Nuclear power has been in the news again. There have been mixed updates on EDF’s difficult European Pressurised Water (“EPR”) projects, but the UK Governments ambitious new climate targets might open the door to re-evaluating the subsidy support available to other projects.
Progress at Hinkley Point but more delays at Flamanville
First came the latest bad news from Flamanville where EDF continues to struggle to deliver its flagship EPR reactor. An inspection in March last year had detected flaws in the welding of the secondary cooling system in which the steam that drives the turbines is produced. In July, EDF confirmed that 33 welds had been found to have quality deficiencies and would need to be repaired, and that a further 20 welds would be redone, despite being free from defects. At the time, EDF revised it start-up schedule for the plant adding around 5 months with commissioning expected by the end of 2022, and increasing the projected cost of the plant from €10.5 billion to €10.9 billion. The reactor was originally expected to enter service in 2013.
However, at its annual safety review in January, French nuclear regulator, ASN, warned that start-up could be further delayed if a number of hard-to-reach weldings that were under investigation were judged to need replacing. ASN has now informed EDF that these welds do need to be replaced ahead of commissioning and rejected EDF’s request to delay replacement until 2024.
“Postponement of the repair operations until after reactor commissioning would pose a number of problems, notably with regard to demonstrating the safety of the reactor during the interim period. ASN therefore considers that repair of the welds concerned before commissioning of the reactor is the baseline solution,” – Autorité de Sûreté Nucléaire
EDF is now analysing the impact of this decision on the plant’s schedule and cost and expects to give a detailed update in the coming weeks.
There was slightly better news from EDF this week in relation to its EPR project at Hinkley Point in the UK. The concrete base slab for the reactor – the UK’s largest ever concrete pour – has been completed, and the site is now ready for above-ground construction to begin. Hinkley Point C will be the first new nuclear power station to be built in the UK in over 20 years, and will have a capacity of 3.2 GW, providing about 7% of the country’s electricity. It is scheduled to start up at the end of 2025, with an identical plant planned for Sizewell C in Suffolk potentially opening in around 2031.
Despite the EPR challenges, nuclear could play a bigger role in the UK power market
On 27 June, the UK Parliament passed a law requiring the country to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least an 80% reduction from 1990 levels. This means that any emissions would need to be balanced by offsetting schemes such as planting trees or the use of technologies like carbon capture and storage (“CCS”).
As I have described previously, CCS technology is not currently economic and is likely to require significant subsidies to deliver the sort of offsetting that will be needed to meet this new net zero target. This is causing renewed interest in nuclear power as a potential solution to the challenge, being itself a carbon-free generating technology. The Confederation of British Industry (“CBI”) is urging the Government to progress large-scale nuclear projects and support the development of innovative nuclear technologies such as small modular reactors (“SMR”). (Unfortunately, the CBI also urged the Government to invest in CCS.)
Achieving the net zero target will require a fundamental change in how the UK economy functions which is likely to be extremely expensive – the Treasury has reportedly calculated that the change in emissions target could cost more than £1.0 trillion over 30 years based on BEIS’ projected costs of £70 billion per year, while the Committee on Climate Change suggested a lower figure of £50 billion per year.
At these levels, new large-scale nuclear projects might be sensible targets for subsidies, particularly Advanced Boiling Water Reactors such as the Wylfa Newydd project, which is a simpler technology than the EPR, with a longer track record of performance. If the Government is serious about its headline-grabbing climate targets, it should look carefully at where it deploys is subsidy resources. Brexit provides an opportunity to be technology-selective, which might be good news for a sector which is beyond the reach of private investment.