There is a place for new nuclear in the future energy mix and that place should not be limited to state controlled economies such as Russia and China. Nuclear can provide power free of emissions. The industry is safer than many others in the energy business. But nuclear has to win that place. It has to be competitive. The question is whether the industry is capable of responding to the challenge. Within the next month Simone Rossi will take over as the chief executive of EDF Energy in the UK. With the job comes responsibility for Britain’s first (and according to one of the energy industry’s leading players, perhaps last) new nuclear plant, Hinkley Point C. The plant is set to be one of the most expensive structures ever built, with the costs estimate pushed up again in July to £19.6bn. HPC is least eight years behind schedule (it was originally supposed to be providing the power to cook our Christmas turkeys this year) but is not expected to be commissioned before 2025, with the possibility that even that target won’t be met.
Mr Rossi could be thought to have the most thankless job in the world. HPC is unloved and unwanted, a project which gives dinosaurs a bad name. That is true in Britain where the decision to proceed last year was only taken because the prime minister’s staff could not identify an alternative source of power – they should have asked more widely and not relied on those already fully committed to one outcome. Instead they gave EDF the go-ahead but placed the entire construction risk on EDF.
Since the company is state owned the ultimate burden rests with French taxpayers. Unsurprisingly HPC is as unpopular in Paris as it is in the UK. At an intriguing conference on the “Global Positive Future” held under the “high patronage” of President Emmanuel Macron at the beginning of September there was no mention of nuclear power. If Mr Macron accepts the tighter financial discipline implied by the proposed eurozone reforms, repeated payments to EDF will become impossible. Many in EDF, once a great company at the heart of the post-1945 reconstruction of France, see the project as an albatross. Control over EDF’s activities in the UK has been moved back to Paris.
Despite all this Mr Rossi could still emerge as a hero. As a new arrival he can look again at the project and decide that instead of throwing good money after bad, it is time to call a halt and look for lower cost solutions. Price has become the key issue since the original deal on HPC was agreed in 2013. A price of £92.50 per megawatt hour, index linked for 35 years from whenever the project is commissioned, was ridiculous then and is even more so now. Given the inflation we have seen since 2013 that starting price is now over £100 per MWh.
The deal symbolised the inability of well intentioned but inexperienced ministers and civil servants to negotiate complex commercial deals. The deal involved no competition and no provision for review if market circumstances changed. The decision demonstrated the unaccountable power of well funded lobbyists.
Circumstances have changed. Over the last four years the price of every available alternative has declined. The cost of offshore wind has fallen to below £60 per MWh in the UK and to just €43 per MWh in Spain. Gas is plentiful and there is no reason to think that a balanced mixture of wind power and natural gas cannot meet future energy needs. There are alternatives.
In the end the price of power will determine whether nuclear has a future not just in the UK but also across Europe. Germany may be religiously opposed to nuclear for reasons which rational observers find hard to grasp but France and other countries are not. The looming question is whether the large French fleet of nuclear stations built in the 1970s and 1980s will be replaced as they reach retirement. Can new nuclear meet the cost challenge? The question is open.
Financing remains the key challenge for the other nuclear projects hoping for a share of the UK market. A different and more easily funded reactor must be found to replace the European pressurised reactor. Around the world there are alternatives which are simpler to build and therefore potentially less expensive. Smaller reactors are available which could be constructed in series at the existing nuclear sites.
Rolls Royce has started to expand its nuclear reactor business, previously dedicated to military use. The Chinese have created the new Dragon reactors. It would be a grave admission of weakness for the newly confident France under residentP Macron if the country’s nuclear industry, once the very symbol of national technical capabilities could not respond.
Mr Rossi can start the process of change. He should accept that those who question HPC are not anti-nuclear or anti-French fanatics. He should explain in detail why the costs of Hinkley have increased since. And he should accept the reality that the current price is uneconomic in a world where industrial energy costs matter.
The risk of a loss of face and the fear of claims for compensation seem to be holding back both the company and some parts from the UK government from reaching this rational conclusion. Abandoning HPC would be hugely popular in the UK, in Paris and among EDF’s long suffering shareholders. Such a decision would also help remove the reputation which the electricity retailers have earned for remoteness and arrogance in the face of consumer concerns. The move would help Anglo-Franco relations, which will matter as the Brexit process proceeds. Finding an alternative would restore confidence in the company and in existing energy policies which otherwise look to be broken. It could also help to restore the reputation and viability of the nuclear sector well beyond the UK and France.