Hinkley Point C
Hinkley Point nuclear plant delayed, says EDF Roger Harrabin; BBC; 4 Sep 2015
The French energy company said Hinkley Point C in Somerset will not start generating power in 2023 as planned. EDF says it will provide a revised timetable for the £24.5bn plant when it takes a final investment decision on the project. The news comes as a report for the OECD says that the UK's projected nuclear costs are the highest in the world.
New Hinkley Point nuclear power station may be further delayed Terry Macalister; Guardian; 3 Sep 2015
France’s EDF gives no definite schedule for construction of £24.5bn plant, which still awaits firm’s final investment decision. The news came as the French energy group said a more advanced sister project at Flamanville in Normandy would now not start operating until 2018, at a cost of €10bn (£7.3bn). It was originally slated to open in 2005 and cost €3bn.
We are pro-nuclear, but Hinkley C must be scrapped George Monbiot, Mark Lynas, and Chris Goodall; Guardian; 18 Sep 2015
If the Hinkley C nuclear project fails, it could mean that taxpayers had to cover £17bn of the £24.5bn construction cost.
Pro-nuclear environmentalists in call to scrap Hinkley C plans Terry Macalister; Guardian; 18 Sep 2015
Three leading environmentalists who broke ranks to give their support to a new generation of nuclear plants have now urged the government to scrap plans for Hinkley Point C. George Monbiot, Mark Lynas and Chris Goodall say the soaring cost and delays to the Hinkley project leave ministers with no option but to pour the estimated £24.5bn worth of investment into other low-carbon technologies.
The quality of Hinkley Point's enemies suggests it's an idiotic venture Damian Carrington; Guardian; 21 Sep 2015
- well-known energy analyst Peter Atherton ... said the deal is “one of the worst ever signed by a British government”, who are buying the “most expensive conventional power station in the world”.
- HSBC agree, noting the high costs and vast delays to EDF’s two other new plants in France and Finland: “We see ample reason for the UK government to delay or cancel the project.”
- Financial Times ... costs are far too high, more expensive than every kind of renewable energy, bar offshore wind. “Backing out might upset the French and embarrass the government. But a wish to spare ministerial blushes is no excuse for saddling the country with costs it cannot afford,” concluded the FT editorial.
- Lord Turnbull, who knows his way around Whitehall, having led the civil service, recently told Osborne the Hinkley deal was a “bottomless pit and a big white elephant”.
- Lord Howell is a former Conservative energy secretary, a fracking fan and also happens to be Osborne’s father-in-law. He warned the reactor design planned for Hinkley C has never “been completed successfully” and that it was “one of the worst deals ever” for British consumers and industry. Paul Massara, boss of RWE NPower, one of the UK’s Big Six, said: “We will look back and think that nuclear was a expensive mistake.”
- George Monbiot, Mark Lynas, and Chris Goodall declared: “Hinkley C bears all the distinguishing features of a white elephant: overpriced, overcomplicated and overdue.
Hinkley Point C to power six million UK homes Department of Energy & Climate Change; 21 Oct 2015
EDF and its Chinese partner China General Nuclear Corporation (CGN) have committed to Hinkley Point C during this week’s landmark China State Visit, confirming the first new nuclear power station in the UK for a generation.
The companies have signed a Strategic Investment Agreement which marks a critical moment for the site in Somerset. EDF has confirmed it will take a 66.5 per cent stake in Hinkley with CGN taking 33.5 per cent, demonstrating a clear commitment from both parties.
The Government and EDF have finalised the detail of the Contract for Difference which offers increased price certainty for the electricity produced from Hinkley Point C. The Funded Decommissioning Programme has been approved and will make sure that the tax payer doesn’t pick up the cost of decommissioning the plant in the future.
Hinkley: Point of no return for nuclear project as UK prepares to sign subsidy deal Emily Gosden; Daily Telegraph; 27 Jul 2016
A legally-binding contract committing UK consumers to subsidise Britain’s first new nuclear plant in a generation is expected to be signed on Friday, after the board of EDF meets to approve the £18bn project on Thursday.
The decision will pave the way for Greg Clark, the new business and energy secretary, to sign a 35-year subsidy deal, marking the point of no return for the UK on the highly controversial project that could eventually provide 7pc of the country’s electricity.
Hinkley Point C nuclear project expected to get go-ahead next week Terry Macalister; Guardian; 22 Jul 2016
EDF likely to greenlight construction of power plant in Somerset, providing boost to UK government amid Brexit fallout.
Nuclear Options Euan Mearns; Energy Matters; 4 Aug 2016
This post provides an overview of the 6 main reactor designs that are vying for the global market today focussing on the large, >1 GW Generation III reactors. While the post focusses on the UK, the part on generic designs should be of interest to all readers
The Hinkley Point C Pantomime Euan Mearns; Energy Matters; 29 Jul 2016
The board of EDF, the French State controlled owner of UK and French power stations and vendor of the new Gen 3 EPR (European Pressurised Water Reactor) voted narrowly to approve the Hinkley C reactor project on Thursday (by 10 votes to 7). Contracts were supposed to be signed today (Friday). But then in an unexpected move the UK Government has called the project in for re-evaluation. Clearly, they did not expect the French to proceed. What on Earth is going on?
U.K. Approves EDF’s £18 Billion Hinkley Point Nuclear Project Francois De Beaupuy; Bloomberg; 14 Sept 2016
expert reaction to news that the UK government has approved plans for Hinkley C nuclear power plant Science Media Centre; 16 Sept 2016
Hinkley Point boosted by Chinese nuclear progress KATHERINE SMALE; New Civil Engineer; 2 JUL 2018
The reactor technology which will be used in the controversial Hinkley Point C nuclear power plant has been connected to the grid and has started generating power in China. The European pressurised reactor (EPR) now in use in China is the world’s first to be connected to a power grid and to generate electricity. The new reactor is the same type as the one to be used at Hinkley Point C in Somerset.
Hinkley Point C hits its biggest milestone yet EDF Energy; 28 Jun 2019
Hinkley Point C has hit its biggest milestone yet on schedule. The completion of the base for the first reactor, known as “J-zero”, means that the construction of the nuclear buildings above ground can now begin in earnest.
Geological and Hydrogeological Review Hinkley Point C power station Haskoning UK Ltd; Jan 2009
- Site slopes 27m above Ordinance Datum to 15m AOD
Comparing the cost of electricity generation from Hinkley Point C with solar and flexibility mechanisms Solar Trade Association; Oct 2015
Hinkley Point C or solar; which is cheaper? Roger Andrews; Energy Matters; 11 Jan 2016
- 7TWh for just solar
- 3.5TWh with equal generation by wind -- still more than 100 times current installed UK energy storage capacity and the equivalent of roughly four hundred more Dinorwigs
Hinkley Point C contract terms World Nuclear News; 8 Oct 2014
If wholesale prices rise above an agreed 'strike price', payments from the generator will be returned to consumers. If they fall below this price, the generator will receive a top-up payment. Customers pay nothing until the power plant is operational. The strike price for Hinkley Point C remains set at £92.50/MWh or £89.50/MWh if the planned new nuclear power plant at Sizewell goes ahead. These figures are in 2012 prices. If it does go ahead, there will be a payment from Sizewell C to Hinkley Point C equivalent to £3/MWh upon the final investment decision being taken with respect to Sizewell C reflecting the fact that the first-of-a-kind costs of EPR reactors are shared across the Hinkley Point C and Sizewell C sites. The Hinkley Point C contract will last for 35 years, the strike price is fully indexed to inflation through the Consumer Price Index and the project will be protected from certain changes in law. As proposed in October 2013, the CfD already contained a series of 'gainshare' mechanisms in which customers would benefit if the project construction costs or equity returns were more favourable than forecast.
... for the first time, the eventual decommissioning and waste management costs associated with Hinkley Point C will be paid by the generator at the time of generation. The cost of this Funded Decommissioning Program has already been taken into account in the strike price.
Final contracts signed for Hinkley Point C project World Nuclear News; 29 Sep 2016
The documents were signed by UK Secretary of State for Business, Energy and Industrial Strategy Greg Clark, EDF chairman and CEO Jean-Bernard Levy and China General Nuclear (CGN) chairman He Yu. Attending the ceremony were French foreign minister Jean-Marc Ayrault and National Energy Administration of China administrator Nur Bektri. The agreements signed included the Contract for Difference (CfD) and the Secretary of State Investor Agreement. The CfD - the ratepayer-backed guaranteed price for electricity generated by Hinkley Point C - was originally agreed in October 2013 and guarantees the plant will get £92.50 per MWh for for its first 35 years of operation.
The Department for Business, Energy and Industrial Strategy’s deal for Hinkley Point C has locked consumers into a risky and expensive project with uncertain strategic and economic benefits, according to today’s report from the National Audit Office.
It is a widely shared view that the UK needs some new nuclear power to ensure the lowest-cost route to decarbonisation. But when the Department finalised the deal in 2016 its value-for- money tests showed the economic case for Hinkley Point C was marginal and subject to significant uncertainty. Less favourable, but reasonable, assumptions about future fossil fuel prices, renewables costs and follow on nuclear projects would have meant the deal was not value for money according to the Department’s tests.
Today’s report finds that the Department has not sufficiently considered the costs and risks of its deal for consumers. It only considered the impact on bills up to 2030, which does not take account of the fact that consumers are locked into paying for Hinkley Point C long afterwards. It also did not conclude whether the forecast top-up payments are affordable.
The government’s case for the project has weakened since it agreed key commercial terms on the deal in 2013. Delays have pushed back the nuclear power plant’s construction, and the expected cost of top-up payments under the Hinkley Point C’s contract for difference has increased from £6 billion to £30 billion. But the Department’s capacity to take alternative approaches to the deal were limited after it had agreed terms. The government has increasingly emphasised Hinkley Point C’s unquantified strategic benefits, but it has little control over these and no plan yet in place to realise them.
Today’s NAO report finds that the Department aligned its approach to the Hinkley Point C deal with its support for other low-carbon technologies. This means the private sector bears the risk that construction costs overrun. The NAO’s analysis suggests alternative approaches could have reduced the total project cost. The Department did not assess whether this would have resulted in better value for money for electricity consumers.
There remains the risk that NNB Generation Company Limited (NNBG) will seek further financial support from the government, notwithstanding the contractual terms of the deal. The reactor design for HPC is unproven and other projects that incorporate it are experiencing difficulties. Furthermore, EDF’s financial position has weakened since 2013. The Department plans to develop and maintain alternative ways of ensuring energy security to mitigate the risk of needing to provide additional support for Hinkley Point C.
It will not be known for decades whether Hinkley Point C will be value for money. This will depend on whether the current contractual arrangements endure, along with external factors – in particular, future fossil fuel prices, the costs of alternative low-carbon generation, and developments in energy technology and the wider electricity system.
The Department has, however, negotiated a deal that means some terms can be adjusted in consumers’ favour in future. It must now ensure it has the right oversight arrangements in place to manage the contract in a way that maximises Hinkley Point C’s value for consumers and taxpayers.
Hinkley Point: the ‘dreadful deal’ behind the world’s most expensive power plant Holly Watt; The Guardian; 21 Dec 2017
Building Britain’s first new nuclear reactor since 1995 will cost twice as much as the 2012 Olympics – and by the time it is finished, nuclear power could be a thing of the past. How could the government strike such a bad deal?
The Hinkley Point C case: is nuclear energy expensive? Joris van Dorp; Medium; 23 Dec 2019
Discussions about the application of nuclear energy as part of the solution to the climate/energy challenge often falter on the perceived high costs of nuclear energy.
Dutch talk show host Jeroen Pauw casually said that it is “terribly expensive” in his broadcast on 31 October and Pieter Boot, energy expert at the Netherlands Environmental Assessment Agency, sanctioned the exclusion of nuclear energy from the klimaatakkoord (The Dutch national climate policy law) with the words“Nuclear energy has become too expensive” .
Like many nuclear opponents, Boot points to the Hinkley Point C project in the United Kingdom, where two nuclear power plants are being built whose costs are higher than initially estimated.
In this article we will take a closer look at Hinkley Point C and the question of whether this project is really as expensive as is claimed. First, we discuss the nature and origin of this type of nuclear power plant, then the economy of the project and finally the future of nuclear energy in Europe.
What the Brits are building
Two nuclear reactors of the type “EPR” (European Pressurized Reactor) are currently being built at Hinkley Point. The design was developed by a consortium of the French company Framatome and the German Siemens. These two reactors are the first part of a national plan, initiated in 2008, to build 16,000 MW of new nuclear power plants in England to support the UK energy transition to a clean, reliable and affordable energy system, with drastically lower CO2 emissions.
Compared to earlier designs, the EPR includes new features to meet the stringent safety requirements of the German government in particular. For example, there is a double concrete building shell to protect against potential aircraft impact, and there are no fewer than four different types of independent cooling systems provided. These cooling systems are there to prevent accidental damage to the reactor core (and therefore the risk of radioactive material escaping into the environment) in case of a natural disaster, equipment failure or human error.
Despite this technological complexity, EPR was intended to be more economical than its predecessors for the following reasons:
- a higher electricity output and reliability, with fewer unplanned interruptions;
- a large and fast control range of the power supplied, to provide extended load following capability and power quality services;
- lower operating and maintenance costs, and a longer economic life, allowing the plant to continue to operate after the end of the design life, up to at least 80 years;
- and extensive possibilities to use different types of nuclear fuels, including combinations of enriched and unenriched uranium, thorium, plutonium and “MOX”, anticipating the closing of the fuel cycle in the course of the 21st century. After all, it is intended that “nuclear waste” will be re-used as fuel in both existing thermal reactors, such as the EPR, and in future fast reactors, resulting in more energy being extracted from the mined uranium (up to a hundred times more) while leaving less “nuclear waste” that also decays faster. In fact, current French reactors already partially run on recycled MOX fuel.
The costs of Hinkley Point C
After seven years of negotiations and revisions, the British government decided in 2016 to execute the Hinkley Point C project (hereinafterHPC). The costs were estimated at around € 20 billion. For that price, French and British companies would take care of the construction, including the development of the necessary industrial chains and trained staff in the UK after thirty years of nuclear industrial stagnation in the country.
The cost estimate has since been adjusted up to 25 billion euros. This is considerably more than the original estimates made during the design of the EPR at the turn of the century. The construction of two EPR’s was estimated at the time to be at most 7 billion euros (see slide 51).
Let us look briefly at the causes of the cost increase at HPC. These include:
- the departure of Siemens from the EPR consortium, as a result of which important components and knowhow had to be re-sourced;
- the series of new safety investigations and requirements following the accident at the Fukushima-Daiichi nuclear power plant in 2011 following the Great Tohoku Earthquake and tsunami;
- the decision of various European governments (including the Dutch one) despite the desired transition to a zero carbon energy supply, not to build new nuclear power plants after all, but rather to construct new coal, gas and bio-energy power plants;
- the uncertainty arising from the systematic exclusion of nuclear energy from various international treaties from bodies such as the United Nations (see for example the Clean Development Mechanism of the Kyoto Protocol) and from support mechanisms in the context of climate policy and sustainable development. For example, the World Bank provides loans to developing countries for fossil fuels, but not for nuclear energy, and while European countries have strong subsidies and mandates for green energy, nuclear energy is taxed extra;
- the demise of the European nuclear industry due to empty order books, rising debts and bankruptcies, and the outflow of specialized personnel towards pensions, other sectors or nuclear projects outside of Europe.
To build HPC despite the aforementioned obstacles, it was agreed that the UK government would guarantee a CfD power price of 11.3 €cents/ kWh (in current prices) for 35 years adjusted for inflation. The project would be funded entirely by EDF and its investors — there would be no money provided up-front by the UK government.
This guaranteed price, or strike price, as it is known, is much higher than the original estimate of the French electricity company EDF, namely 5.5 cents / kWh (at current prices). Moreover, it is higher than the current price of electricity on the wholesale market, which is only 5 cents / kWh. In that regard, we might conclude that HPC indeed appears to be “terribly expensive.”
And what are the benefits?
To find out whether HPC at 25 billion euros really is expensive, we have to compare the costs with the benefits. HPC consists of two EPRs with a combined net capacity of 3200 Megawatts. On an annual basis they will together supply 26 billion kWh to the British electricity grid. That is enough power for almost 9 million households. (In the Netherlands, HPC could therefore provide all households with CO2-free electricity.) HPC has a design life of 60 years, with the possibility of extending it to at least 80 years. HPC will supply more than 1500 billion kWh of electricity for 60 years. This yields a construction cost per kWh of 1.6 cents.
The operating costs after commissioning of the plant are estimated at between 1.5 and 2.5 cents / kWh. This includes all running costs during operation, including personnel costs, fuel costs, permits, insurance, maintenance, taxes and premiums to the decommissioning fund and the processing and, importantly, the ultimate disposal of nuclear waste.
The construction costs and the operating costs together are therefore at most 4.1 cents / kWh. That is by no means the CfD strike price of 11.3 cent that the owner of HPC will get. What happens to the 7.2 cent / kWh difference? Well, this will be paid as a premium (interest, dividend or other forms of profit distribution) to the investors and lenders of HPC, namely the (pension) funds and (state) participations of France and China who are the owners of the project. (The UK government had prohibited itself from participating in nuclear energy investment for antinuclear political reasons, though that policy appears to have softened in recent years, as noted in the NAO report on HPC, which we'll get to below.)
If the price of 11.3 cents continues to be realized even after the expiry of the 35-year CfD, the owners will earn another 100 billion euros (7.2 cents x 1500 billion kWh) over the 60-year lifetime of HPC, in addition to the recovery of the original investment of € 25 billion and the 60 year running costs. That 100 billion is the compensation for the risk that investors take to finance and operate HPC for 60 years.
Expensive, and cheap?
So is HPC “terribly expensive”? That depends on the perspective one takes. From the investor standpoint, one could say that HPC is indeed expensive when compared with other recent nuclear projects. After all, HPC costs almost 8 billion euros per GigaWatt, while in China, Russia and South Korea a comparable project costs less than 3 billion per GW.
Yet, despite the relatively high construction cost, the total costs per kWh for investors are still low. That 4.1 cents / kWh is comparable to the costs of a fossil power plant and much lower than the costs of the cheapest equivalent (stable, independent) combination of solar panels and wind turbines plus storage with batteries and hydrogen, the costs of which can run up to 50 cent / kWh . When compared to other options — particularly other stable zero-carbon options — HPC is “terribly cheap”.
Even by assuming “radical transformation” of the energy system to 100% renewables under very favorable assumptions (such as continuous cost reductions of wind turbines, solar panels and storage systems, the construction of an international electricity network on a continental scale, and the availability of cheap land surface for all equipment), opponents of nuclear energy anticipate a stable supply cost not below 5 cents / kWh in 2050.
As well as the investor’s perspective, what about that of consumers and of society as a whole? For electricity consumers — all those households, institutions and companies that receive an energy bill every month — the price of HPC is relatively highcomparable to the cost of solar rooftop electricity (which costs at least 11 cents / kWh, but which appears cheap to owners because it exempts them from paying high retail energy taxes and surcharges worth up to 14 cents / kWh). But the societal cost of HPC is low because the costs that society experiences are exclusively the costs for building and operating the plant, not the interest and dividends, because those are returned to society.
The HPC owners will earn a lot of money, although they have to wait a long time for it. These owners include pension funds and state holdings. Most of the money that the British consumers will pay for HPC electricity — about two thirds — goes directly back to society in the form of pensions, public spending and so on. Only a third goes to actually building, operating, fueling and eventually decommissioning the HPC nuclear power plant (see the pie chart below).
Expensive for consumers, but cheap for society that was the gist of the conclusion of the UK National Audit Office (NAO). In its audit of the HPC project, the NAO concluded that up to six (!) HPC's could have been built for the 11 cents / kWh of the HPC CfD, if the British state had financed the project itself with cheap government bonds.
The NAO writes“If we assume the government financed the project and required a 2% return (nominal, equivalent to its borrowing cost), construction costs could overrun by between 400% and 600% to the total cost of the HPC deal.”
This 400 to 600 percent corresponds well with the difference between the actual building cost share estimated in this article and the interest / dividend share of the HPC price, namely 1.6 cents / kWh and 7.2 cents / kWh respectively on the total of the guaranteed price of 11.3 cents / kWh.