GUEST ARTICLE: UK must stop ‘Braxton Hicks’ approach to nuclear to meet energy security targets
Andrew Renton, Partner, Commercial, Bird & Bird: “Although nuclear power is probably the cheapest, large-scale, low-carbon electricity source, it is not without problems and the current situation at Hinkley Point has highlighted the challenges facing the industry.”
By Andrew Renton, Partner, Bird and Bird
The rebirth of civil nuclear in Britain seems to be suffering from long term Braxton Hicks.
Having been granted the first nuclear site licence in the UK for 25 years, Hinkley Point is the central focus of the UK's nuclear renaissance.
Current predictions for the project envisage a completion date in 2023 and a total development cost of approximately £25bn. Generic Design Assessment ("GDA") approval for the design and implementation of Areva's EPR reactors was obtained in late 2012 and the relevant environmental and planning permits were issued soon after by the Environmental Agency and Planning Inspectorate respectively.
Securing the relevant levels of capital investment will be pivotal to the future of Hinkley Point. A final investment decision anytime soon still seems unlikely and dates in late 2015 are now being talked about. Concern remains over the challenge to the pricing structure devised by the government and approved by Europe, and that funding gap is still not clearly closed. Sizewell C is EDF's other licensed site on which two further EPR reactors are to be built. Progress there could be described as elementary and whether it ever goes ahead will depend on a number of factors, not least a financial investment decision on Hinkley Point and "the real nuclear work" commencing.
Although nuclear power is probably the cheapest, large-scale, low-carbon electricity source, it is not without problems and the current situation at Hinkley Point has highlighted the challenges facing the industry.
The Financial Times recently reported that there is a large hole in the funding commitment for Hinkley Point C and even the EDF agreements with Chinese investors may not allow the gap to be plugged.
Changing the Strike Price deal to disconnect and perhaps increase the Sizewell C Strike Price seems politically unworkable and questions surrounding the "buildability" of the Areva EPR, following the issues at Olkiluoto and Flamanville, have cast a long shadow.
Waddington Report effect
The recent Waddington Report (National Nuclear Laboratory) seems to have influenced MPs in recent cross party and select committee hearings to express favourable views on the development of British Small Modular Reactor (SMR) technology with an aspiration to become a world leader holding the valued IP.
However, the Austrian Government, which is strongly anti-nuclear, has openly declared its intention to challenge the Commission's decision to approve the state aid measures contemplated by the (Contracts for Difference) CfD.
Reports also suggest that Luxemburg is likely to support Austria's challenge. If successful, the Commission's decision will be retrospectively annulled and Government subsidies under the CfD will need to be reconsidered.
There are doubts over the "buildability" of Areva's EPR reactors at Hinkley with some questioning the prudence of building yet another first of a kind in Britain. Areva's financial woes are public knowledge with a restructuring and savings being promised which has led the workforce to threaten strike action in the event of redundancies or wage reductions.
There is also some unease over the proposed Chinese investment, with the UK Government seemingly reluctant to give in to Chinese demands for exclusive ownership and development rights atBradwell and for Chinese companies to be awarded a higher proportion of the underlying supply chain contracts.
The upcoming general election has created a further degree of nervousness amongst industry stakeholders. A change of Government could result in a moratorium being imposed on the future nuclear new build programme.
Security of supply will never go away
Some revisionists are raising legitimate concerns in light of a lack of direction on the part of Britain’s civil nuclear power industry.
The speed of change in technology and the global growth and interest in this source of power means continuous development is inevitable. It is certainly inconceivable that the enormous amounts spent by all parties involved in the UK’s developments will be allowed to go to waste.
The need for security of supply through a balanced generation mix remains as essential as it ever was and Britain's aspirations of re-entering the nuclear market as a main player, albeit with SMR technology, points to an unavoidable consequence that the current projects going through the GDA, possibly followed by the Chinese, will be built out as planned.
Whether any more large scale nuclear generation takes place will depend on the speed and appetite that those promoting the British SMR solution have for investment in and delivery of what the National Nuclear Laboratory report clearly envisages as the dawn of a new era for Britain as a global (civil) nuclear power.
It may be that the difficulties with the birth of a new nuclear age are almost insurmountable in the current political and financial environment. The recent publications espousing the benefits of SMR technology seem to be more than coincidental, especially with a global market the size predicted in the NNL report.
There will be a large prize for those who surpass the challenges and get to the front of the market with buildable, less costly and lower risk technology.
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