There was a time – not so long ago – that government ministers talked enthusiastically about a new nuclear age. A fleet of brand new reactors producing reliable, low carbon electricity for decades to come. Not only that, but the government wouldn’t be taking any of the risks associated with financing and building them.
Hinkley, Moorside, Wylfa, Oldbury, Bradwell and Sizewell were identified as the sites for the most significant national wave of new nuclear power construction anywhere in the world.
Of those six, only one is under construction, three have been abandoned, and two face an uphill battle to get the green light.
Under those circumstances, you might think the government would be embarrassed that its energy policy was in disarray. But it’s not.
The collapse of the Wylfa and Oldbury projects today (following the abandonment of Moorside) is evidence of some new economic realities that have seen government enthusiasm for new nuclear fade.
High price
The first and most obvious is the cost of building the darn things.
At £20bn Hinkley Point is the most expensive UK construction project to date – HS2 will beat it.
The good news is that the UK government isn’t paying a penny of it.
The bad news is that the electricity it will one day produce will be expensive.
EDF, the French contractor that’s paying for its construction, could only raise the money to do it by extracting a guarantee from the UK government that it would receive more than double the current going rate – for 35 years.
That’s one way to finance it. Let EDF raise the money and take the risk but ultimately foist the cost onto future generations of energy customers.
Who pays?
One of the reasons Hinkley is so expensive is that EDF needed to go out and borrow huge sums for a risky project at interest rates of over 9%. In fact, of the total £20bn bill for Hinkley, well over half of it was the cost of raising the money over the lifetime of the project.
The government can borrow money much more cheaply than anyone else. Right now it could get a £20bn 10-year loan at 1.3% and use that money to build the thing itself. There are financial and political problems with that.
First, it adds to the public debt – which successive recent governments have been keen to reduce.
Second, if there are massive cost overruns (and that is almost a rule with nuclear projects), the government foots the spiralling bill, taking commensurate political flak.
Third, if the government is suddenly in the business of building nuclear power stations, why not other things – in fact why not nationalise the infrastructure we have already got? That is not comfortable territory for a Conservative government.
Doing the sums
There is a another way. Pay-as-you-go. Rather than lumber future generations with more expensive energy, get current consumers to pay a little extra on their bills (amount decided by the regulator) during the construction. This removes the need for massive borrowing and means you don’t have to offer a juicy price guarantee to the contractor at the end as a reward for taking the operational and financial risk.
This is the model the government now prefers and is testing on the Thames Tideway project. If Sizewell and Bradwell are ever built – this is how they will be financed.
I say “if” because the truth is, the sums for new nuclear have been made very tough by the sharp falls in the cost of renewables. In 2015, the cost of offshore wind was over £140 per megawatt hour. That makes Hinkley Point look cheap at £92.50. The price of offshore wind is now £57.50……. https://www.bbc.com/news/business-46906245
ECIU (accessed) 17th Jan 2019 The future of the Government’s plans to roll out six new nuclear power
stations across Britain is looking increasingly parlous, as the Wylfa
project becomes the second power station to be scrapped in just two months.
Wylfa’s demise makes the Oldbury project extremely unlikely to proceed,
while Toshiba has already backed out of developing its Moorside station.
Their absence leaves space for new low-carbon capacity to fill the gap. Filling the ‘nuclear gap’ with
alternative low-carbon power sources would keep bills down, maintain secure
energy supply and allow the UK to maintain progress towards legally binding
climate targets.
A representative scenario, in which 80% of the energy
output of Moorside, Wylfa and Sizewell C was replaced in equal measure by
onshore and offshore wind, with the remaining 20% by solar PV would entail
an average price of £50-65/MWh, including the cost of system balancing.
This is 13-33% cheaper than the cost of energy from nuclear (not accounting
for nuclear system costs). This would see an additional 11.3 GW of onshore
wind and 5.7 GW of offshore wind capacity, as well as 20.8 GW of new solar
PV capacity. Renewable capacity is already set to increase on current
levels, as more – and cheaper – capacity continues to come online.
IAEA 17th Jan 2019 , In September 2018, as part of a regulatory intervention on external
corrosion management, the UK nuclear safety regulator (Office for Nuclear
Regulation (ONR)) issued a direction for Dungeness B nuclear power station
to carry out a review and reassessment of safety addressing the corrosion
of concealed systems that fulfil a safety function.
Inspections carried out by the site nuclear licence holder (licensee) in response to this direction
identified that seismic restraints, pipework and storage vessels associated
with several systems providing a safety function were found to be corroded
to an unacceptable condition. This condition would have been present whilst
the reactor was at power, although, the affected systems were not called
upon to perform their safety function. Rectification of the degradation has
now been undertaken whilst the units have been shut down for maintenance.
The rectification work required more than 300m of pipework associated with
reactor cooling systems to be renewed, along with renewal of numerous
seismic pipework supports and remediation of carbon dioxide storage
vessels.
Both reactors at Dungeness B are currently (January 2019) shutdown
as part of the licensees ongoing recovery program. The licensee has
identified a number of additional commitments that will be fulfilled prior
to returning either reactor to service. ONR continues to engage with the
licensee to monitor progress against commitments. The licensee has an
on-going investigation underway to establish the causes of this issue. https://www-news.iaea.org/ErfView.aspx?mId=6033b140-6500-4900-a8bb-6bdb9f347c94
Physics World 16th Jan 2019 Dave Elliott: The UK government’s plan to abandon the feed-in tariff
(FIT) system for small renewable energy projects did not go down well,
especially since it meant the loss of the export tariff. Householders who
invested in a photovoltaic (PV) array on their roof have used that to
offset the cost of their investment by selling any extra power they
generated at a reasonable rate – 5.24 p/kWh – to their grid supplier.
However, with the FiT, along with the export tariff, to be closed to new
applicants from the end of March, they will get nothing for any exports. In
a parliamentary debate on the FiT in November last year, energy minister
Claire Perry said she aimed to avoid that situation. It certainly looked
unfair and counterproductive.
Claire Perry has now gone ahead with a
consultation on the Government’s proposals for a new market for
electricity export from small-scale PV solar, configured “so that people
are not providing it to the grid for free”. Under the proposed “Smart
Export Guarantee” (SEG), electricity suppliers would pay new small-scale
PV and other energy producers for excess electricity from homes and
businesses put back into the power grid. https://physicsworld.com/a/after-the-fit/
Dave Toke’s Blog 14th Dec 2019 There’s a bunch of highly misleading statements that the Government is to adopt so-called ‘Regulated Asset Base’ (RAB) financing of nuclear power projects.
Yes, some of the mechanisms that are being proposed are also used in RAB, but the term is being grotesquely distorted to hide the fact that this is a cover for the Government risking very large sums of money to be lent to nuclear power developers.
Put simply, if the nuclear power projects are as expensive as they usually are the electricity consumer will lose an awful lot of money and prices will be jerked upwards. Either that or the
taxpayer takes a hit and funding of public services suffer big time. You can see the cover up printed in the Sunday Times yesterday where, we are told that ‘Ministers are expected to accelerate plans to introduce regulated asset base (RAB) financing, which is popular in the water and infrastructure sectors, for nuclear plants including the Horizon project’.
Under such schemes the developers are allowed to charge consumers in advance for the capital building projects. What Ministers are not emphasising of course, is that in industries such as water the Government does not lend lots of money to the privatised companies. They raise this on private markets. But in the case of nuclear power plants the bulk of the money needed to build them will be borrowed from the Government.
So if the nuclear plant has very big delays and cost overruns (as has happened to ALL nuclear power plant built in the West this century), the Government loses shedloads of money. The Treasury is likely to insist that this gets paid for by adding the (large) sums to electricity consumer bills. RAB has been used to try to finance nuclear power plant in the USA, in the states of Georgia and South Carolina recently.
The result was disaster and the developing company, Westinghouse, went bust. But this was ‘normal’ RAB where the developer takes the risk of cost overruns. But in the proposed UK
nuclear version it will be the electricity consumer who goes bust when the almost inevitable cost-overruns set in!
Business Green 16th Jan 2019, Renewables are on course to overtake fossil fuels for the first time as the UK’s primary electricity source as early as 2020, according to the latest market forecast from EnAppSys. If current trends continue, the market analyst predicts growing renewable power sources such as wind and solar
will generate 121.3TWh of electricity over the calendar year of 2020, pushing ahead of declining coal and gas-fired power sources with a forecasted 105.6TWh of generation.
The forecast assumes current trends of declining fossil fuel generation and rising renewables generation continue at the same annual rate. In 2018, coal and gas fired power stations
produced a combined 130.9TWh, a 6.7 per cent fall from the previous year’s 140.3TWh, the report states.
FT 13th Jan 2019 Nick Butler: Who could blame the board of the Japanese company Hitachi if
its members decide at their meeting this week to scrap plans for a new nuclear power station at Wylfa on the North Wales island of Anglesey?
Hitachi has invested more than £840m in the project over the past six years. The technology has passed all the tests set by the UK’s nuclear regulator. But the company has been unable to get the government to put in place the clear and credible financial structure necessary to underpin the investment.
That failure has already led other investors to abandon the new plant planned at Moorside in Cumbria. Talk of scrapping the Wylfa project could be a bargaining tactic on the part of Hitachi but the reality is probably much simpler. Hitachi’s doubts have been well signalled during the
past few months and the company’s purchase of ABB’s power grid business at the end of last year gives it a range of investment choices.
Given Whitehall’s chronic indecision, the company is ready to use its capital elsewhere. Hitachi’s withdrawal would mark the collapse of the energy policy adopted in 2013 by the UK’s coalition government. Facing what were believed to be ever-rising energy prices the policy plumped for new nuclear, promising that 35 gigawatts of new capacity would be on stream by the mid 2030s – more than replacing the first generation of nuclear plants, which would by then have reached the end of their useful lives.
Because the price of gas seemed doomed to keep rising, new nuclear would come to look highly competitive over time as well as reducing dependence on imports. Since then much has changed, and the assumptions which underpinned the old policy now look laughably wrong.
The costs of all forms of energy (apart from nuclear) have fallen dramatically and there is no shortage of supply. Electricity demand is down thanks to efficiency gains and new technology.
The contract for the first new nuclear station being built at Hinkley Point in Somerset, which enjoys a guaranteed index-linked price for 35 years from the moment the plant is commissioned, looks exorbitant. The demise of Wylfa forces the need for a comprehensive review of energy policy.
Since the UK government is too busy preparing for Brexit to focus seriously on any other issue, the review should be conducted independently. Advances in energy technology offer more
possibilities each year. But those options will never be taken up unless the old outdated policy is scrapped and a more realistic approach put in place. https://www.ft.com/content/7b33e9fa-1648-11e9-9e64-d150b3105d21
More than 700 ‘safety events’ recorded at nuclear bases, News and Star, 14th January 19. More than 700 nuclear safety events have been recorded at Scotland’s nuclear bases since 2006, the Ministry of Defence (MoD) has said.
Defence Minister Stuart Andrew revealed the figures in letters to SNP MP Deidre Brock.
A total of 789 nuclear safety events were recorded at HM Naval Base Clyde at Faslane and nearby Royal Naval Armaments Depot Coulport in the 12 years between 2006 and 2018.
Earlier the MoD disclosed 505 incidents had taken place at Faslane, where the majority of the UK’s nuclear submarine fleet is based. Now, a further letter shows 284 incidents took place at Coulport, where the nuclear warheads are stored and loaded onto the submarines, in the same period
………A Category A incident took place in 2008 when water overflowed from a now-decommissioned primary effluent barge.
Category A events have “actual or high potential for radioactive release to the environment of quantities in excess of IRR99 notification limits”.
……….In response to parliamentary questions from Ms Brock, the MoD also disclosed there have been 22 fires on its nuclear armed or nuclear powered submarines since June 2015.
“It’s a shocking record of accidents and incidents in places where the most dangerous weapons on the planet are,” Ms Brock said.
“We already knew that there were 505 nuclear safety events on board submarines while they were berthed at Faslane and now we find that there have been another 284 in other locations at Faslane and at Coulport where weapons are handled.”
She added: “One bad accident would be enough to wipe Scotland out and the safety record is appalling.
Times 13th Jan 2019 Ministers will be forced to pioneer a new way of financing nuclear power after Hitachi walked away from a £16bn plant in north Wales. The suspension of the Japanese giant’s Horizon project on Anglesey, expected to be confirmed at a board meeting tomorrow, will force the government to lure investors with a financing method that would pile costs on to consumers, even before a plant has been built.
Ministers are expected to accelerate plans to introduce regulated asset base (RAB) financing, which is popular in the water and infrastructure sectors, for nuclear plants including the Horizon site. Hitachi’s mothballing of its scheme, which could cost about 400 jobs, will be a damaging blow to Britain’s energy policy.
In November, its Japanese counterpart Toshiba scrapped plans to build a nuclear plant at Moorside in Cumbria. Japan’s withdrawal from the UK market will kill the country’s ambitions to sell reactors around the globe.
It leaves Britain dependent on France’s EDF and the Chinese company CGN. Together they are
building the £20bn Hinkley Point power station in Somerset, and CGN has ambitions to build its own reactors on the Essex coast at Bradwell-on-Sea. Industry insiders said state-controlled CGN could swoop on Anglesey if Hitachi puts the project up for sale. Kepco of South Korea would also be interested.
The project’s collapse follows years of negotiations between Tokyo and London. Last summer Britain agreed to split the equity equally with the Japanese government and Hitachi. Ministers were keen to avoid a repeat of the deal struck with EDF, which guarantees at least £92.50 per
megawatt hour for Hinkley Point’s electricity for 35 years. The Horizon deal would have guaranteed about £75 per megawatt hour, falling to the £50s for future reactors on the site.
However, the Japanese government balked at the risk, and tried to pass the equity on to Japanese utility companies. That triggered nervousness at Hitachi, a conglomerate with interests from train manufacturing to power grids. Nuclear power makes up just 4% of its business.
Shares in Hitachi surged almost 9% on Friday amid speculation about Horizon being halted, despite the company having spent more than £2bn on the plans.
EDF is keen to use RAB financing for Sizewell C in Suffolk, its next UK plant. The funding method, which allows investors to earn a set return, has been used for a huge new sewer beneath London and Terminal 5 at Heathrow. However, the pre-funding formula passes some of the risk of cost overruns on to consumers, and their bills rise even before a project has been completed. https://www.thetimes.co.uk/article/fce4e714-169e-11e9-9e09-701e9f424b2e
U.K’s Nuclear Future Fades as Hitachi Exit Follows Toshiba, Bloomberg, By Lars Paulsson and Mathew Carr January 11, 2019,
EDF’s atomic plants need to be replaced by new generation
Offshore wind could be the winner from withdrawal, RBC says
…….Japanese conglomerate Hitachi Ltd. will halt work on the Wylfa project and take a one-time charge as negotiations with the British government over funding stalled, the Nikkei newspaper reported. After Toshiba Corp.’s withdrawal from its Moorside plant in November, it leaves the nation with just Electricite de France SA’s Hinkley Point project underway and that’s been mired in controversy because of delays and the cost to the U.K. consumer.
……..The Nikkei report said the company’s board will make a decision next week and cited an unidentified executive saying the project isn’t being abandoned entirely and could be restarted in the future.
Toshiba said in November it planned to liquidate NuGeneration Ltd., its U.K. nuclear power developer, after failing to find a partner or a buyer for the Moorside project. In September, China General Nuclear said it may give upthe chance to operate a nuclear plant at Bradwell amid political sensitivities over Chinese investments, the Financial Times reported.
As the U.K. is running out of nuclear options, other technologies stand to benefit.
Ecuador has begun a “Special Examination” of Julian Assange’s asylum and citizenship as it looks to the IMF for a bailout, the whistleblowing site reports, with conditions including handing over the WikiLeaks founder.
Former Ecuadorian President Rafael Correa tweeted an image of the letter he received from the State Comptroller General on December 19, which outlines the upcoming examination by the Direction National de Auditoria.
The audit will “determine whether the procedures for granting asylum and naturalization to Julian Assange were carried out in accordance with national and international law,” and will cover the period between January 1, 2012 and September 20, 2018.
Assange has been in the Ecuadorian Embassy in London since he sought asylum there in 2012. He was granted Ecuadorian citizenship last December in a bid to protect him from being extradited to the US where he fears he faces secret charges for publishing US government cables and documents.
WikiLeaks tweeted the news on Wednesday, joining the dots between the audit and Ecuador’s consideration of an International Monetary Fund bailout. The country owes China more than $6.5 billion in debt and falling oil prices have affected its repayment abilities.
According to WikiLeaks, Ecuador is considering a $10 billion bailout which would allegedly come with conditions such as “the US government demanded handing over Assange and dropping environmental claims against Chevron,” for its role in polluting the Amazon rainforest.
Assange’s position has increasingly been under threat under Correa’s successor, President Lenin Moreno, with Ecuadorian authorities restricting his internet access and visitors.“I believe they are going to turn over Assange to the US government,
Wales Online 11th Jan 2019, The campaigning group People Against Wylfa B (PAWB) said in a statement: “Should the news be confirmed at a meeting of the Hitachi Board next week
then it will be a relief for all of us who worry about the future of our
island, our country, our language, our environment and indeed renewable
energy.
PAWB has warned for years that the costs associated with the Wylfa
project would be likely to prove fatal to the project, but we were ignored.
“Consequently, millions of taxpayers’ money from the island, Wales and
the UK was invested to back Wylfa B. In addition huge political capital has
been invested, and there has been a failure to have a mature public
discussion about the project other than in terms of cash and jobs.
“The legacy of this, if the reports from Japan prove to be true, is that over a
decade has been wasted on Wylfa, with very little alternative economic
planning in evidence. Our young people have been promised jobs on very
shaky foundations. “Good land has been destroyed to create infrastructure
to back the project. It is time for politicians and officials from the UK
Government, the Welsh Government and Anglesey to admit that they were
wrong. “Wales is rich in natural resources which can be used to create a
vibrant and sustainable energy future, and above all else create more jobs
in less time than Wylfa would have done.” https://www.walesonline.co.uk/news/politics/hitachi-to-pull-plug-angleseys-15663299
TEAGS 11th Jan 2019 Locals and campaigners create ‘Sizewell Hero’ – a tribute to the film
‘Local Hero’ – to launch a new online campaign, urging EDF to change
its approach. Theberton and Eastbridge Action Group on Sizewell [TEAGS]
today launched a new video and online campaign.
Made by local people, it is aimed at increasing awareness and concern about the impacts of the proposed Sizewell C&D nuclear power station to audiences beyond east Suffolk. EDF
launched its Stage 3 consultations on the twin-reactor development last
week. ‘Sizewell Hero, hosted on YouTube and Facebook, is a three-minute
homage to the award-winning 1980s film ‘Local Hero’, and shows a
company executive transformed and inspired by the beauty of Minsmere and
the coast at Sizewell to think again about the company’s plans.
The video is entirely a local initiative, starring Middleton actor Simon Bridge and
featuring other residents from Theberton and Middleton. The film was shot
and produced by Steve Sutton and crew from UK Aerial Photography Ltd, based
in Peasenhall. Permission to use the famous ‘Local Hero’ theme music
was kindly granted by Mark Knopfler’s management, Crockford Management
and the project was made possible by a grant from Lush Charity Pot. Stills
and ‘making of’ photos are available. https://teags.org/sizewell-hero-video-and-online-campaign-launched/
Energy ministers eye new formula to pay for Britain’s nuclear power plants
Japanese withdrawal leaves UK energy policy in tatters Times, John Collingridge, January 13 2019,Ministers will be forced to pioneer a new way of financing nuclear power after Hitachi walked away from a £16bn plant in north Wales.
The suspension of the Japanese giant’s Horizon project on Anglesey, expected to be confirmed at a board meeting tomorrow, will force the government to lure investors with a financing method that would pile costs on to consumers, even before a plant has been built.
Ministers are expected to accelerate plans to introduce regulated asset base (RAB) financing, which is popular in the water and infrastructure sectors, for nuclear plants including the Horizon site.
Japan’s prime minister Shinzo Abe is in London this week, and it seems likely in his meeting with Theresa May that the Japanese-backed nuclear power plant in Wales will come up.
The Wylfa project, to be built by Hitachi and its subsidiary Horizon, is one of a clutch of planned nuclear power stations which the UK government has heavily prioritised for security of power supply, and meeting the country’s climate obligations.
These developments effectively illustrate that UK nuclear power policy is heavily dependent on overseas developers. What is less understood is that there are significant shifts underway in Japan which strongly suggest Hitachi’s projects may too be at risk.
‘Nuclear export superpower’ The most advanced of Horizon’s nuclear plans is a large power station to be built at Wylfa on Anglesey, North Wales.
In fact, with the collapse of Moorside, the Wylfa plant is the only nuclear project that could realistically be built before 2030, in addition to the plant already under construction at Hinkley Point in Somerset.
Japan, however, is reconsidering its nuclear export strategy. Because it keeps going wrong.
Until recently it had 3 companies interested in building nuclear power stations abroad: Toshiba, Mitsubishi and Hitachi.
These companies have experience building nuclear stations at home but since the Fukushima disaster in 2011, they have had to look elsewhere. Seeking to help these giants of Japanese industry to maintain their businesses, Prime Minister Abe reportedly wanted to turn Japan into a “nuclear export superpower”.
Meanwhile, another of Japan’s nuclear groups, Mitsubishi Heavy Industries (MHI), has also been struggling to get its international project off-the-ground. It had one nuclear power station in the offing, at Sinop in Turkey, following an agreement years ago between the two countries’ prime ministers. However it seems clear that MHI is preparing to leave the project amid its “ballooning costs”. This is the only nuclear power station project MHI had an interest in.
The last of the companies involved in Japan’s nuclear export push is Hitachi. It has one active overseas nuclear project in UK at Wylfa, North Wales, and one more speculatively planned at Oldbury in Gloucestershire.
Despite this already generous largesse (on behalf of UK taxpayers, not offered to any other energy projects) Hitachi are intending to come back to UK government and ask for more. It looks like no assessment of the risks by a private funder come back looking good, and the only way nuclear plants can be built is with government stepping into very risky projects that require taxpayers to shoulder the risk.
Reportedly Japanese government has asked its development banks to fund the ‘nuclear export strategy’, and Wylfa in particular, but they don’t want to. It is quite difficult to see how Hitachi can manage the risks of this project without some home support, and support in Japan is ebbing away.
Few other countries will be stepping into the UK’s nuclear hole. The South Korean company KEPCO – that once might have taken over the Moorside project – is also finding exporting nuclear power tough to export, as ‘shoddy’ construction in a nuclear plant in United Arab Emirates, with attendant delays and extra costs, is showing.
For the UK, which has made a heavy bet on new nuclear to cover for retiring plants and make up a significant share of its decarbonisation targets, news from the other side of the world makes that bet look a dodgy one.
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