Friday, 29 January 2016

How rational choice theory explains EDF's mad gamble on Hinkley C

The spectacle of the disastrous attempts to build a new generation of nuclear reactor - the European Pressurised Reactors (EPRs) - and EDF's apparent desire to carry on despite the increasing likelihood that the financial losses from this will destroy EDF as a going business (see my earlier blog posts on this) raise the question: If this is true, then why do they carry on with this apparent financial suicide? The answer can be analysed through something well known in political science: rational choice theory. This says that actors will pursue their self interest so that they can achieve the best outcome in a given set of circumstances that define their dilemmas. This can often lead to outcomes that are worse for everyone, despite people apparently pursuing their 'rational' self interest (eg see 'prisoners dilemma').

The set of choices facing the leaders of EDF appear to them as follows: a) abandon Hinkley C and effectively end EDF's visions as being leaders of a world (or even French) nuclear resurgence. Ok, why not? Well, the leaders believe they would have to resign! b) carry on spending money on Hinkley C and hope that not only the French Government will bail them out of any further difficulties (mounting up now, with the french and Finnish reactors going pear shaped) but that somehow the British project will come right. But what seems more likely is that the French Government will end up pouring billions into the project, as well as needing to salvage the Finnish and French EPRs still being built.

Now choice a) involves, to them, the certainty of loss of face and resignation.
choice b) involves a probability of disaster (and eventual resignation), but the faint hope that they still might win out (and regardless they remain in power for a while longer).
Of course the interests of the French state are clearly to avoid losing billions of euros, so rationally, of the two, option a) would be better.

But the French state is not independent. The problem with EDF is not that they are controlled by the state, but that they seem to control the state. Even to the extent that the French state is compelled to spend billions of euros providing the British with nuclear power stations! (which may or may not work very well). The French Ministry of Finance is currently holding out against attempts by EDF to ensure that the French Government 'immunise' EDF against losses from its project in France (and I assume the Finnish and projected UK projects), but EDF seems prepared to just go ahead and assume it will eventually cave in.

How do we get out of this? In option b) eventually the French state will have to draw a line somewhere - it will not be able to afford to carry on hurling countless billions down a bottomless pit. This will damn nuclear power even more severely than abandoning Hinkley C at this stage. But why do we have to suffer this trauma? After all it will waste so much resources.
Personally, I say to Vincent de Rivaz and Jean-Bernard Levy, the bosses of EDF, I've nothing against you, I wish you well, please carry on with your jobs, but please make an appeal to do so based on renunciation of the obviously bankrupt EPR path you are now following. Say how you are going to put investments into renewable energy and advanced energy efficiency technologies.


  1. The two EDF bosses you mention are 60 and 62, they know they will be retiring soon so don't care about the longer term issues.

  2. There is also a psychological phenomenon sometimes called "light plane syndrome". It is quite common for pilots of light aircraft to plan a journey, take off, realise they are going to encounter fatal weather conditions en route, but carry on regardless instead of turning back. I've started, so I'll finish.

    While comparison of the Hinkley monster with a 'light plane' has some obvious drawbacks, the psychology certainly seems to be the same.

  3. I've just calculated that 3.75 Hinkleys can supply exactly the same number of TWh of [24:7/on-demand] electricity as the EU's entire current wind farm fleet.

    4 Hinkleys will occupy an area of land about 1.64 km x 1.64 km. There are about 64,400 wind turbines in the EU, rated at 2 MW average, giving the installed capacity of 128.8 GW.

    Unless anyone has different information, my browser perusals lead me to an average figure of about £1.5 billion/GW installed - £193.2 billion.

    At the top end of the £18 to £24.5 billion we see bandied about for Hinkley, that's £91.9 billion for 3.75 Hinkleys - under half the price.

    Your Hinkley monster is my profiled/blended, architectural structure. My monstous/unnecessary eyesores are your majestic wind turbines. The only trouble is - there are 64,400 of them.

    Details and links:

    1. I don't recognise your figures.There are close to 145GWe of wind installed in Europe according to Wind Power Monthly which, even assuming Hinkley C actually gets delivered and works, will generate around 10 times as much power as Hinkley C's projected 3.6 GWe. As for cost, Hinkley C can't, it seems, now, be delivered for £93 per MWh over a 35 year contract with two thirds of the cost guaranteed by the Treasury. Meanwhile under the UK's contracts for difference and the Renewables Obligation wind power is being delivered for £80 per MWh for contracts with just 15-20 year contracts and no govt loan guarantees. Not much contest there. Wind clearly wins. And we've got lots of onshore wind waiting to get installed but which are being denied contracts by the govt. Lots of cheap solar farms are waiting as well.
      And when is Hinkley C going to be generating its mythical power? 2025? 2030? Never?

  4. European Wind Energy Association document (2014 statistics)
    Extracts from Page 12 are the following data:

    Total installed capacity: 128.8 GW
    Total wind energy production: 284.02 TWh

    That works out at a capacity factor of 25%
    The probable average turbine will be 2 MW
    So that's 64,400 or so wind turbines.

    What renewables enthusiasts fail to appreciate is the staggering amount of electricity Hinkley will deliver - 1513.7 TWh - over its 60 year design life.

    Cumulatively, over their 20 year life-span, the EU's installed 128.8 GW of wind turbines will deliver 5,680.4 TWh - and so, 3.75 Hinkleys will deliver exactly the same amount of electricity as the 64,400 or so wind turbines scattered over the much vaunted EU 'renewables nations' - Germany, Spain, UK, Denmark (and the rest).

    So, unless you can offer a different figure, all of those wind turbines will have cost £193.2 billion, whilst 3.75 Hinkleys would be about half of that.

    Don't blame the technology for our government agreeing to what is a fantastic deal for EDF. We will be paying £92.50/MWh for 35 years, which is about £82 billion. Then, for the next 25 years, EDF will be paid the going rate/MWh when their running costs are literally peanuts.

    All parties will struggle to get any consequential onshore wind farms approved in the UK, so it's all offshore from now on and that costs at least 3x more/GWh of electricity generated than nuclear.

  5. Well, I used 2015 figures for wind power deployment, and the fact that this is rather more than your 2014 figure indicates rapid expansion (as opposed to no expansion in nuclear power). Even if the wind turbines only lasted 20 years that's only because they are replaced by machines that are cheaper whilst meanwhile Hinkley C would be running on a much more expensive contract, MWh per MWh. Hence, the total cost of the power from the wind turbines is a lot less MWh for MWh whatever period you choose. And anyway one of EDF's key problems is that its ageing nuclear fleet has to be refurbished at quite a cost, so even if the EPRs did last longer than their 35 year contract they would need more money poured in to make them last longer on the basis of existing nuclear power experience. Actually I overestmiated Hinkley C as 3.6 GWe in my last comment, when it is only 3.2 GWe, so the power generated by wind turbines in Europe at the end of 2015 is likely to be over a dozen times the output of Hinkley C (as opposed to just tenfold that I stated) - that is if Hinkley ever gets comnpleted, which is now in very severe doubt. Of course by 2025, the earliest date that Hinkley C could be in operation the amount of renewable generation will have expanded a great deal more, and the price difference between MWh of nuclear and renewables make even bigger to nuclear's disadvantage.

    1. "...Even if the wind turbines only lasted 20 years that's only because they are replaced by machines that are cheaper..."

      Iam able to speak from an engineering background and can tell you that power to weight ratio for wind turbines is nearly as much of a problem as for aircraft.

      When you're perching a substantial mass on top of a 330 feet column, the designer needs to keep component weight down which means accepting higher stresses in gears and bearings. On top of that is the slow speed of rotation which is a big problem for effective lubricaion. No - 20 years is the lifespan for wind turbines and over that time the performance (capacity ration) falls substantially.

      "...Hinkley C would be running on a much more expensive contract, ..." Don't blame the fact that our representatives have negotiated this terrible deal for us on the technology. It's a great deal for EDF - they'll collect £80 billion for the 35 years of the contract and then for the remaining 25 years of design life, they'll get another £30 billion selling electricity at the going wholesale rate, whilst their operating costs will be absolute peanuts.

      "...EDF's key problems is that its ageing nuclear fleet has to be refurbished at quite a cost..." It's going to cost £40 billion to get a 20 year life extension for their 58 French nuclear power plants. Over those 20 years at 416 billion kWh/year, those 58 reactors will deliver 8,320 TWh of (24:7/on-demand) low-carbon electricity.

      To get that amount of electricity delivered in the UK, we'd have to install 136 GW of offshore wind to deliver 8,320 TWh of (intermittent) low-carbon electricity and, at £3 billion/GW, that's £408 billion.

      "...even if the EPRs did last longer than their 35 year contract..." You've failed to understand that the 35 years only applies to the period EDF will be paid £92.50/MWh. The design life of the power plant is 60 years, so EDF will get the commercial wholesale rate for the remaining 25 years.

      "...Actually I overestimated Hinkley C as 3.6 GWe in my last comment, when it is only 3.2 GWe, so the power generated by wind turbines in Europe at the end of 2015 is likely to be over a dozen times the output of Hinkley C (as opposed to just tenfold that I stated..." 145 GW will indeed deliver 12 x more than Hinkley each year - but that cumulative installed number of wind turbines will only do that for 20 years. Hinkley delivers for 3 x longer, so that means 4 Hinkleys, costing £98 billion will deliver as much electricity as 145 GW of wind turbine [at £1.5 billion/GW installed] = £217.5 billion.

  6. This is a bit of nit picking here - large parts of nuclear stations need replacing for the ones that stay in operation just as a lot of the wind turbine infrastructure needs replacing - but you still have to pay high amounts for the nuclear power whilst renewables are getting cheaper to do the same all the time. In fact this 60 years for the life of an n power plant is a bit of hope as in practice nuclear power stations are being retired much earlier than this and then they give us the problem of decommissioning radioactive structures.