Wednesday, February 1, 2017

Hinkley in La La Land

 ‘The reactor at Hinkley, as well as being the first of its kind in the UK, will also be the last of its kind, and any future build will be a new design. I cannot believe that independent due diligence would give this project the green light as it stands. The decision has been strongly influenced by political opportunism and fear of loss of face.’ So said pro-nuclear stalwart Prof. Ian Fells, in the Times 19/9/16.
Concerns about annoying China, by spurning their offer of £6bn in inward investment in the project, were certainly there, but so were concerns about giving China more control over the UK energy system. However former energy minister Lord Howell said that, rather than worrying about whether China will be a good nuclear partner, we should worry about EDF: ‘The real risks are that EDF's financial affairs are wobbly, its supplier's affairs are wobbly, the design has never yet worked anywhere, it's a design that's unproven. And we are going to be really in unknown territory as we build this thing.’ 
There are of course protections in case of financial problems, including contract cut off deadlines, and under the renegotiated agreement, should it go bust, ‘the government will be able to prevent the sale of EDF’s controlling stake prior to the completion of construction’.
Moreover, the legal framework means the government can intervene in the sale of EDF's stake once (if!) Hinkley is operational. There’s still the Austrian legal objection to be heard and the results of the forging quality tests on Areva’s steel containment, but for now EDF is obviously happy. So its next EPR project, at Sizewell, may soon be up for consideration, along with the other UK projects- Wyfa and Olbury (Hitachi ABWR), Moorside (Westinghouse AP1000) & Bradwell (a Chinese reactor). We will be hearing more about that:
Meanwhile though, the Guardian’s nuclear evangelist George Monbiot, who opposed Hinkley as an expensive distraction, sang the praises of small modular reactors that use nuclear waste as fuel’: the integral fast reactor variant ‘could supply all the UK’s energy needs for 500 years by consuming the nuclear waste stockpile.’
A bit fantastical- with many cost, safety and security unknowns and risks. Even the pro nuclear ETI said that SMRs wont be available, at best, until 2030: And for now, dazzled by the promise of jobs, the TUC and  GMB, along with the government, seem delighted to build conventional large plants, starting with Hinkley!
I will be coming back to the union’s position in my next post, but it does seem very short sighted. Renewables can also create jobs and they are much faster to deploy, in weeks or months for PV and wind, not up to a decade, as with large nuclear projects. And, quite apart from the unique safety, security and waste management worries with nuclear, it’s expensive. Indeed, as even the government now admits, more expensive than some renewables.
In its three page ‘Value for Money’ assessment in relation to the Hinkley project, the government says its £92.50/MWh strike price is ‘above the comparable cost range of large-scale solar Photovoltaics (PV) (£65-92/MWh) and onshore wind (£49-90/MWh)’. However, it claims that ‘in order for large-scale solar and onshore wind to produce the same amount of electricity provided by HPC, there would be significant upgrades to the grid required (such as connection and planning costs) as well as increased costs to keep the system in balance’.
Well yes, balancing might add 10-15% to the cost, on the basis of CCC estimates by Imperial College:  Moreover, grids and balancing have to be upgraded anyway since we plan to use more renewables, offshore wind especially, even with Hinkley on line. The government says that Hinkley comes out at towards the bottom of the comparable cost range of offshore wind (£81-132/MWh)’ but that may now be dated- offshore projects are going ahead for 2020 at ~ £54/MWh off Denmark. Even with grid costs added that would still beat Hinkley, and who know what offshore wind costs will be by 2025 when Hinkley might start up- 20-30% cost falls have been predicted.
There could also be some extra unexpected nuclear costs. The large cost of dealing with nuclear waste and eventual plant decommissioning (put at £5.9-7.2bn) is meant to be covered by the CfD strike price, with contingency extras added in to the legal agreement. Insurance cost similarly. But who knows if these provisions will be sufficient- all previous clean up cost estimates have proved wrong:
As for fossil fuel alternatives, the government says that Hinkley comes out at towards the top of the comparable cost range of gas Combined Cycle Gas Turbines (CCGT) (£47-96/MWh)’ but ‘towards the bottom of the comparable cost range of first-of-a-kind commercial carbon capture and storage (£77-249/MWh) for delivery in 2025’. It has dumped CCS for now, but it is still keen on CCGT, presumably using shale gas, increased emissions not withstanding. However, perhaps a little deviously, it argues that Hinkley offers extra value by avoiding the costs of replacing the gas fleet and avoiding the rising carbon costs of gas generation post-2050’ and also by unlocking the option of ‘further new nuclear’. But renewables could avoid all of that, arguably at lower cost. Certainly by 2050 and probably by the time Hinkley might run. Or any SMR’s: if, as it seems, the earliest for them is 2030,  by then renewables could be clearly dominant, if not before.                                               
That is clearly not how the government sees it. On Hinkley, it puts the total cost over its whole 35-year index-linked CfD at £11-21bn (2012 prices, discounted to 2012), although the NAO say there is likely to be a £30bn top up: But sticking with the governments lower figures, the NAO says: ‘Our most realistic projections mean that around £12 from energy bills will go towards supporting the plant in 2030’. Whereas, if Hinkley ‘is delayed by three years and offshore wind and Carbon Capture and Storage (CCS) are needed to fill the gap, it would lead to a £24 annual increase on household electricity bills on average from 2026 to 2030 (2012 prices). Similarly, if onshore wind and large- scale solar PV were to fill the gap, consumer bills would increase annually by £21. Gas plant coming on to fill the gap would see bills £6 cheaper per year, but this would undermine the UK’s ability to meet legally binding decarbonisation targets’.  
Greenpeace said ‘The numbers speak for themselves. In the unlikely event Hinkley is working sometime in the second half of the next decade, renewable energy will be much cheaper, yet British consumers will still be forced to pay over the odds for nuclear power’. It’s hard not to agree. Though that doesn’t explain why the government is still pushing for it- something I will look at in my next post in this series.  

The government’s Value for Money analysis is at:

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