A French nuclear farce11 June 2016
Both the UK and China need to invest in nuclear power, and both for the same pivotal reasons of reduced fossil fuel emissions and increased base load supply reliability to meet demand growth. Yet while China committed to more than double its nuclear capacity by 2020 under its latest Five Year Plan the UK’s nuclear ambitions are being held hostage by the corporate-political machinations of state-owned EDF.
Both the UK and China need to invest in nuclear power, and both for the same pivotal reasons of reduced fossil fuel emissions and increased base load supply reliability to meet demand growth. Yet while China committed to more than double its nuclear capacity by 2020 under its latest Five Year Plan the UK's nuclear ambitions are being held hostage by the corporate-political machinations of state-owned EDF.
EDF's nuclear build aspirations have become a French farce of which Moliere would be proud. The first act of the farce involves the technology - the European Pressurised Reactor (EPR) using Generation III+ technology. That the EPR being built at Olkiluoto 3 in Finland is almost 10 years behind schedule and three times over budget should be a cautionary tale for other countries looking to invest in EPR technology. But this is not a one-off EPR problem. The EPR being constructed in Flamanville, in Normandy, has had its scheduled operating date put back again, to 2017, and will be at least six years behind schedule if the latest revised completion date is met.
In light of the clear problems presented by the EPR technology, the French company Areva that is supplying the technology, and by EDF that is managing the nuclear build, questions have to be asked of the UK government's faith in EDF to deliver a new nuclear future for the country. But nonetheless we are now in the second act of this farce.
The problem for the UK is that the government wanted nuclear power to be privately developed, and having allowed EDF to buy up swathes of the UK electricity market and the current UK nuclear plants it immediately became an unwitting nuclear hostage to the French government, which owns around 85% of EDF.
The UK government has bent over backwards to make the EDF Hinkley Point project work; it has presented an extremely generous contract-for-difference strike price of £92.50/MWh and successfully defended this generosity against European Commission concerns that this constitutes unfair state aid. Yet still EDF prevaricates on a final investment decision.
To reduce its financial exposure on the project EDF agreed a deal with China General Nuclear Power in October 2015 under which CGN would cover a third of the costs in return for a 33.5% stake in the project. Yet EDF can't find the cash for the remaining 66.5% stake with the development cost of Hinkley Point now exceeding the market value of EDF.
As this French farce closed its second act the chief financial officer of EDF resigned (in March) over the project, and the French energy minister called for the project to be delayed. Meanwhile the French economy minister called the project "important for France, the nuclear sector and EDF" when addressing a UK audience while at the same time reassuring the increasingly anti-nuclear domestic market that no decision has been made whether to proceed.
While we await the opening scene in the third, and final, act of this engrossing farce we should use the intermission to study a more successful approach to nuclear development - that of China.
First the facts. China currently has 32 operational nuclear reactors with 22 under construction. Beijing plans a threefold increase in nuclear capacity to 58 GW by 2020-21 and then above 150 GW by 2030. This rapid nuclear development is being supported by investment in uranium stockpiles and self-sufficiency in reactor design and construction. As with other manufacturing areas China has made full use of western nuclear technology and then adapted and improved it. Consequently, some of the planned reactors will use the world's most advanced nuclear technology.
China will approve between six and eight reactors each year from 2016 through 2020, with the National Energy Administration, China's energy regulator, claiming the country can manufacture eight full sets of nuclear equipment each year. Compare this with the UK. It took three years to approve the nuclear design, a further year to approve site and operator specific licences and, if Hinkley Point is commissioned in 2024 as per the latest schedule, it will have taken the UK 16 years since the 2009 nuclear site nominations to construct just one reactor.
This approval process in the UK has more to do with lengthy consultation processes than efficient due diligence. China has not compromised nuclear safety for development efficiency, but then Beijing is not subject to the trials and tribulations of democracy. There are no public consultations on new technology, just a single-minded efficiency that some would call ruthless in developing technologies that the government believes are in the country's best interest.
Clearly the UK's development of new nuclear capacity has suffered from its open and transparent democratic approach to licensing new technology, but this is not the reason the UK's nuclear development is fast becoming a Shakespearean tragedy born out of a French farce. The root cause of this nuclear farce can be traced back to the development of a competitive electricity market that was not reciprocated within Europe that left the UK electricity market effectively owned by French and German utilities that benefited from UK market competition while keeping their domestic markets closed to reciprocal investment.
By allowing [unreciprocated] foreign investment in the UK electricity market ... the UK has become increasingly hostage to the investment decisions of foreign utilities that place domestic protectionism over foreign assets.
By allowing foreign investment in the UK electricity market without benefiting from reciprocal investment in the EU markets the UK has become increasingly hostage to the investment decisions of foreign utilities that place domestic protectionism over foreign assets. The reason EDF can't, or won't, commit to Hinkley Point is due to the mess in its domestic market and its abject failure in successfully managing its Flamanville project, while its French partner, Areva, has been similarly incompetent in both the Flamanville and Olkilouto projects.
That the UK government still has confidence in EDF and Areva is deeply concerning. Given the nuclear strides made by China in terms of technology and construction, the lack of UK restrictions on foreign ownership and Westminster's heartfelt wooing of Chinese investment, then surely it is time to say au revoir to Paris and ni hao to Beijing.
Jeremy Wilcox is managing director of the Energy Partnership, an independent Thailand-based energy and environment consulting firm.