The total bill for the first nuclear reactor to be built in the UK in a generation has surged more than 50 per cent, as the European Commission – on a split vote – approved subsidies that will amount for two-thirds of the extraordinary $45 billion price tag for the 3.2GW facility.
The Financial Times reported that the price tag for Hinkley C – Europe’s biggest and most controversial infrastructure project – had been lifted to £24.5 billion, up more than 50 per cent from the £16 billion disclosed last year by EDF, the state-owned French utility running the project. The FT described the project as potentially the “last hurrah” for the nuclear industry.
The discrepancy in costs was apparently due to the fact that the original figure did not include interest payments made during construction and other pre-building costs, according to EDF. In other words, it didn’t include the cost of capital, a frequent omission from nuclear industry costings.\r\n\r\n
The bill could actually be much higher. Joaquin Almunia, the EU competition commissioner, said the project’s total costs would be about £34 billion ($A62 billion), including cash the developers had to show they could come up with in the event of problems during construction.
The EC approval for the project came despite objections from many commissioners, including Austria, which plans a legal challenge. Germany is also unhappy.
The UK intends to provide up to £17.6 billion in subsidies to the project, including a guaranteed, inflation-linked tariff over 35 years that is twice the cost of electricity in the UK now, and could be lifted after 15 years. The plant, if it goes ahead, will not start before 2023.\r\n\r\nEven the FT was unimpressed.
“The obvious losers are the UK’s consumers who are trapped into paying a price for electricity that is double the current wholesale price for 35 years after the plant starts up,” the paper said.
“The deal will go down in history, alongside the privatisation of the Royal Mail, as an example of the inability of the British government – ministers and civil servants alike – to negotiate complex commercial deals,” the FT wrote. “The phrase ”rolled over” will enter the French language and be accompanied always with a Gallic smile. Still, one should recognise talent and so chapeau to the French negotiators.”\r\n\r\nThe FT said the nuclear energy industry as a whole would be a loser, because it underlines the limits of the technology, and its inability to compete against other fossil fuels, or renewables.
\r\n\r\n“With the prices of oil, coal and natural gas falling, nuclear has a limited future if this is the best price point the industry can offer. The deal carries the air of being the last hurrah of an old order within which energy deals were done on the assumption of ever-rising prices.”\r\n\r\nEven France, the country with the highest penetration of nuclear, is reassessing its nuclear options. It cannot afford to build new plants at scale – which is why it is so delighted its state-owned EdF is given such a leg-up by the UK government – and it is even hesitating at extending the life of its current fleet because of the cost of doing so.
r\n\r\nEDF has estimated that extending the life of its plants would cost at least 55 billion euros ($A80 billion), a sum that Deutsche Bank estimated the company cannot afford, because it would leave it cash flow negative. The French government has already decided to put a cap on nuclear production, and is looking to cut nuclear’s share from 75 per cent to 50 per cent.
“Investments in reactors at the oldest plants don”t last forever. You then have to re-invest and that is very expensive,” Energy Minister Segolene Royal told France 3 television this week, Reuters reported.
“If it costs a lot more to carry out maintenance to make older plants secure, it would be better to build renewable energy installations,” Royal said. In other words, France”s energy minister is ready to conceded that even refurbished nuclear plants cannot compete with renewables.
Meanwhile, the solar industry and environmental groups were also disappointed by the EC decision on Hinkley. Greenpeace labeled it a “world record sell-out to the nuclear industry”, and noted that it distorted competition rules so much there were sure to be legal challenges, such as Austria’s.
James Watson, CEO of European Photovoltaic Industry Association (EPIA), questioned why EC could ask renewables to integrate in the energy market, while at the same time validate another subsidy to nuclear.
“In order to drive public and private investments, and deliver an energy transition that a vast majority of European citizens want, renewables need fair access to the market. That includes policymakers adopting a balanced attitude towards different energy technologies. [The decision] simply constitutes a step in the opposite direction,” said Watson.
As the decision was handed down in Brussells, the UK climate change minister Amber Rudd said that the government intended to remove subsidies for solar PV by 2020.
Speaking at the opening of a 2.7MW solar project in Yorkshire yesterday, the minister said that the industry was on track to be subsidy free by 2020, PV Tech reports.
Rudd said: “I think that the public share our [the Department for Energy and Climate Change’s] enthusiasm for getting solar out there. The evidence is that, of all the renewable energy technologies available, the public are most supportive of solar – they understand that there is still a subsidy. We hope that it will be subsidy free by 2020 and on the current rate of deployment that seems achievable.”
However, the solar industry warns that the removal of renewable obligation support for solar projects over 5MW could threaten the technology”s journey to grid parity. Speaking to PV Tech’s sister site, Solar Power Portal, Rudd described the scrapping of RO support for solar as “looking after taxpayers’ money”.
The minister continued: “It’s right that the subsidies came down because the deployment was so dramatic, it will continue to be reviewed so that we can eventually – hopefully by 2020 – have it subsidy free, which is obviously the goal.
The Solar Trade Association (STA) calculates that solar accounts for just 5 per cent of the RO budget.