New CEO of EDF, Simone Rossi , facing a thankless task in trying to develop Hinkley Nuclear Power Station

Ft.com 2 Oct 17 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. …….

October 4, 2017 - Posted by Christina Macpherson | business and costs, France, UK

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