nuclear-news

Hinkley nuclear plant vulnerable to becoming a “stranded asset”

A Nuclear Lesson For Big Oil (And Vice Versa), Bloombeg Gadfly, 16 Sept 16  By Liam Denning It is a reasonable bet that the $24 billion Hinkley Point C nuclear power project in the U.K., due online in 2025, will neither be ready by 2025 nor cost just $24 billion. Indeed, it’s so reasonable that, as fellow Gadfly Chris Bryant lays out here, the stock market appears to be making that very same bet.

Leave aside the also reasonable conspiracy theories about London buttering up Paris and Beijing by approving the project and focus on the ostensible reason for doing it: maintaining security of energy supply……….

The oil and gas industry’s experience reveals one more insidious risk facing the nuclear project.

There’s a reason EDF demanded the U.K. government guarantee an electricity price for Hinkley Point’s output atdouble the current wholesale price. Financing a $24 billion project that won’t produce a cent of revenue for a decade is really tough — especially in an industry carrying as muchhistorical baggage on busted budgets and timescales as nuclear power does. Subsidies and guarantees help bridge the risk gap………

mega-projects can prove vulnerable not despite their scale but because of it. They might extract savings on, say, procurement, but their inherent complexity makes it hard to apply lessons from previous examples to gain efficiency. ……..

And once a company is several years into building a new power plant or LNG terminal, the compulsion to complete it is enormous, due to the already huge sunk costs (and need to save face), even if budgets and schedules have been blown through or — as was the case with fracking — another technology has disrupted the market……..

With energy technology in such flux right now, ranging from renewable power to batteries to energy efficiency, is there a high risk that a giant plant a decade or more away from completion becomes stranded? You bet…..……

In Hinkley Point’s case, of course, any future U.K. government wouldn’t dare try to wriggle out of those high, guaranteed power prices for fear of enraging the French. Because that’s never happened. https://www.bloomberg.com/gadfly/articles/2016-09-16/hinkley-point-nuclear-power-project-s-lesson-for-big-oil

September 17, 2016 - Posted by Christina Macpherson | business and costs, UK