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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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Why Britain’s Bespoke Nuclear Program Won’t Work

Why Britain’s Bespoke Nuclear Program Won’t Work

To: David Cameron, PM

From: Unofficial Independent Energy Maven Advisory Policy Group (UIEMAPG)
Re: UK Nuclear Policy
Subject: Mr Cameron, Please Consider a Plan B, Not Just Hinckley Point C

In a speech last November titled “A New Direction for a UK Energy Policy”, your estimable new Department of Energy and Environmental Change Secretary, Amber Rudd, outlined her goals for Britain's energy future. With respect to electric power generation she made four key points.

First, coal fired power stations lacking environmental abatement would be phased out by 2030. More natural gas plants, like the Carrington unit, would be built. Needless to say the government expressed its commitment to "renewables" in preparation for a lower carbon emitting world. And lastly about mid way through her published remarks she spoke of the government's desire for an expanded nuclear fleet.

There has been much attention lately focused on efforts to get the Hinckley Point C nuclear project underway. The final investment decision was expected more than a month ago. EDF, the French utility that purchased most of Britain's nuclear infrastructure in 2009, has apparently been agonizing over this decision. EDF’s finance chief reportedly quit in opposition to the proposed plant. It appears that France will have to pump more money into EDF so that it can continue its efforts. And the pink paper reports that EDF’s engineers want a delay and a rework of the specs. Related: Oil Falls As Saudi Arabia Questions Freeze Deal

We realize that you have invested much political capital in Hinkley Point and may be preoccupied fighting the Brexit campaign, but we urge you to take time out to reconsider your nuclear strategy.

There are three other places where the AREVA designed EPR type reactor is being built.

• In Flamanville, France the project is at least five years behind schedule and costs have tripled.
• The Olkiluoto EPR in Finland is almost a decade behind schedule and two times over budget.
• Two Chinese EPRs, the Tianshin units in Guangdong, are believed to be somewhat behind and over budget.

This is not a track record that inspires confidence.

But regardless of the Hinckley Point C decision, a significant part of Britain's energy planning relies on a total of thirteen additional nuclear power stations.

Four groups have purchased sites where nuclear plants may be built. In addition to the Hinckley Point in Somerset, EDF also owns the Sizewell site where it may place two more EPRs, Sizewell C units 1 & 2. These would also be the relatively large 1670 MW units although no in service date is being publicly discussed.

Horizon Nuclear Power, formerly a joint venture between German energy companies, RWE and E.ON, is now owned entirely by Hitachi (Japan), which presently plans to build four ABWR type reactors at two sites, one at Wylfa in Wales and the other at Oldbury. There are several ABWRs operating presently in Japan and another planned for Visaginas in Lithuania. Horizon has filed for a General Design Assessment from British regulators, the first in a multi-step approval process. In service dates for these four units are presently described as being in the late 2020's. Related: Crude Crushed As Production Freeze Hopes Thaw

NuGeneration, also a former joint venture between Iberdrola and GDF-Suez, is now majority owned by Toshiba (Japan). NuGeneration purchased land at the Sellafield site and promptly renamed it Moorside, an excellent move considering the site’s history. It plans to construct three Westinghouse AP 1000 reactors rated at 1135 MWs which might go into service in the late 2020s. NuGeneration said it would make a final investment decision in 2018, although we would caution that Toshiba’s accounting issues and recent losses could impact the timing and investment decision.

And lastly, EDF's Chinese partner in Hinckley Point C, China General Nuclear (CGN), has purchased the Bradwell site outside of London. CGN, which has made no secret of its desire to enter the European market, has plans to construct two 1150 MW nuclear units of its own design, the Hualong One. EDF is also a minority owner in this venture with a 33.5 percent stake.

Several observations are in order.

First, the principal reason that the French and later the South Koreans could continually lower construction costs of their nuclear fleets is that they picked one design, standardized it and built lots of them. What the UK is proposing is almost bespoke nuclear construction with six sites and four different plant designs one of which, EDF's, is already proving “difficult". Think of it this way: more people can be clothed, per pound spent, at Marks & Spencer than at Savile Row. Well, maybe the cuts are different, but not the electricity. Related: Saudi Policy Tied to Weak Economy

In her address, Secretary Rudd extolled the virtues of privatization. Somehow she neglected to mention that these proposed nuclear units will not be built unless heavily subsidized by the government and the consumer. For example in 2013 the UK government announced a £10 billion loan guarantee for Hinckley Point C under the Guarantee Scheme for infrastructure financing. In addition the government agreed to a fixed price of £92.50 per MWhr for the plant's output a price roughly twice the market price for electricity. And even with both loan guarantees and a generous fixed price contract, indexed to the cost of living, the project is having difficulty getting traction. Maybe the capital markets are telling us something.

Our point here is simple. The Cameron government, despite its supposed faith in free markets, finds that it must provide extensive almost extraordinary guarantees for these nuclear projects. This will add to the government's debt burden and commit electricity consumers to decades of high prices. For these and other reasons the government should be working on a Plan B.

By William Tilles and Leonard Hyman

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  • robert collins on April 04 2016 said:
    Everything you say is right, but the real question is, without nuclear what is the alternative? Renewables could be increased by a wide margin and electricity saving will help.The fact remains however that we face two problems, not only do we have to eliminate coal fuelled electricity generation but also we have to replace the power lost as our ageing fleet of nuclear reactors finally come off-line. Its impossible to see what will fill this massive gap.
    Relying on natural gas puts us back in the situation where we depend on a fuel source that ultimately is finite and will become progressively more expensive (unless of course you believe in the fairy story of abundant supplies being domestically recovered through fracking). Renewables do not make up for the loss of baseline power provided by coal and nuclear.
    Undoubtedly new nuclear is a dead duck- look at te current situation in France and Finland, we are never going to be able to bring enough capacity on-line in time,especially as every other European country with nuclear is facing the same problem. This is a train crash of mega proportions heading our way but governments seem incapable of grappling with it.

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