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Nuclear Prospects

By Dave Elliott

‘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’. So said the National Audit Office in its recent review of UK nuclear policy: 

It did, however, say that ‘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’. That’s an odd view. As the NAO admitted, nuclear is inflexible and cannot balance variable renewables, and the ‘security of supply’ argument may not be as strong as is sometimes claimed.

The immediate issue in the UK is the proposed 3.2 GW Hinkley nuclear plant to be built by EDF with some investment from China. The European Pressurised-Water Reactor (EPR) it plans to use has not so far fared well – the EDF/Areva projects in Finland and France are many years behind schedule and vastly over budget, with more delays likely. And the economics of the next one, the Hinkley double EPR, seem to be going from bad to worse. The initial estimated cost was around £18bn. However, that has now been raised to £21bn, with extra contingency estimates. There would also be capital borrowing/financing costs that could push it up more – the EU once put the total at £34bn with debt financing, but it may be £24bn (£27bn with the new extras) under the current mostly foreign equity finance deal:

With costs rising, there have been many calls for the project to be abandoned – even from those with otherwise pro-nuclear views. Indeed, Hinkley seems to have few remaining friends, apart from the UK and French governments, and (after some resignations) EDF senior management. The French desperately need an export success, while the UK clearly relishes inward Chinese investment, even if the cost to consumers will be high. However, the security of (energy) supply argument, sometimes used when the economics looks dubious, does not seem to hold up. Prof. Jim Skea has argued: ‘I don’t think security of supply is necessarily a worry that’s caused by Hinkley Point. It could be filled in by renewable energy and renewables projects have a three- or four-year planning timeline to get them through, whereas a nuclear station it’s a decade at least, on experience. So there are other technologies that could come and fill the gap more quickly’:

With repeated delays in making a final investment decision (the plant was at one time expected to be running by ‘Christmas 2017’), there have been many calls for a ‘Plan B’ – and as Skea indicates there are renewable options, some of which could be speeded up. Several scenarios along these lines have been produced, most of which do not include any new nuclear plants: With on-shore wind and solar projects now going ahead at much lower CfD strike prices than that promised for Hinkley, if and when it started up in the mid- to late 2020s, the alternative scenarios are beginning to look very attractive, even when the extra cost of grid balancing to deal with the variability of wind and solar is included. And crucially, offshore wind projects are now set to get a lower strike price from 2026 (£85/MWh) than Hinkley would get if it ever starts up – £92.5/MWh. With only 38% of the UK public now supporting nuclear power, and 81% backing renewables, it seems like a rethink is called for:

The nuclear lobby sees it all differently. Their ‘Plan B’ would be to support new allegedly cheaper nuclear projects. There are already some candidates, including Hitachi’s Advanced Boiling Water Reactor design proposed for Wylfa and Oldbury and the Westinghouse AP 1000 system proposed for Moorside alongside Sellafield. Some see them as likely to be better than the EPR, though there have been problems with the ABWRs in Japan (all of which are still closed) and no AP1000s have yet been built. Neither design has so far obtained design certification status for use in the UK – although both have applied and the review process is underway:  

However, if the Hinkley project collapses, the prospects for these new projects may not look too good – they would have to negotiate CfD strike prices and funding in the new post-Brexit climate may be tighter: The Hinkley deal was also linked with possible Chinese involvement with a future plant at Bradwell, using Chinese technology. It’s hard to know if that would survive the collapse of the Hinkley project, or indeed if EDF would be able to continue with its plans for EPRs at Sizewell.  One way or another the prospects for the 16GW of new nuclear that the government envisages by 2030 seem uncertain, much less the 18GW referred to by Andrea Leadsom, when still a DECC Minister:

There are other, longer-term, nuclear options, such as Small Modular Reactors. In theory,  being quicker to build and modular, they might be cheaper than large GW plants of the current type. But SMRs are some years off – the focus of R&D projects and speculation. One idea is to locate them in or near cities so that the waste heat could be used for district heating networks – that would improve their economics. But would everyone be happy with having mini nukes in their backyard? There are obviously safety and security issues, as well as many technical and economic unknowns, especially if some of the more exotic ideas for using thorium and molten fluoride salt fast neutron breeders are followed up: It all seems rather a long shot, with the UK only backing small R&D/assessment programmes at present.

What about the rest of the world? The UK is one of a few countries in the West still pushing nuclear hard. Most other western European countries either have no nuclear or no plans for expansion – Finland notably apart. Most are pushing renewables very hard. Sweden has recently decided to replace its old plants, but also, confusingly, to go for 100% renewables – it’s at over 50% (of total energy) already. France has set a cap on nuclear, in effect cutting it back by around 20% (of electricity), so that old plants will have to be retired to make way for any new ones. Germany has closed eight of it plants and is to shut the remaining nine by 2022, with no new ones planned. Renewables are booming. The US programme is foundering with old plants being closed early due to competition from gas and renewables and few new ones going ahead. By contrast, Russia is keen to expand – and to export nuclear technology, while China and India have significant nuclear programmes, although their renewables programmes are larger: renewables output is already 10 times that of nuclear in China.

The bottom line is that, with old nuclear plants closing around the world and all but two of Japan’s plants closed, the global nuclear contribution has stayed more or less static at around 11% of world electricity, while renewables are accelerating ahead, supplying 24% of global electricity:

That doesn’t mean that nuclear is dead, and in some countries it may expand, but with their costs falling, renewables are winning in most places. As far as the UK is concerned, despite Brexit, EDF still seems desperate to proceed with Hinkley, and two weeks ago it launched a new €4bn share offer, with €3bn to be bought by the French government, to sustain it. On that basis EDF’s board decided to go ahead with Hinkley. However, the UK government then unexpectedly announced that it wanted to review the whole thing – so all bets are off for the moment. Could it be that the UK will back off? Or seek other nuclear options? The long running saga continues…but with the Economist saying ‘Britain should cancel its nuclear white elephant and spend the billions on making renewables work’.


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