Last week I covered some of the background of the new nuclear deal on Hinkley C and others with China and EDF. In this post we will look at some of the other problems with the new nuclear deal. There are a variety of problems in the way of this happening which may still mean it won’t see the light of day. These are in no particular order;
Costs – as alluded to in last weeks post the only track record the EPR has is one of cost overruns and delays. There are still rumours of a £10 billion shortfall in funding even after the Chinese agreed to stump up £6 billion. It will not be easy for the EDF and CGN to raise the money since the city thinks the deal is a bad one and even if they do the interest rates on the loans will be high. Its quite easy to see construction starting and then 5 years down the line the companies running to the government essentially saying if you want this your going to have to help fund it. I think this is a very likely outcome if construction gets going.
Energy costs – one of the central problems of new nuclear as we outlined in our book is that its costs are constantly rising as the renewable alternatives are constantly falling. I was going to write more about this but Jeremy has put an excellent blog post up on this on Make Wealth History. The graphs in his post give two strong messages. First its irrelevant in comparing nuclear costs with renewables costs today (although the Secretary of State for energy and climate change said PV was cheaper now than new nuclear on the Today programme a few weeks ago). The time for new nuclear build is at least 10 years, in addition there is talk of this reactor being there for 60 years. Second, within 10 years all technologies will be cheaper in the best case scenarios with new nuclear. After 15 years cheaper full stop. Jeremy has left out offshore wind but this is almost certainly going to be cheaper after 10-15 years as well, costs are falling fast. After 30-40 year even this will be much cheaper. So would wave and tidal, the current very expensive rivals. Incidentally the same will be true for fracked gas it won’t be able to compete on costs soon either.
This has implications that go beyond economics. You don’t have to be too cynical to see the government’s attacks on everything from energy efficiency to the Feed in tariff (FIT) as a way of trying to close down the alternatives to fracking and nuclear. Having had a brief go at responding to the FIT “consultation” there were some worrying suggestions in it that have not been picked up on by many people. The biggest one is the idea of making micro-generators pay for the privilege of connecting to the grid. This has been tried in the US but failed. Could it come here? There is little doubt that for 3-4 years the likely FIT cuts will kill new solar dead. But in 4-5 years time solar will be at grid parity so it will be back -unsubsidised. Then the government and energy companies lose control. The energy companies don’t care where their power comes from they just want it to be cheap. Its clear they will have to be forced to buy new nuclear electricity to make this work. Could we be taxed for having PV on our roofs? Maybe, but could they stop us fitting batteries and going as off grid as possible? In five years max these will be a very cheap.
Regulation – finally don’t underestimate the difficulties in regulating all this with the language barrier. Its said the Chinese want to take a hit on Hinkley C to build their own designs at Bradwell and Sizewell. There is no guarantee that he UK regulator will approve the Chinese design although they will be under worrying amounts of political pressure to do so. A mere handful of people will have the ability to read the and translate the technical documentation before regulatory approval and during any construction phase. Deeply worrying.
New nuclear looks more likely to go ahead, but the economics look terrible. The steel industry maybe complaining about electricity costs now but in 30 years time if we get 30-40% of our electricity from new nuclear they really will be paying. Its more likely than not any new build will go bust before its finished or after. The question is what is the implication for energy security? Also the stakes could not be higher for EDF and Areva. Their survival as well as that of the nuclear power industry in Europe probably depend on this being a success, which on the history of the nuclear industry and the EPR looks very unlikely.