Proponents of an Australian nuclear power industry — of which there are quite a number in the federal Liberal Party — might read up on what’s been happening in the UK around the planned Hinkley Point nuclear power station, which yet again demonstrates how the maths of nuclear power rarely add up — even in countries with established nuclear power industries, let alone a country like Australia that would have to build one from the ground up.
The Hinkley Point project, which will contain two “European pressurised reactor” (EPR) units, was originally planned to come online from 2025 and provide 7% of the UK’s power needs. It was to be built by French nuclear giant EDF (85% government owned), backed by Chinese investment. But that was until the hideous maths of nuclear power construction reared their ugly head. Despite new UK chancellor Philip Hammond yesterday confirming his commitment to Hinkley Point, there are now real doubts the project will go ahead.
EDF’s financial position is increasingly problematic, partly because the new EPR design still hasn’t been cleared by safety authorities. EDF has been building a new EPR reactor at Flamanville in France for years and its pitch to the UK government was that its experience building the additional Flamanville reactor would make Hinkley Point much easier. But Flamanville was already behind schedule when we first covered nuclear power costs in 2009 and is now nine years behind schedule, a delay of near-F-35 proportions, albeit less expensive — the cost of Flamanville has only blown out from 3.3 billion euros to 10.5 billion euros.
Hinkley Point was originally expected to cost 18 billion pounds, but a UK Infrastructure and Projects Authority assessment from the Department of Energy and Climate Change lifted the potential cost of the project to 37 billion pounds. Normally governments are required to either provide funding or guarantee construction loans for new reactors; for Hinkley Point, EDF has been guaranteed a subsidised price of 92.50 pounds per megawatt hour of electricity, rising with inflation, as a way for the government not having to pay the financing costs during construction. That per megawatt cost was more than twice the 45 pounds a megawatt whole sale cost in the UK and was originally planned to cost consumers a total of six billion pounds.
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But in a report on Wednesday from Britain’s National Audit office said that the subsidy would cost up to five times that. “We estimate that the value of future top-up payments under the proposed HPC [Hinkley Point C] CFD have increased from £6.1bn in October 2013 when the strike price was agreed, to £29.7bn in March 2016,” the report estimated. Under the terms of the subsidy scheme, the British consumer must compensate EDF for lower wholesale electricity prices, and that arrangement looks increasingly bad for the consumer as energy prices have plummeted in recent years largely due to a fall in the cost of fossil fuels as well as renewables. “Supporting early new nuclear projects could lead to higher costs in the short term than continuing to support wind and solar. The cost competitiveness of nuclear power is weakening as wind and solar become more established,” according to the report. “The decision to proceed with support for nuclear power therefore relies more on strategic than financial grounds: nuclear power is needed in the supply mix to complement the intermittent nature of wind and solar,” it added.
EDF, struggling with the massive blow-out in the cost of Flamanville, is yet to give a final go-ahead to Hinkley Point amid concern over the financial risks and the possible need for (more) aid from the French government. EDF said last week it remains committed to Hinkley Point, despite the Brexit vote, but so far it has not given a firm date for an announcement of the go-ahead — it says a decision will be made by September, but that is not a hard and fast deadline. Last month, EDF urged that the whole project be delayed until it has worked out solutions to problems with EPRs. Some commentators wonder if the French government will now be interested in pushing EDF to do the project in a non-EU economy, once Brexit happens.
Hinkley Point was conceived under the Blair-Brown government, although the site wasn’t chosen until 2010. Early on, it was said there would be power by 2017. The project was pushed back in 2013 despite a “start” to work at the Somerset site. Part of the problem is that, as the Audit Office noted, Britain has not completed a new nuclear plant since 1995 and the loss of skills and the hollowing out of the nuclear supply chain would push up costs and extend delays.
All of which reinforces a key point for Australian spruikers of nuclear power: the costs of building reactors are massive and always end up a multiple of initial budget, nuclear power requires government re-entering the power generation sector via some mechanism — whether it’s ownership, loan guarantees or subsidies — when we’ve spent the last 20 years trying to get governments out of the power industry, and however many years you think it will take to build a reactor, at least double it. And that’s in countries that already have nuclear power industries.