Sunday, 16 August 2015

So which countries will take care of the likely ruinous debts for Hinkley C?

As widespread incredulity spreads about the UK Government's insistence that the plan to build Hinkley C nuclear power station is still on track, we must wonder which country and which companies will take the hit in the event of the near certain financial catastrophe that will befall the project. It is near certain given that the first three reactor projects, in Finland, France and China, have all suffered delays and thus heinous cost overruns. Indeed the failure of the European Pressurised reactor (EPR) design, produced by the French state owned nuclear constructors, AREVA has so far ruined AREVA. This company is now being merged with EDF who are already set to fork out billions to plug the financial holes in the company.

The UK Government is insisting that it will not pay for any cost overruns suffered by the Hinkley C project, which is due (on the latest word) to start construction in 2016. Quite how that squares with the £10 billion worth of loan guarantees to be offered by the UK Government is not clear. However, if the British Government will not pay for the cost overruns then who will? The Chinese nuclear companies involved in the deal? That sounds odd given that Chinese companies, whilst they are state owned, are incentivised to make money. There managers will not do well if they make large losses. Of course western state owned companies can continue making loss after loss, as typified by British and French nuclear operations, and expect to be continuously bailed out by the state.

So, is the French state effectively going to underwrite the whole project through a merged EDF-AREVA? Certainly British electricity consumers will be paying out large sums over a very long period for any electricity generated by the project (for 35 years after generation starts), sums that will  increase with inflation. I wish people would not keep quoting the agreed 2012 figure of £92.50 per MWh. It is now over £94 per MWh. Meanwhile of course the Government has stopped the scheme that pays for wind power to be paid just £80 per MWh for just 15 years (and no loan guarantees).

But it seems that EDF-AREVA could end up carrying the can for cost overruns on top of the £25 billion price tag already estimated. This could do serious financial damage to EDF. Ultimately the French electricity consumer would end up paying a high price to install a failed nuclear power design in the UK. Does the French public understand this? They ought to be acquainted with what they are taking on.

Andy Blowers, having read this post, sent me the following comment:
'More importantly, on whom will the debts fall? Given the financial provisions on pricing and on decommissioning, clean up and repository costs, part of the burden will be levied on future generations.  The intergenerational equity aspect of new nuclear policy gets scant attention. Presumably something will turn up.'

1 comment:

  1. Nuclear is not "carbon free" that is just a tired ☢ sales pitch used by the Nuclear Industry to try and justify keeping Nuclear in business.

    Remember that Fukushima PROVED that Nature can destroy any land based nuclear reactor, any place anytime 24/7 so it is only a question of when not if yet another Trillion Dollar Eco-Disaster like Fukushima occurs. When that happens look for all those downwind to scream for shutting down all nuclear reactors if they are still healthy enough to speak out at all. Just imagine what a French Fukushima would do to W. Europe or (pick one) some other reactor location that is upwind of a major population center.

    In reality the Nuclear Industry is its own worse enemy, since it boasts of safety while at the same time it strives to reduce costs in order to maximize its own profits which is a recipe for disaster.

    We can and will be able to meet future demand without using Nuclear, we just have to start doing it and stop listening to all those that are just promoting other forms of Generation because it is good for their own bottom line. What I call Nuclear Payback:

    Those that support nuclear power because nuclear power somehow supports them; no matter what the health implications or other "costs" are for others.
    Here is a great example of how people in the US are being "played" by those seeking to stop Solar:

    How Charles Koch Prevents Clean Energy Businesses From Succeeding

    Here is a good article on why the UK is even considering the hugely expensive Hinkley C boondoggle:

    Shining a light on Britain’s nuclear state