What precedents does the Government’s belated green light for a new Hinkley Point C nuclear plant in Somerset set? What are the commitments? What are the alternatives? And what will happen nearer the end of the 21^st century Jon Herbert asks?

Late September saw NuGen announce wide-ranging talks with overseas investors on options to fund, build and commission its proposed Moorside nuclear power station near Sellafield by the mid-2020s.

If the Cumbrian project goes ahead, it will have a generating capacity of 3.8 GWh/year. Hinkley Point C’s (HPC) capacity on the West Country coast in comparison will be 3.2GWh/year.

However, it is the more advanced HPC project that has made news and opened up a Pandora’s Box of reactions – the idea that once a process has begun, it can generate many complicated problems.

The sense of drama was heightened by the new occupants of Downing Street’s insisting that they review all commitments involving foreign partners made by No 10’s and No 11’s previous tenants before finally signing the project off on 29 September.

Costs are controversial too. HPC’s current price tag is £18 billion, plus £6 billion financing costs, with scope to grow. There is also unease the new reactor will be built to an untried design from EDF, the French nuclear contractor managing and two-thirds funding the project. China will add £6 billion.

It was recently reported that Areva, the EDF-owned company due to build the reactor, faces court action in Finland from Finnish utility, Teollisuuden Voima, which wants assurances that its Olkiluoto 3 reactor will be completed by 2018. It is a decade late. EDF’s former finance director resigned earlier this year saying that HPC was too risky if it went wrong. EDF unions have opposed the deal.

And then there is China’s long-term involvement with the UK nuclear sector. The Asian super-power’s interest in UK energy does not stop at HPC. After helping EDF to build another new reactor – Sizewell C in Suffolk – the ultimate prize for China’s General Nuclear Power Corporation (CGN) will be the chance to deliver a new Bradwell B reactor in Essex successfully using Chinese technology in the UK’s tough regulatory framework. However, it will take many years for its design proposal to be scrutinised. To date, China’s huge nuclear sector has not had a presence in Europe. However, EDF and CGN have a history of working well together for decades.

One further factor bothering a lot of people is whether CGN could install software giving China potential external control of UK reactors.

 

In the seven weeks since the project was on hold, Prime Minister Theresa May’s team say they have introduced important new safeguards. Their critics claim they could have done far more.

 

New contract

The Government is adamant that its new 50% or more ‘golden stake’ holding means that no strategic UK nuclear interest can be sold by French or Chinese partners without explicit UK consent.

But ministers should have pressed harder for a financially more favourable deal, according to former business secretary, Vince Cable, who accused the PM of ducking an opportunity to revisit Hinkley’s cost figures. He commented, “The biggest issues around Hinkley are the price and the technology and those remain unchanged. The big question is about the economics of it, and that is still unresolved and worrying.”

He also noted that Hinkley Point, Heathrow and HS2 high-speed rail – the three big UK infrastructure ‘H’s’ – needed a tough approach before key decisions are taken.

Shadow energy secretary, Barry Gardiner, commented that the Government had ‘backed down with a whimper’ over Chinese security concerns.

Writing to current business secretary, Greg Clark, Green Party MP, Caroline Lucas, has opposed the new deal citing National Audit Office data showing that public subsidies could increase from £6.1 billion to £29.7 billion. This ‘significant deviation’ warrants new scrutiny by Parliament, she says.

Perhaps not surprisingly, EDF and the French Government have welcomed the HPC agreement as good for French industry and employment; 60% of construction work is expected to go to UK firms.

The manufacturer’s organisation, EEF, is relieved to see Hinkley go ahead ‘after months of delays and uncertainty’ but warns that for nuclear to play a major role in the UK energy mix, guaranteed prices – the so-called ‘strike price’ – must be lower for future projects. The CBI welcomed the news for investors that ‘the UK is open for business’.

However, given that the goal is a low-cost, low-carbon secure energy sector, another concern is whether higher renewable energy investments would increase UK energy independence by 2050?

The corollary is what will the UK’s position be when the projected 60-year-life of the new nuclear station, and its fellow fleet members yet to be build, ends later this century and should we be making more long-term plans now?

Whatever the validity of these arguments, the truth is that the Government could actually be in a bit of a corner with little room to manoeuvre.

 

Hobson’s choice

As thing are, with dirty power stations that generated some 10% of UK energy already shut and more due to close on environmental grounds in the 2020s and 2030s, nuclear power could be Britain’s only way of meeting its Climate Change Act commitments to cut carbon emissions by 80% by 2050.

Without nuclear plants, it has even been suggested that the act might have to be repealed.

The first stage of the UK’s decarbonisation strategy is to replace coal and gas-fired stations by intermittent wind and solar power (supported by increasingly-efficient energy storage technologies such as commercial-scale batteries), plus base-load nuclear power.

A second stage should see low- to zero-carbon electricity replacing fossil hydrocarbons (diesel, petrol and aviation fuels) with electric vehicles, plus electric alternatives to gas-fired central heating.

The country is also running out of generating capacity. National Grid already warns of 5.5% spare capacity this winter. A lot could be riding on nuclear.

 

Costs

Costs are inevitably at the root of much of the discomfiture around HPC. If the UK needs to create a nuclear capacity of 18GW by 2035 to decarbonise society, what precedents are being set so early?

When Hinkley C was first mooted in 2006, no public subsidy was envisaged. In 2009, the chief executive of EDF told a Commons select committee that Hinkley Point C would cost £9 billion to build and needed no subsidy.

What EDF and the Government signed up to in September was a ‘contract for difference’ which is an agreement for the amount of money the French company will receive for 35 years for the power it generates to cover construction and operating costs, plus profits.

This fixed strike price has been set at £92.50 per megawatt hour (MWh) – one MWh could power some 18,000 television sets for an hour. This is far higher than current prices for energy from gas- and oil-fired power stations. What that argument does not take into account is what the future cost of fossil-fuel energy will be if carbon-pricing is introduced.

The power industry sells electricity to commercial suppliers for a wholesale price; suppliers then pass power on to consumers. They receive their income through business and domestic electricity bills. If the wholesale price falls below the strike price, EDF will still receive £92.50 per megawatt.

 

Moorside – an alternative vision

Moorside is meant to be a different ballgame. The company notes that, “There is a universe of options open to us.” Projected costs for building Europe’s largest new nuclear power station are currently £10 billion. NuGen explains that a final investment decision for the plant that could supply energy for six million homes is due to be taken in 2018.

A company spokesperson said recently, “We are talking to potential investors familiar with the nuclear industry, including banks, credit-export agencies and nuclear companies interested in nuclear new build projects.”

The Financial Times reports that one party interested in joining the project is the state-controlled South Korean firm Korea Electric Power Corporation (Kepco). An agreement with the company’s owner, Japan’s Toshiba and France’s Engie, could see both funding and construction expertise heading for Cumbria.

Moorside could employ up to 21,000 people over its lifespan, during which it would provide 7% of the UK’s power. It is understood that three reactors would be provided by Toshiba’s US subsidiary, Westinghouse. NuGen also aims to tap into the largest concentration of nuclear skills and experience in Europe – the 10,000 staff at Sellafield.

The Cumbrian project is almost certain to hit snags as more details emerge. Planners would clearly like to avoid the storm that has gathered around HPC which the Government would like to see ironed out as soon as possible.

Are their grounds for optimism? Mythology has it that there was one emotion left at the bottom of Pandora’s empty box – hope.

Published by Croner-i on 5 October 2016