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Hinkley nuclear white elephant: Institute for Energy Economics and Financial Analysis (IEEFA) warns UK govt against further loan guarantees

IEEFA Brief: U.K. Government at Risk in Over-Budget Nuclear Project That Stands Incomplete, A Sensible ‘Plan B’ for Hinkley Point C Project in Somerset Would Avoid Extending Public Loan Guarantees   Institute for Energy Economics and Financial Analysis (IEEFAOct. 16, 2017 (IEEFA.org) — A research brief published today by the Institute for Energy Economics and Financial Analysis cautions the U.K. government against investing further in an unfinished nuclear project on the Bristol Channel in southwest England.

The brief — “A Half-Built, High-Priced Nuclear White Elephant: How Should the U.K. Proceed With This Troubled Project?”— concludes that the Hinkley Point C plant, an over-budget and delayed 3,200 megawatt (MW) power project in Somerset, may never enter commercial operation.

Gerard Wynn, a London-based energy finance consultant and lead author of the brief, said problems surrounding the project reflect those affecting the nuclear electricity-generation industry broadly.

“The now-stumbling renaissance of nuclear power in Europe and the U.S. has been a story of delays and cost overruns, with a new generation of untested nuclear power designs proving much harder to build than anyone imagined and even the project developers admitting to high levels of risk,” Wynn said.

“European Pressurized Reactors are untested, and those under construction have been more expensive and take longer to build than expected,” Wynn said. “The history of recent nuclear projects makes it very likely, perhaps probable, that Hinkley will cost substantially more and take far longer to build than its advocates are claiming.”

THE BRIEF DRAWS PARALLELS BETWEEN HINKLEY AND COSTLY NUCLEAR PROJECTS that have faltered elsewhere, most recently in the U.S.

“The similarities between Hinkley, which is now finally under construction after years of delay, and other troubled European and U.S. projects, particularly the recently shelved V.C. Summer plant in South Carolina, cannot be ignored,” the brief says. “Perhaps the most important similarity is in the question of what the project ultimately will cost.”

“Hinkley already is frequently described as the world’s most expensive power plant, with EDF estimating that the project will require £19.6 billion to build by the time it enters commercial operation, currently set for 2025. But others see higher costs, and any delays would inevitably lead to an increase in total costs. For example, the U.K.’s National Audit Office (NAO), which advises on the use of public money, calculates that the public subsidy for the plant could top £30 billion, and says the government needs a Plan B.”

Wynn noted that rising costs “were the leading factor in the decision by SCANA Corporation and Santee Cooper, the two South Carolina utilities building the Summer facility, to cancel that project. Costs there soared from an originally estimated $11.5 billion to upward of $25 billion by the time the utilities said they would abandon the two unit, 2,200-MW project.”

Other parallels with struggling and failed projects in Europe and the U.S. include:

1. Untested technologies…….

2. Construction delays of five to nine years…….

3. Cost overruns ranging from 79 percent to 250 percent…..

4. Delays and cost overruns are causing technology vendors extreme financial distress…..

5. Internal turmoil indicates misgivings among those closest to the projects……

Full report here: “A Half-Built, High-Priced Nuclear White Elephant: How Should the U.K. Proceed With This Troubled Project?”

Media contact: Karl Cates, kcates@ieefa.org, 917.439.8225

About IEEFA: The Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. http://ieefa.org/ieefa-brief-u-k-government-risk-budget-half-finished-nuclear-project-may-never-come-online/

October 18, 2017 - Posted by Christina Macpherson | business and costs, politics, UK