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UK Nuclear Subsidies – We Told You So – Hinkley Point C

NuClear News No.107 May 2018

Ten years ago Steve Thomas, Professor of Energy Policy at Greenwich University predicted that nuclear companies would eventually insist on receiving subsidies to build new reactors, and the government would be forced to drop its refusal to give subsidies or abandon its nuclear ambitions. Regrettably his prediction has come true. (1)

 Hitachi Chairman Hiroaki Nakanishi had a face-to-face with Prime Minister Theresa May earlier this month, and according to the Japanese media the UK government has offered to shoulder 2 trillion yen (£13.3 billion) in loans and other means to cover a huge portion of the cost of new reactors at Wylfa. Whether that will be enough to persuade Hitachi to go-ahead remains to be seen. The Company is reported to be planning to decide week ending 19th May according to the Mainichi newspaper. (2)

 Horizon was supposed to be submitting its application for Development Consent to the Planning Inspectorate by the end of March, but this has now been delayed until spring or summer. (3) Officially the application has been delayed by concerns over the plant’s impact on colonies of protected seabirds. The Company said it needs to thrash out the impact building the power station will have on colonies of sandwich, Arctic and common terns. The species are protected under the EU birds and habitats directive. Nearby Cemlyn nature reserve is home to thousands of sandwich terns, which account for about fifth of the birds’ UK population and is the biggest on the country’s west coast. Wildlife groups are concerned about the effect of noise and light from the power station’s construction, as well as a reduction in food for the birds to forage on. Land clearance for the vast site is also expected to displace potential predators, such as rats and foxes. The company says it hopes to resolve the issues and submit the Development Consent Order (DCO) application before the end of June. The delay is expected to be a bump in the road rather than major headache for Horizon, which, rather optimistically believes Wylfa could be generating electricity by the mid-2020s. (4)

Horizon might be telling the truth about the need to resolve these wildlife issues, but the delay gives the Company more time to lobby the Westminster Government for more financial support to build the reactors.

Hitachi now says it wants to slash its Horizon shareholding. The Chairman was apparently planning to ask Theresa May to take direct stake in Horizon. According to the Nikkei Asian review Hitachi expects the U.K. government to invite private British companies to participate and hopes to reduce its own stake to less than 50%.

 Hitachi has recently concluded that the risk of proceeding with the Anglesey project, at an estimated cost of more than 3 trillion yen (£20 billion), is too great to manage on its own as a private company. It plans to withdraw from the project if restructuring negotiations fall through. Such a move would have significant repercussions for nuclear power policy for both Britain and Japan. In response to Hitachi’s concerns, the British government earlier this month proposed that U.K. interests and Japanese public and private interests join with Hitachi to move Wylfa forward. The three sets of shareholders would each put 300 billion yen into the project, giving each a one-third stake. According to sources, the company and the Japanese government.

see it as too risky for Japanese interests to retain a majority shareholding and hope that British interests will acquire a controlling stake. (5)

 Number 10 remained tight-lipped over its negotiations with Hitachi, and a spokesman declined to comment on the latest talks. Hannah Martin, of Greenpeace, said the “information blackout” is “unjustifiable” because of the high costs to be paid by energy users to support the projects. “The public have a right to know what the government is planning to do with their money and why,” she said. “Major Western economies are reducing their exposure to nuclear, so why is Britain doing the exact opposite? It would make no sense to waste yet more on expensive and outdated nuclear when technologies such as offshore wind can do the same job faster and cheaper”. (6)

The Times reports that the entire £15bn-plus cost of Wylfa could land on the government’s balance sheet, even though taxpayers are expected to hold only a minority stake. The final deal with Hitachi may see taxpayers take an equity stake in Wylfa, possibly as much as 33%, alongside Hitachi and the Japanese government. Direct state exposure to the construction of a nuclear plant has faced stiff resistance from the Treasury because of fears about cost overruns and the impact on government debt. Industry insiders said a minority taxpayer stake could result in the entire liability landing on the state’s books, despite the Japanese partners, because official statisticians now take a more conservative approach to accounting for risk where the government is concerned. Any state stake in Horizon would be sold on once construction was completed. (7)

The Japanese Mainichi newspaper reported that Hitachi had received an assurance from the British government that it will guarantee loans for the construction of two reactors in Wales. But Hitachi is still pushing for the British government to take a stake in the project and guarantee electricity prices to ensure it is profitable, the Mainichi said. The cost of the Hitachi project in Wales has ballooned to 3 trillion yen (£20 billion) due to the tougher safety measures, the newspaper said. But BEIS said “We don’t recognise these reports. Nuclear power remains a crucial part of the UK’s energy future but we have always been clear that this must be delivered at the right price for consumers and taxpayers.” (8)

The Times concluded that Britain’s plans to offer financial support for Wylfa were mired in confusion amid conflicting reports of the meeting between the prime minister and Hitachi. Duncan Hawthorne, chief executive of Horizon, told The Times last year that loan guarantees would not make the plant viable and the company had been seeking direct government investment as well as a subsidy contract. Mainichi reported that the plant would cost more than £20 billion, making it even more expensive than EDF’s Hinkley Point C project. A Horizon source distanced itself from that figure. (9)

Caroline Lucas says if Theresa May has agreed to a £13.3 billion loan she’s doing it “without any transparency or scrutiny”, effectively lending out public money behind closed doors. (10) The SNP demanded the Government rule out public money on “failing nuclear projects”. Drew Hendry, their business spokesman, said: “This is yet another damning report of the UK government’s misguided nuclear obsession. Hinkley Point is already set to cost consumers a fortune because of the appalling strike price deal the UK government made with EDF. The Prime Minister must now categorically rule out any public bail out of this, or any other nuclear project and put an end to secret discussions behind closed doors.” (11)

Hannah Martin, Head of Energy at Greenpeace UK, said: “No bank, hedge fund or insurer will touch the UK’s new nuclear programme with a bargepole. So Hitachi has no option but to ask the government for a taxpayer bailout to keep their collapsing reactor programme afloat. This would leave the British public to carry much of the cost and all of the risk. Any prudent investor would laugh at this request. After the Hinkley debacle, it’s vital that the government stops trying to keep our energy policy a secret and presents any offer of a deal to Parliament before the Hitachi board meeting at the end of May. Otherwise it’s difficult to know where their generosity to the nuclear industry might end.”

Prof Stephen Thomas says Wylfa could provide a new model for UK nuclear projects. The Government needs something to demonstrate that Hinkley is the exception rather than the rule. Wylfa has 3 big advantages – support of the Japanese Government; unlike Areva and Westinghouse Hitachi-GE is not bankrupt and disgraced; and it is claimed that the ABWR is a proven technology. The project is a little bit cheaper than Hinkley but only because it’s smaller. Loan guarantees will be essential, and will reduce interest payable to banks. Hitachi is too small to own and operate a facility that is going to cost £25bn. And they don’t have the experience to operate it. The ABWR is actually quite an old reactor design. There are no other prospects for Hitachi to sell the ABWR. 4 reactors in Japan were completed in 4 to 5 years, but that’s the same for other reactors in Japan. There are 2 uncompleted reactors in Japan; and 2 reactors ordered for Taiwan but work suspended. The lifetime load factor of the 4 reactors has been very poor 47 – 71%. All have suffered long shutdowns. In 3 cases this was down to seismic issues. Two reactors had big turbine problems. Even if you take out those years when the reactors were shut performance was still poor. It’s a pre-Chernobyl; pre 9/11; pre-Fukushima design that we have a track record for. (12)

Steve Thomas’ briefing for Greenpeace on “The failings of the Advanced Boiling Water Reactor (ABWR) proposed for Wylfa Nuclear Power Station” is available here: https://www.greenpeace.org.uk/wp-content/uploads/2018/05/ABWR-briefing-final.pdf

Greenpeace has also published a briefing on “Hitachi’s nuclear safety breaches and the case against public funding for the proposed Wylfa Nuclear Power Station.” https://www.greenpeace.org.uk/wp-content/uploads/2018/05/hitachi-briefing-final.pdf    http://www.no2nuclearpower.org.uk/wp/wp-content/uploads/2018/05/NuClearNewsNo107.pdf

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May 19, 2018 - Posted by | politics, UK

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