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."
However the HPC project faces many hurdles and potential delays. The government said the agreement with EDF is not legally binding. 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."
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. 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.
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. 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."
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  − 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. 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. The estimated cost has ballooned from 3 billion euros to 8 billion. Project partners Areva and TVO have been engaged in extensive, ongoing litigation regarding cost overruns.
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. Its estimated cost has grown from 3.3 billion euros to 8.5 billion.
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. Italian utility Enel pulled out of the project last December.
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.
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.
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%. 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.
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.
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". 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.
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?"
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."
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.
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".
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.
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.
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.
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." 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.
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."
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."
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. 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. 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.
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".
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."
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.
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."
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"  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."
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."
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."
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.
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.
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."
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.
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(Written by Nuclear Monitor editor Jim Green.)