The appeal of nuclear power in the Western world has dropped significantly after the disaster with Japan's Fukushima power plant. It fueled the skepticism of taxpayers and the willingness of politicians to approve new projects that cost years if not decades to finish and leave behind a radioactive legacy that remains a hazard for thousands of years. The UK is one of the few exceptions where a nuclear power plant is under construction at, Hinkley Point C, and a second one, Sizewell C, is awaiting approval. French state-owned EDF is the company behind the revival of the nuclear industry on the island. Although proponents have touted the necessity of carbon-free technologies to produce electricity, Hinkley Point C’s eye-watering price tag of $27.8bn for 3.2 GW is a reason for concern. Furthermore, research has shown that the typical nuclear power plant built since the 1970s had a cost overrun of 241 percent.
A significant part of the costs are a consequence of the extended security measures which have increased over the years. During the extended construction time, IDC (interest during construction) also added up. All in all, this has created a financial burden that needs to be paid back during the lifecycle of the power plant which obviously goes at the expense of profitability.
Although the British government and EDF agreed on a strike price of £92.50/MWh for 30 years, critics warn that alternatives are much cheaper. Especially the dramatic drop in costs of wind and solar and the expected continuation of this trend, fuels criticism towards more expensive, and some would argue dangerous, options such as nuclear.
EDF, therefore, has been looking for ways to increase profitability and improve the reputation of its projects in the UK. Hydrogen is seen as an opportunity to increase the value of the electricity produced in the nuclear power plant. The French company intends to use some of the power from the second and equally expensive plant, Sizewell C, for electrolysis. The modular nature of the electrolyzers means that they could also be used for Hinkley Point C.
EDF points at the advantage nuclear has over solar and wind which are intermittent. Nuclear power plants can run constantly and, therefore, are reliable sources. Also, renewables can have a destabilizing effect on wholesale prices. EDF intends to use the excess power of its facility during periods of overproduction in the system to produce hydrogen through electrolysis.
However, analysts are warning that the economics of the proposal don’t add up. The IEA’s ‘the future of hydrogen’ report in 2019 shows that the levelized cost of hydrogen (LCOH) is strongly dependent on the number of hours it runs. Hydrogen could be produced with LCOH of more than $4 per kg if the electrolyzer would be running for 500 hours/year. That would drop to $0.50/kg if it was used for 8,000 hours/year.
According to Michael Liebreich, founder of BloombergNEF, “the approach needs to be exactly the opposite: have nuclear running 24/7 supplying processes that require 24/7 power. The only time that you change that is when there’s no wind or solar: then you dial down the processes and switch the nuclear power to keeping the lights on.”
Furthermore, the cost of offshore wind power has already decreased significantly over the past decade. The UK's latest wind farms have agreed on strike prices of around £40/MWh. And this price is expected to decrease even further in the next decades. However, the intermittent nature of renewables does increase the overall costs to run the power system through additional flexibility and infrastructure needs.
Nevertheless, EDF is optimistic about its plans. The French company intends to install an experimental 2 MW electrolyzer that will produce 800 kg of hydrogen per day. It could increase to 550 MW by 2035 with a daily production of 220,000 kg. EDF expects LCOH of around €2.44/kg (or £1.89/kg) over a 20-year project cycle depending on power price and falling technology costs.
By Vanand Meliksetian for Oilprice.com
More Top Reads From Oilprice.com:
- U.S. Rig Count Rises To 16-Month High
- Where Does Wall Street Think Oil Is Heading?
- U.S. Natural Gas Dominance May Be Coming To An End