A top lawyer at Pillsbury, a global law firm who specialise in energy and natural resources, says that while the Austrian challenge to Hinkley Point C is difficult to understand and is likely politically motivated, the main focus should be implementing lessons learned from other recent new-build projects.
Vincent Zabielski, Senior Lawyer in the firm’s Nuclear Energy practice in London was an engineer in the nuclear sector for 15 years before going into law. He says that considering what is at stake, and the expense to the British tax-payer, it’s critical that the UK take a prudent approach to building this next generation of reactors.
“EDF is going to build, own and operate an EPR at Hinckley Point. To do that effectively, they will have to take a serious look at the recent experience in Finland and Flamanville. First-of-a-kind technologies always pose new sets of problems, but there is a good opportunity to apply lessons learned from those teething pains.”
Zabielski told Power Engineering International that he thinks a design like the APR1400 would also make a lot sense for UK applications.
“The Koreans have a very mature domestic new-build program, and have thus far shown that they can transport those capabilities overseas. Barakah (in the UAE) is widely reported to be on time and on budget. Building Korean reactors in the UK would potentially be less expensive than other options, giving the British rate payer better value for their pound.”
Last week the Austrian government served notice that it was not going to back down in legally challenging the decisionfacilitating Hinkley’s construction. Zabielski says the current and threatened delays are concerning in terms of the overall profitability of the project.
“When it comes to nuclear projects, time really is money. Delays are a vast drain on the economy and every year its delayed that drain continues and the project becomes less viable as a project and then it will all have been just a waste of money, could wind up having no nuclear plant but you’ll have expended all of this money.”
“The problem with nuclear is its construction phase financing. Even under the best circumstances you are probably looking at seven years to build a plant. But the construction risks are the biggest risks and that’s a potential risk here, with the pre-construction and the construction phases and the longer the delays, the less profitable this endeavour is going to be. In the end the Austrian challenge will be costly for the UK tax payer.“
For the moment the chief concern for the re-elected Conservative government and French state-owned EDF is the damage that could be inflicted by a fellow member state who could stymie the project’s progress for at least five years.
David Cameron’s government has threatened retaliatory measures in the event of the challenge being pursued, but the official word from Austria is that it will post its official lawsuit within the next two weeks.
Regarding the Austrian challenge to nuclear development in the UK, “As an American the whole area of sovereignty is hard to get my mind around. That a country can decide to go ahead and address its own energy needs and another country can come in and effectively derail it, it’s shocking,” Zabielski told PEi. “Macroscopically it doesn’t make any sense to me either. If your country doesn’t have a lot of resources, nuclear makes sense. So this idea of a common interest – I think the common interest is having a stable electricity supply across the EU and not necessarily how you achieve that.”
Zabielski’s office focuses on international nuclear energy matters, including matters related to nuclear new-build EPC contracts, operation and maintenance agreements for nuclear power plants, nuclear fuel supply chain, nuclear liability issues, and export controls.
Previously a Nuclear Steam Supply Systems Branch Manager at Public Services Enterprise Group, his work as legal counsel in the industry has given him a highly-informed perspective of the challenges associated with the sector worldwide.
Rejecting Cultural Differences in Applying Nuclear Engineering
South Korea has a strong reputation in the nuclear arena but underwent some difficult questioning of its standards in recent times die to a corruption scandal and problems associated with fraudulent parts.
“Korea has the technology down, and while their regulatory environment isn’t yet where it needs to be, it has certainly become more transparent and focused on solving problems. Some of it comes from the cultural bias around respect for authority, respect for elders. They don’t feel as comfortable raising safety issues as they need to be. This view persists that there is a right way of doing nuclear power depending on the culture. Like practices in the US may not be the same as in China or the UAE. I reject that hypotheses – I think there is a right way and a wrong way – there are core values that need to be supported in the implementation of any nuclear power programme. Engineers need to be able to raise their hands and say when something isn’t right. Creating a nuclear safety culture is going to be especially important for new build nuclear programs in emerging markets.”
So why then hasn’t the nuclear power sector got an unambiguous standard documentation such as found in the airline industry that sets out the way things should be done? Why is there allowance made for regional, cultural differences? System failure was most apparent, for example, in Fukushima.
“The Fukushima report starts off that this accident was made in Japan, there wasn’t anything wrong with the underlying technology it was the implementation of it.”
“If you look at what caused Fukushima what really failed was the emergency diesel power systems, a technology that is over 100 years old. The reactor plant survived the earthquake but then the diesels supplying power to the heat removal systems failed and there were inadequate contingency plans in place. Likewise, with Chernobyl the reactor systems didn’t cause the accident, they were trying to do a safety test while bypassing all of the safety equipment and that caused it. People cause nuclear accidents. The same happened with Three Mile Island – they cut off the cooling injection because they didn’t understand basic thermodynamics. Having a nuclear safety culture means thinking about what could go wrong and getting ahead of small issues before they become larger issues.”
How can the UK supply chain hope to cope if the worst case scenario happens with regard to the Vienna government’s intentions? One of Britain’s ambitions is to be a centre for new nuclear power expertise, and Zabielski says the failure of this or other such initiatives are detrimental to the future of nuclear technology as a whole.
“For Hinkley Point to experience a five or possibly eight year delay while the EU sorts through Austria’s challenge – nobody is going to have their capital waiting around that long. It is a legitimate question and you add on top of that the ageing population of engineers in the nuclear industry in general, a lot of the technology and techniques could be lost over time.”
“In the US there’s almost no domestic nuclear manufacturing capability any more. To replace steam generators at a plant in the US you have to buy them in from France or Japan. Germany has arguably the best nuclear operators of any country. They have an incredible operating record and it’s all disappearing and there’s no younger generation to come in and pick up that whole supply. All that engineering and manufacturing expertise is going to leave Germany and it represents a net safety decrease for the entire industry having Germany shut down its programme. Its madness really.”
Looking At Germany’s Decision To Phase-out Nuclear
With Japan sitting on four tectonic plates, an argument against them hosting nuclear power plants appears entirely valid, so why did Germany put such stock in the Fukushima incident for their decision to phase out nuclear, especially with decarbonisation so high a priority?
Lamenting what he sees as the total waste of resource in Germany as Berlin had done the hard part in going through the capital intensive construction phase in building up its fleet, before opting to mothball, he says the government there is misguided.
“A good way to look at it is the death per kilowatt hour –coal mining and mercury in the ocean and all these impacts from fossil generation result in cancers every year. Even if you take the Chernobyl and Fukushima experiences, nuclear has the lowest death rate per kilowatt generated; that’s demonstrable when you take into account the number of coal miners, dead, smog and total environmental impact. Closing nuclear sounds green but it really isn’t – the risks are far smaller than the everyday tangible health impact of fossil energy – it’s just a matter of taking a rational look at the problem.”
“But Germany is a special case because the decision happened so quickly and it was so reactionary they didn’t even have time to think through it. How that measures out in the long term; it has to increase the greenhouse gas emissions of Europe on the whole.”
“France is one of the most nuclear dependent countries in the world and is right on their border anyway. So they’re living with all of the perceived risks and not getting any of the benefits so when I say its madness it’s just not a well-considered decision, more of a gut reaction without the careful analysis which would have yielded an opposite result.”
Even if the UK somehow escapes and Austrian challenge, Zabielski says the prospect of invigorating a new world-leading British home-grown nuclear power base is doubtful.
“From a standpoint of trying to maintain a nuclear domestic supply infrastructure, unless you structure a project to have some sort of mandatory domestic content, most of the nuclear island will be sourced from the supplier country. Such an arrangement is possible – the Chinese have done that with Westinghouse – but unless there is a clear intention to do so for new build in the UK I wouldn’t expect a big boost to the UK nuclear manufacturing sector from the new build projects on the horizon .”
Creative Financing of New Nuclear Projects
Zabielski last month delivered a presentation at the New Build Licensing Conference in Prague where he spoke about the area of creative financing for new nuclear plants and how the industry could grow if it applies itself in the right way.
“What would be fascinating for me is to be able to build a plant in the Czech Republic or in Poland where there is not a whole lot of cash. If you can get the construction period risks under control, you get a good strong PPA in place you could potentially do a project finance model in those countries but you have to start from the very beginning- you have to put a bankable project together from the get go and what that means primarily is controlling the construction period risks.”
“The key thing is the party that controls the risk should be responsible for the risk. Look at the market today. So-called “turn-key” contracts that have assigned to the vendor risks it had no control over have resulted in much fighting that could have otherwise been avoided.
“If a person can control a risk that they bear, they are incentivised to resolve the issues. So you just allocate the risks in an optimal way and then you’re not monetising them. If you ask me as a vendor to go ahead and take on all the risk you will put it in to the price. Then you end up fighting over it. I think there is an optimal way to structure these thing s and it hasn’t been done yet.”
Vincent Zabielski is a senior lawyer in the law firm’s Nuclear Energy practice and is located in the London office. He focuses on international nuclear energy matters, including matters related to nuclear new-build EPC contracts, operation and maintenance agreements for nuclear power plants, nuclear fuel supply chain, nuclear liability issues, and export controls.
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