Analysis: Hinkley Point C nuclear power plant

Work is finally poised to start on Hinkley Point C, the first new nuclear plant built in the UK for a generation. Kelvin Ross gets reaction to the pact between EDF and China General Nuclear and also finds out what the project will mean for the UK

The signing of a deal between EDF and China General Nuclear Power Corporation on Hinkley Point C is almost the final piece of the new nuclear jigsaw that the UK has been trying to put together for a decade.

It was Tony Blair who set the ball rolling in 2005 by announcing an energy review which would consider the possibility of a new nuclear plant. By 2007 the plan for a new reactor at the existing Hinkley Point plant in Somerset was on the table and EDF said that those of us living in the UK would be cooking our 2017 Christmas dinner on electricity from Hinkley.

Well, those hoping for some atomic turkey for their festive lunch next year will be disappointed, as Hinkley is now scheduled to be online in 2025, but nonetheless, the deal is (pretty much) done, and having been told for the past 18 months that the project was “shovel-ready”, those shovels should be digging by the end of the year.

A final investment decision from EDF to go ahead with the plant – which is expected to provide 7 per cent of Britain’s electricity – is now pretty much a formality following the China pact, which sees EDF own 66.5 per cent of the plant and CGN 33.5 per cent.

China General Nuclear Power Corporation (CGN) will make its investment in the UK through a new company called General Nuclear International (GNI). EDF, without ever reducing its initial stake below 50 per cent, still intends to bring other investors into the project at a later date.

UK Energy Secretary Amber Rudd said on the day of the Chinese deal that “the UK is open for business and this is a good deal for everyone – Hinkley Point C will continue to meet our robust safety regulations and will power nearly six million households with low-carbon energy”. CGN chairman He Yu said that the deal was a “triple-win for the existing nuclear energy partnership between China, France and the UK”, while EDF Energy chief executive Vincent de Rivaz said Hinkley Point C and future nuclear projects in Britain “will guarantee the UK the reliable, secure low carbon electricity it needs in the future”.

“Nuclear power will save customers money compared with other energy options and provide a huge boost to British industrial strength, jobs and skills both in Britain and abroad,” de Rivaz said, adding that the go-ahead for Hinkley was “good news in the fight against climate change”.

The operators of Hinkley Point C have negotiated a contract for difference with the UK government for the electricity generated by the plant. That price is à‚£92.50 ($142)/MWh for 35 years, roughly double the current market price of power – or à‚£89.50/MWh if a final investment decision is taken on a subsequent new EDF reactor at Sizewell nuclear plant.

This contract was approved by the European Commission in October 2014 following a 12-month investigation. The Commission has also recently approved the UK’s waste transfer contract scheme, which will apply to Hinkley Point C. This scheme means that the full costs of decommissioning and waste management associated with new nuclear power stations are set aside during generation and are included in the price of the electricity.

Among the companies which have signed final partnership deals for Hinkley Point C are Areva for the steam supply system, instrumentation and control; Alstom France for the turbines and Alstom UK for services during operations; Bouygues TP/Laing O’Rourke for the main civil works and BAM Nuttal/Kier Infrastructure for the earthworks.

The positive views

Prospect, the largest union for nuclear industry employees, welcomed the signing of the deal. Deputy general-secretary Garry Graham says it is “a key milestone in paving the way to build our low-carbon, secure energy future”.

“The building of the new Hinkley nuclear plant will create 25,000 jobs in construction and provide 1000 jobs in operation. These will be high-quality skilled jobs that will create a positive legacy for major infrastructure projects for the future.”

World Nuclear Association director general Agneta Rising is relieved to see the China pact go ahead, and she says “we need to see more countries learning from the UK’s example to support nuclear energy among a mix of generation technologies that are fit for the future. Governments must act to ensure that markets support new investment in technologies such as nuclear. The UK is showing one way this can be achieved.”

Tony Ward, Head of Power & Utilities at EY, says the deal “is a vital injection of momentum that can unlock billions of pounds worth of investment in the UK’s energy infrastructure. It also brings to an end a protracted period of negotiation and uncertainty, and puts in place the key remaining precursor to a final investment decision.”

He adds that “with growing concerns in the UK around the security of our electricity supply, and a rapid retreat from some of the more progressive renewable energy policies of recent years, delivering low-carbon baseload capacity at scale is a key step in securing the UK’s energy future, as well as embedding thousands of highly skilled UK jobs, economic activity and industrial and export potential.”

Dr Jenifer Baxter, Head of Energy and Environment at the Institution of Mechanical Engineers, agrees. “Nuclear is currently one of the least CO2-intensive ways to generate baseload electricity. If we are to secure the UK’s energy future, while at the same time meet a challenging emissions target, nuclear must play a part in the electricity mix, in addition to gas generation and renewables.” But she adds that “while it is important to look to secure future energy supplies, the government also needs to encourage significant investment in the whole nuclear lifecycle”.

“We still need proper research and development into methods for recycling and maximizing the energy returns from nuclear waste. We haven’t yet found a way of dealing with the large stockpile of nuclear waste at Sellafield, which is set to include an estimated 140 tonnes of plutonium by 2020. It is clear the UK has been too slow to address this issue. Long-term deep geological disposal offers a potential solution; however, around 20 years of testing is required in the UK for this approach to be used with confidence and we are yet to start this process.”

Environment group Greenpeace is, unsurprisingly, not a fan of nuclear or the Hinkley project. Its UK chief scientist Dr Doug Parr said of the EDF-China pact: “With this deal [UK chancellor] George Osborne is not so much backing the wrong horse as betting billions of consumers’ money on a nag running backwards.

“There’s no end in sight for the nuclear industry’s dependence on billion-pound handouts whilst the renewable sector is on the verge of going subsidy-free. Backing the former and punishing the latter makes no economic sense whatsoever. Our grandchildren will one day wonder why their bills are propping up a foreign-owned, outdated and costly nuclear industry instead of supporting cutting-edge UK firms producing cheap clean energy.”

…And the backlash

Pushing ahead with Hinkley sets the UK on a nuclear newbuild path unlike any elsewhere in the world. The government has identified a further seven reactor sites it wants to develop, including another by EDF at Sizewell, one at Bradwell which could be built by the Chinese using their own technology, and Moorside, which would be the biggest nuclear plant in Europe.

The government is debating closing all of its 12 coal-fired power plants by 2023 at the same time as it’s facing a squeeze on supplies. EDF’s 1.2 GW Sizewell B plant is the only one of the nation’s current 15 reactors scheduled to generate beyond 2023.

The building of a fleet of new nuclear plants was originally put on the table as a means of addressing decarbonization, but since then the European energy sector has changed radically. The buzzword is flexibility and nuclear – while highly reliable and not subject to swings in fuel price – is pretty inflexible.

All of which would still make Hinkley Point C a sensible plan if it and other future nuclear plants are intended to be the long-term – and don’t forget that with nuclear plants we are talking very long-term – partner to an expanding utilization of renewables. But the UK government is facing a backlash from some high-profile figures over its recent policy decisions on renewables.

Since the General Election in May, the new Conservative government has ended subsidies for onshore wind, because it believes there are enough such wind farms already in Britain – Rudd has said that “we could end up with more onshore wind projects than we can afford”.

In September the government also vetoed plans for the Navitus Bay offshore wind farm – the first offshore project not to be granted consent.Whitehall has also dropped support for new large-scale solar farms and is consulting on plans to cut subsidies for smaller installations on households, schools and community buildings.

The Solar Trade Association says around 27,000 jobs could be at risk as the solar industry’s 3000 firms face the cuts. Trade body the Renewable Energy Association (REA) says it has tracked 11 major policy changes which it says is having – or will have – a negative impact on the British renewable energy industry.

James Court, the REA’s head of policy, said the policies represent “the UK turning away from renewables, which is surprising given the extraordinary decline in costs and increases in technological efficiency that have been achieved over the past five years. The government, frustratingly, seems intent on tripping up the industry within sight of the finishing line.”

Last month, the United Nations’ chief environment scientist slammed the UK government for its cuts to renewables support. It is unusual for the UN to single out a particular government for criticism, however Prof Jacquie McGlade branded Britain’s actions as “perverse”.

She said that as more and more countries around the world were adopting and spending money on renewable energy objectives, the UK was going in the opposite direction. And she added that recent reductions in wind and solar subsidies, coupled with tax breaks for oil and gas, sent out the wrong message ahead of next month’s UN climate summit in Paris.

In an interview with the BBC, Prof McGlade said: “What’s disappointing is when we see countries such as the United Kingdom that have really been in the lead in terms of getting their renewable energy up and going – we see subsidies being withdrawn and the fossil fuel industry being enhanced.” She said the UK was sending “a very serious signal – a very perverse signal that we do not want to create”.

Last month John Cridland, head of the Confederation of British Industry (CBI), also said investors would be put off Britain by its latest policy decisions. He said that the “green economy is an emerging market in its own right, brimming with opportunity” but added that “with the roll-back of renewables policies and the mixed messages on energy efficiency, the government risks sending a worrying signal to businesses”.

In September, the UK dropped out of the top ten countries for renewable investment in an annual ranking compiled by analysts at EY.

Ben Warren, EY’s Energy Corporate Finance Leader, said that investors are “trying to make sense of what seems to be policymaking in a vacuum, lacking any rationale or clear intent. Worryingly, this trend of inconsistent policy tinkering could also sour investor confidence in other areas, such as new nuclear, carbon capture and storage and shale gas, as well as offshore wind.”

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