the world. The construction of two EPRs in China appears to be on schedule and largely untroubled [6] − though of course the Chinese state is not known for its transparency.

The other two EPR projects − one reactor each in Finland and France − have been disastrous. When the contract was signed in 2003 for a new EPR in Finland, completion was anticipated in 2009. Now, commercial operation is not anticipated until 2015 — six years behind schedule.[7] And utility TVO recently announced that it is "prepared for the possibility" that the plant may not start up until 2016 − seven years behind schedule.[8] The estimated cost has ballooned from 3 billion euros to 8 billion.[9] Project partners Areva and TVO have been engaged in extensive, ongoing litigation regarding cost overruns.[10]

EDF's Flamanville 3 EPR reactor in France is behind schedule — it was originally meant to enter service in 2012 but that date has been pushed back to 2016.[11] Its estimated cost has grown from 3.3 billion euros to 8.5 billion.[12]

The Daily Mail characterised the French EPR project as one "beset by financial mismanagement with rocketing costs, the deaths of workers, an appalling inability to meet construction deadlines, industrial chaos, and huge environmental concerns", and notes that "it continues to be plagued by delays, soaring costs, and litigation in both the criminal and civil courts." A report by France's nuclear safety authority in 2011 found 13 incidents of below-standard safety measures. In 2011, two former EDF employees were jailed for spying on anti-nuclear campaigners and the company was fined £1.2 million for the crime.[13] Italian utility Enel pulled out of the project last December.[14]

Chinese partners

The EDF Group has announced the intent of two Chinese companies, China National Nuclear Corporation (CNNC) and China General Nuclear Corporation (CGN), to invest in HPC as minority shareholders, following the signing earlier in October of a Memorandum of Understanding on nuclear energy cooperation between the UK and Chinese governments.[1]

EDF has been working as a partner with CGN and CNNC for 30 years, including a joint venture to build two EPRs in Taishan, China.[15]

According to Nuclear Energy Insider, EDF will have between a 45% and 50% stake in the project, CNNC and CGN will take 30-40% between them, Areva will take 10%, and EDF is discussing with interested companies about the remaining 15%.[16] The sovereign wealth funds of Kuwait or Qatar are rumoured to be in the running; in 2010 the Kuwait Investment Authority paid 600 million euros for a 4.8% stake in Areva.[17]

Of the four major partners − EDF, Areva, CNNC and CGN − three are 100% state-owned and one is 85% state-owned; two are French and two Chinese.[18]

No UK firms are involved after Centrica pulled out of the HPC project earlier this year. Centrica chief executive Sam Laidlaw said that since its initial investment the "anticipated project costs in new nuclear have increased" while the construction timetable "has extended by a number of years".[19] Other utilities have also given up on the UK nuclear program; for example German utilities E.on and RWE reneged on their promise to invest in new nuclear at Anglesey.[20]

Former Labour Party chancellor Alistair Darling said the government should look at publicly funding new nuclear plants: "It will be the next generation that pay for these very high wholesale prices of electricity and the point is, you need to ask yourself would it be better for the state to do it as opposed to what looks like quite an expensive deal?"[21]

Chinese investment in the UK nuclear program has generated some consternation. Consultant John Large said: "We can see that even with the French operatorship of UK nuclear power stations [through EDF] that there are differences in the regulatory regimes in France and the UK. But these problems would be much more profound with the Chinese, who like the Russians, are rooted in a government system without independent [safety] regulators."[22]

A GMB union leader said it was "almost Orwellian" to allow a country like China, which has been linked to allegations of corporate hacking, to be allowed access to highly sensitive energy infrastructure. A survey of 75 companies in major emerging economies by Transparency International found that Chinese companies were the least likely to publish financial information and vital details about corporate structure that allows them to be held to account.[22]

China's domestic nuclear power program certainly leaves much to be desired. He Zuoxiu, a member of the Chinese Academy of Sciences, said earlier this year that "to reduce costs, Chinese designs often cut back on safety".[24]

Li Yulun, a former vice-president of CNNC, said in October that Chinese "state leaders have put a high priority on [nuclear safety] but companies executing projects do not seem to have the same level of understanding." Li Yulun noted that Westinghouse has yet to receive approval from British authorities for a modified version of the AP1000 reactor design, while Chinese nuclear safety regulators approved it several years earlier.[25]

In August 2009, the Chinese government dismissed and arrested CNNC president Kang Rixin in a US$260 million corruption case involving allegations of bid-rigging in nuclear power plant construction.[26]

The first reactor designed and built entirely by the Chinese — in 1990 at Qinshan — had to be torn down and rebuilt because of faults in the foundation and the welding of the steel vessel that contained the reactor itself.[27]

In 2011, Chinese physicist He Zuoxiu warned that "we're seriously underprepared, especially on the safety front" for a rapid expansion of nuclear power. Qiang Wang and his colleagues from the Chinese Academy of Sciences noted in April 2011 that China "still lacks a fully independent nuclear safety regulatory agency."[27] They also noted that China's nuclear administrative systems are fragmented among multiple agencies; and China also lags behind the US, France, and Japan when it comes to staff and budget to oversee operational reactors.[28]

Cables released by WikiLeaks in 2011 highlight the secrecy of the bidding process for nuclear power plant contracts in China, the influence of government lobbying, and potential weaknesses in the management and regulatory oversight. Westinghouse representative Gavin Liu was quoted in a cable as saying: "The biggest potential bottleneck is human resources – coming up with enough trained personnel to build and operate all of these new plants, as well as regulate the industry."[29]

The UK government / EDF agreement has reinvigorated cross-channel rivalries. The Daily Mail explained "why we can't trust the French with Britain's nuclear future" and complained that "huge profits are expected to be milked from British consumers to go to the French."[13]

Economic jiggery-pokery

Most reports estimate a total construction cost of £16 billion for the two 1.6 GW reactors at Hinkley Point, while World Nuclear News gives a cost estimate of £14 billion.[30] The £16 billion estimate equates to £5 billion / GW (US$8.1 b / GW).

EDF (and its partners) will be guaranteed a minimum price − a 'strike price' − for the electricity generated by HPC. If wholesale market prices are below the strike price, the government makes up the difference; if market prices are higher, EDF will have to pay back to government. The government announcement nominates a strike price of £89.50 / megawatt-hour (MWh), fully indexed to the Consumer Price Index, or £92.50/MWh if EDF does not take a final investment decision on proposed new reactors at Sizewell, Suffolk.[1] Those figures are around twice the current wholesale price.

The government announcement flags various circumstances which would lead to upwards or downwards movement of the strike price. The guaranteed minimum price will apply for 35 years.[1]

Paul Dorfman from University College London's Energy Institute says the deal ties consumers into subsidising one energy source for a whole generation − potentially at a very high level. In contrast, renewable energy sources' shorter contracts mean the subsidy can be cut if the costs of building wind turbines or solar panels fall. Dorfman predicts that the cost of nuclear "will flatline or hike, while renewables will do nothing but go down".[31]

Dorfman said the government/EDF agreement "is essentially a subsidy of what we calculate to be £800 million to £1billion a year that the UK taxpayer and energy consumer will be putting into the deep pockets of Chinese and French corporations, which are essentially their governments."[32]

In addition to the strike price deal, the government has offered to provide a loan guarantee for HPC of up to £10 billion under a scheme whereby the government uses its balance sheet to provide guarantees for major infrastructure projects.[19]

Previous promises that nuclear power would not be subsidised have clearly been breached, notwithstanding disingenuous government claims that the strike price deal and the loan guarantee do not represent subsidies. A number of expert witnesses voiced scepticism at a recent hearing of the UK Environmental Audit Committee. "This is a huge public contribution towards yesterday's energy thinking," said Alan Simpson, a former Labour MP. "I just wonder what we are inhaling."[33]

The government has been indulging in creative accounting and jiggery-pokery. The October 21 announcement asserts that the HPC project "will ... reduce consumer bills over the long-term" [1] but on the same day turncoat LibDem minister Ed Davey said: "I can't guarantee that. There are huge uncertainties here. It would be absurd to say we can guarantee everything in the 2020s."[32]

Since the 2010 promise that there would be "no public subsidy" of new nuclear, ministers have bundled up nuclear with green energy sources to claim that there would be no "unfair" subsidies for nuclear compared to other green sources. That intellectual contortion will need to be unravelled in the coming months as Prime Minister Cameron plans to reduce green levies ... without reducing subsidies available to the nuclear program.

Government claims about job creation have been equally disingenuous. Nuclear critic Tom Burke said: "The Prime Minister proudly boasted that this would create 25,000 jobs. He forgot to mention that only 900 of them will be permanent and that most of the high value jobs will be abroad. He also forgot to mention that the cost per job is over £600,000. This compares rather badly with the 320,000 jobs that could be created spending the same amount on really delivering energy efficiency improvements for British energy consumers."[34]

The government/EDF agreement "is another disgraceful example of profit being privatised and risk being socialised," Burke said.

Greenpeace UK executive director John Sauven said: "Hinkley C fails every test – economic, consumer, and environmental. It will lock a generation of consumers into higher energy bills, via a strike price that's nearly double the current price of electricity, and it will distort energy policy by displacing newer, cleaner, technologies that are dropping dramatically in price."[35]

A Greenpeace briefing paper states that the HPC strike price is not only almost double the current market price for electricity, but also well over twice the Department of Energy and Climate Change's original cost estimate for nuclear power of £38/MWh.[36]

Antony Froggatt from the Chatham House think-tank noted that in 2006, EDF's submission to a government energy review said that EPR-produced electricity would cost £28.80 / MWh in 2013 values. "This more than threefold increase [to £92.50], over eight years, puts the cost of nuclear electricity at about double the current market rate – higher than that produced by both gas and coal-fired power stations, and more costly than many renewable energy options," Froggatt said.[37]

Even nuclear convert George Monbiot weighed in with sharp criticisms: "Seven years ago, I collected all the available cost estimates for nuclear power. ... 8.3 pence was so far beyond what anyone else forecast that I treated it as scarcely credible. It falls a penny short of the price now agreed by the British government. I still support nuclear power. But none of this means that we should accept nuclear power at any cost. And at Hinkley Point the cost is too high."[38]

Monbiot adds: "That's not the only respect in which the price is too high. A fundamental principle of all development is that we should know how the story ends. In this case no one has the faintest idea. Cumbria – the only local authority which seemed prepared to accept a dump for the nuclear waste from past and future schemes – rejected the proposal in January. No one should commission a mess without a plan for clearing it up."

Monbiot's solution is nothing if not quixotic − non-existent liquid thorium reactors and non-existent integral fast reactors.

References:
[1] Edward Davey and David Cameron, 21 October 2013, 'Initial agreement reached on new nuclear power station at Hinkley', https://www.gov.uk/government/news/initial-agreement-reached-on-new-nucl...
[2] Stop Hinkley, 22 Oct 2013, www.stophinkley.org/PressReleases/pr131022.htm
[3] Alan Whitehead, 24 Oct 2013, http://alansenergyblog.wordpress.com/2013/10/24/the-knowns-the-unknowns-...
[4] Allan Jeffery, 31 July 2013, 'The Hinkley nuclear power station will never be built', www.thisiscornwall.co.uk/Hinkley-nuclear-power-station-built/story-19591...
[5] Cumbrians Opposed to a Radioactive Environment, 21 Oct 2013, 'Nothing welcome about Government's new build deal', www.corecumbria.co.uk/newsapp/pressreleases/pressmain.asp?StrNewsID=326
[6] Francois de Beaupuy and Tara Patel, 25 Nov 2010, 'China Builds Nuclear Reactor for 40% Less Than Cost in France, Areva Says', www.bloomberg.com/news/2010-11-24/china-builds-french-designed-nuclear-r...
[7] WNN, www.world-nuclear-news.org/NN-Olkiluoto_3_delayed_beyond_2014-1707124.html
[8] WNN, 24 Oct 2013, 'Symbolic milestone for Finnish EPR', www.world-nuclear-news.org/NN-Symbolic_milestone_for_Finnish_EPR-2410134...
[9] http://online.wsj.com/article/BT-CO-20121213-703038.html
[10] WNN, 11 Feb 2013, 'TVO prepares for further Olkiluoto 3 delay', www.world-nuclear-news.org/NN-TVO_prepares_for_further_Olkiluoto_3_delay...
[11] www.ft.com/intl/cms/s/0/5f849de4-dbf8-11e1-86f8-00144feab49a.html
[12] http://uk.reuters.com/article/2012/12/04/enel-edf-idUKL5E8N4DIJ20121204
[13] Steve Bird, 26 Oct 2013, 'Deaths, chilling safety lapses, lawsuits, huge cost over-runs and delays: Why we can't trust the French with Britain's nuclear future', www.dailymail.co.uk/news/article-2477202/Deaths-chilling-safety-lapses-l...
[14] Reuters, 26 Feb 2013, www.reuters.com/article/2013/02/25/areva-nuclear-idUSL6N0BPK4820130225
[15] Aaron Larson, 23 Oct 2013, 'Agreement Sets Stage for Construction of New Nuclear Plant in UK', www.powermag.com/agreement-sets-stage-for-construction-of-new-nuclear-pl...
[16] K. Steiner-Dicks, 23 Oct 2013, 'Hinkley Point C strikes a price', http://analysis.nuclearenergyinsider.com/new-build/hinkley-point-c-strik...
[17] Reuters, 23 Oct 2013, http://uk.reuters.com/article/2013/10/23/uk-edf-gulf-britain-idUKBRE99M0...
[18]Wales Online, 26 Oct 2013, www.walesonline.co.uk/news/news-opinion/rhodri-morgan-beware-price-promi...
[19] Tom Fitzpatrick, 8 Feb 2013, 'Treasury willing to back Hinkley nuclear plant with UK Guarantee', Construction News, www.cnplus.co.uk/sectors/energy/treasury-willing-to-back-hinkley-nuclear...
[20] Alex Brummer, 21 Oct 2013, 'Nuclear deal is a devastating indictment of the muddled approach of successive governments', www.dailymail.co.uk/news/article-2471115/Nuclear-deal-means-giving-overs...
[21] Construction News, 28 Oct 2013, http://www.cnplus.co.uk/8654752.article
[22] Terry Macalister and Jennifer Rankin, 18 Oct 2013, 'Nuclear expert raises concerns about Chinese role in UK's new nuclear plants', www.theguardian.com/environment/2013/oct/17/nuclear-expert-warning-chine...
[24] He Zuoxiu, 19 March 2013, 'Chinese nuclear disaster "highly probable" by 2030', www.chinadialogue.net/article/show/single/en/5808-Chinese-nuclear-di
[25] South China Morning Post, 7 Oct 2013, 'China nuclear plant delay raises safety concern', www.scmp.com/business/china-business/article/1325973/china-nuclear-plant...
[26] Keith Bradsher, 15 Dec 2009, 'Nuclear Power Expansion in China Stirs Concerns', www.nytimes.com/2009/12/16/business/global/16chinanuke.html?_r=2&
[27] David Biello, 16 Aug 2011, 'China's nuclear ambition powers on', www.abc.net.au/environment/articles/2011/08/16/3293802.htm
[28] 'China needs improved administrative system for nuclear power safety', 22 June 2011, www.eurekalert.org/pub_releases/2011-06/acs-cni062211.php
[29] Jonathan Watts, 25 Aug 2011, 'WikiLeaks cables reveal fears over China's nuclear safety', www.guardian.co.uk/environment/2011/aug/25/wikileaks-fears-china-nuclear...
[30]WNN, 28 June 2013, 'Loan guarantee for Hinkley Point C', www.world-nuclear-news.org/NN-Loan_guarantee_for_Hinkley_Point_C-280613S...
[31] 'An Overview of the New Nuclear Deal in the UK', 21 Oct 2013, www.carbonbrief.org/blog/2013/10/an-overview-of-the-new-nuclear-deal/
[32] Tamara Cohen, 21 Oct 2013, 'Nuclear plant may NOT cut bills, minister admits', www.dailymail.co.uk/news/article-2471071/Nuclear-plant-NOT-cut-bills-adm...
[33] Michael Klimes, 23 Oct 2013, 'Subsidy-Free Nuclear Deal Questioned by Environmental Audit Committee', www.ibtimes.co.uk/articles/515440/20131021/caroline-flint-generation-dav...
[34] Tom Burke, 25 Oct 2013, http://tomburke.co.uk/2013/10/25/third-or-fourth-time-lucky/
[35] Business Green, 21 Oct 2013, www.businessgreen.com/bg/news/2301810/government-hails-historic-nuclear-...
[36] Greenpeace, Hinkley Strike Price Briefing, https://docs.google.com/document/d/1ZLhBTXYpiiUMtB1e7gWQjtjVVhinLaE-ulBi...
[37] Guardian, 21 Oct 2013, www.theguardian.com/environment/2013/oct/21/uk-nuclear-power-plant-contr...
[38] George Monbiot, 22 Oct 2013, 'The farce of the Hinkley C nuclear reactor will haunt Britain for decades', www.theguardian.com/commentisfree/2013/oct/21/farce-hinckley-nuclear-rea...

More information:

• Stop Hinkley: www.stophinkley.org
• UK government: www.gov.uk/government/news/hinkley-point-c
• EDF: http://hinkleypoint.edfenergyconsultation.info/

(Written by Nuclear Monitor editor Jim Green.)