Nuclear companies struggle with finances but solar is fast becoming the cheapest form of power everywhere

The three companies seeking to build new nuclear reactors at Hinkley Point, Sizewell, Moorside, Wylfa and Oldbury are under growing financial pressure, raising doubts about whether the UK’s nuclear renaissance will ever get off the starting blocks.

The French nuclear regulator – ASN – has been investigating a growing nuclear scandal in France involving steel components made at Areva’s Le Creusot factory which have been found to contain excessive carbon levels which could make them vulnerable to cracking. There is also evidence that some of the quality-assurance documentation for some components may have been falsified. Although all French nuclear reactors which were temporarily closed as a result have now re-started, the Financial Times reports that ASN now wants to dig further into several issues before they are willing to give a clean bill of health to the French nuclear industry.

In addition, the results of an investigation by EDF at Flamanville will be delivered to the ASN in the coming weeks. The regulator will then analyse the findings and issue a report in the first half of this year. if the structural weaknesses initially found on the reactor pressure vessel are as serious as feared it could have an effect on the development of the Hinkley Point C (and Sizewell C). Any significant problems could be catastrophic for EDF as replacing this important piece of the plant would mean restarting much of the construction work, which is already billions of euros over budget and several years late. (1)

If Flamanville’s start up is delayed beyond 2020 this would be bad news for Hinkley Point C. EDF’s plans depend partly on £2bn of financing from the UK government. To take this funding and get any more there is a condition: Flamanville must be operational by end 2020 at the latest, according to an agreement with the European Commission over state aid. This last point raises questions as to whether EDF could complete Hinkley without the aid. (2)

Another planned new nuclear power station is located at Moorside, adjacent to Sellafield in Cumbria. This is being promoted by a consortium of companies known as NuGen which was originally owned by the French company GDF Suez, the Spanish company Iberdrola, and Scottish and Southern Energy (SSE). Scottish and Southern Energy (SSE) withdrew from the consortium in September 2011 and sold its stake to GDF Suez and Iberdrola. Then in January 2014 Toshiba-owned Westinghouse Electric Company agreed to buy all Iberdrola’s stake and another 10% from GDF-Suez (now called ENGIE) giving it a 60% controlling stake. The plan is to build three AP1000 reactors with a total capacity of around 3.6 GW. Nugen expects to take its final investment decision by the end of 2018.

In December it was reported that the French company – Engie – would like to abandon its 40% share of Nugen. (3) And nuclear power has turned into a financial quagmire for Toshiba. (4) Shares in the Japanese company plunged at the end of December wiping 40% off its value after an announcement that it may have to write down billions due to its acquisition of Westinghouse Electric which is struggling with 4 new reactors in the US which are late and over-budget. (5)

Horizon nuclear, is proposing to build two Advanced Boiling Water Reactors with a total capacity of 2.7MW at Wylfa on Anglesey. It expects to make its final investment decision in early 2019. (6) Horizon nuclear was originally a consortium of two German companies – Eon and RWE. Hitachi Ltd has now bought the project for about £700m in March 2012. Investing billions in new reactors would have forced a credit-rating downgrade on RWE, said Volker Beckers, CEO at RWE npower in May 2012 and Tony Cocker, CEO of E.ON UK said E.ON lacks the “financial firepower”. (7)

Horizon has now gone cap in hand to the UK and Japanese Governments. The two governments are to review investment and lending for Horizon through the Japan Bank for International Cooperation and the Development Bank of Japan. Financing of the project from the Japanese side is expected to reach Y1 trillion (£7 billion). Japan is particularly keen for the projects to go ahead after its previous attempt to export nuclear energy technology, to Vietnam, fell through. (8)  The UK Government might decide to fund up to 25% of the project according to the Telegraph. The likely cost of the proposed twin-reactor development at Wylfa has not been disclosed but a source close to the negotiations insisted a Reuters report that put the figure at £19bn was wide of the mark. (9)

The Financial Times commented that “all this comes as offshore wind progressively looks cheaper to run, even with all the subsidies, than Hinkley ever will.”  (10)  Swedish utility Vattenfall has agreed to build a giant offshore wind farm in Denmark that would sell power for €49.50 per MWh. Vattenfall has broken its own previous record of €60 per MWh. Once the cost of transmission is included this works out at around £75.50/MWh compared with £100.50/MWh for Hinkley Point C (once inflation has been added to the £92.50 at 2012 prices). (11)

The cost of solar and wind continues to fall. The World Economic Forum reports that solar and wind are now the same price or cheaper than new fossil fuel capacity in more than 30 countries. As prices for solar and wind power continue their precipitous fall, two-thirds of all nations will reach the point known as “grid parity” within a few years, even without subsidies. (12) Bloomberg reports that solar is now cheaper than coal in some parts of the world and in less than a decade is likely to be cheaper everywhere. (13)

  1. FT 4th Jan 2017 https://www.ft.com/content/2baf6270-c36a-11e6-81c2-f57d90f6741a
  2. FT (LEX Column) 4th Jan 2017 https://www.ft.com/content/da093f3e-d26b-11e6-b06b-680c49b4b4c0
  3. BFM Business 7th Dec 2016 http://bfmbusiness.bfmtv.com/entreprise/engie-veut-sortir-du-nucleaire-1067637.html
  4. Energy Collective 2nd January 2017 http://www.theenergycollective.com/dan-yurman/2395561/toshibas-financial-meltdown-puts-its-nuclear-projects-at-risk-worldwide
  5. In Cumbria 30th December 2016 http://www.in-cumbria.com/Concern-for-Moorside-nuclear-project-as-Toshiba-shares-plunge-53b94005-449f-4355-a3a0-df7b69ecb142-ds
  6. Telegraph 14th Feb 2016 http://www.telegraph.co.uk/finance/newsbysector/energy/12156773/UK-new-nuclear-plan-will-fail-without-private-investors-says-Horizon-chief.html
  7. Guardian 15th May 2012 https://www.theguardian.com/environment/2012/may/15/energy-companies-abandonment-nuclear-plans
  8. Telegraph 23rd December 2016 http://www.telegraph.co.uk/news/2016/12/23/britain-japan-sign-nuclear-energy-cooperation-agreement/
  9. Telegraph 15th December 2016 http://www.telegraph.co.uk/business/2016/12/15/government-mulls-stake-horizon-nuclear-plant/
  10. FT (LEX Column) 4th Jan 2017 https://www.ft.com/content/da093f3e-d26b-11e6-b06b-680c49b4b4c0
  11. Energydesk 15th Nov 2016 http://energydesk.greenpeace.org/2016/11/15/offshore-wind-power-vattenfall-denmark-record/ See also Renew Economy 7th July 2016 http://reneweconomy.com.au/dong-energy-build-700-mw-offshore-wind-farms-e72-70mwh-22550/
  12. Quartz 26th December 2016 http://qz.com/871907/2016-was-the-year-solar-panels-finally-became-cheaper-than-fossil-fuels-just-wait-for-2017/ and Independent 5th Jan 2017 http://www.independent.co.uk/environment/solar-and-wind-power-cheaper-than-fossil-fuels-for-the-first-time-a7509251.html
  13. Bloomberg 3rd Jan 2017 https://www.bloomberg.com/news/articles/2017-01-03/for-cheapest-power-on-earth-look-skyward-as-coal-falls-to-solar

 

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Published: 5 January 2017