EDF chief Vincent de Rivaz giving evidence today to Parliament's Energy & Climate Change Select Committee. Photo: still from parliamentlive.tv.
EDF promises MPs: 'we will build Hinkley C!' But still no 'final investment decision'
Paul Brown & Oliver Tickell
23rd March 2016
MPs today grilled EDF Energy supremo Vincent de Rivaz over the troubled Hinkley C nuclear plant in Somerset. He insisted that the project was definitely going ahead - but refused to say when the 'final investment decision' was due. Confused? Bewildered? Frustrated? So were the MPs.
Hinkley represents a terrible deal for taxpayers and bill payers. This flies in the face of relentless ministerial rhetoric on value for money for consumers, when wind and solar power are cheaper than nuclear and their costs continue to fall.
"Hinkley Point C will go ahead", EDF Energy boss Vincent de Rivaz assured MPs today in the Energy & Climate Change Select committee.
But even as he continued in similar vein, saying how confident EDF in the EPR technology to be employed, the supply chain, its partners, and eveything else to do with it, one vital element of the package was missing.
Yes, it was the long-awaited 'Final Investment Decision' (FID) which - while comprehensively pre-empted by de Rivaz's representations - has still not been made. It was due in January, then in May, but today de Rivaz refused to confirm any time scale whatsoever to the evident exasperation of MPs.
Moreover the FID is not de Rivaz's to make, but rather for the full Board of Directors. And there's still a number of important pieces to be slotted into the puzzle before it can be made. So MPs are well advised to take de Rivaz's assurances with a hefty pinch of finest sel de mer.
But one thing is clear as day. The Hinkley C project is grossly, monstrously uneconomic and the only way it can be financed is with massive public subsidies and preferential 'investments' from the French, British and Chinese governments. No genuinely private investor is willing to put up a penny.
The depth of the financial problems that EDF is facing was underlined this month by the resignation of its finance director, Thomas Piquemal, who believes that the project - estimated to cost £18-24 billion - could threaten the viability of the EDF group, whose finances are already stretched to breaking point, and so he decided he would leave.
Massive cash injection
Within days of Piquemal's resignation both the UK prime minister, David Cameron, and the French president, François Hollande, pledged to support the building of the plant, despite the fact that the economies of the project look disastrous.
The massive subsidy package at UK energy users expense would see the project enjoy guaranteed, index-linked payments for its power at almost three times current UK wholesale power prices for 35 years, along with loan guarantees and price caps on decommissioning and waste management costs.
Video: Parliament TV Live record of today's Energy & Climate Change Committee evidence taking on Hinkley C. Set to begin with Laurent de Rivaz testimony.
But even that largesse is not enough to attract private sector finance. So in came China General Nuclear Corporation (CGN) last October to take a 33.5% stake in the project for £6 billion (US$8.7 billion) into the project, on a promise of being able to build a nuclear power station of its own in the UK.
But EDF was still unable to finance the balance of costs estimated at £12 billion, as set out in a letter last week from EDF chief executive Jean-Bernard Levy, which said the project could not go ahead without a massive injection of new capital into EDF by the French government.
Immediately, Emmanuel Macron, the French economy minister, made it clear that EDF would be bailed out. He dismissed concerns in both countries about the high cost of the project and signalled the French government's willingness to prop up EDF to enable it to complete the job, whatever it took.
"If we need to recapitalise, we will do it", he said. "If we need to renounce dividend payments again, we will do it." Which is all very well - but would have to be done in a way that would avoid falling foul of the EU's rules on state aid.
If the French government's investments into EDF appears to be distorting markets in energy or giving EDF unfair support over and above other energy suppliers and sources, then the Commission could well rule against the measures. And even if it doesn't, legal challenges are certain to be field at the European Court - potentially tying the whole thing up for years.
And another thing: EDF and CGN have agreed their deal in principle, but nothing has been signed. The key question is how any cost overruns are to be divided up between EDF and CGN. CGN wants EDF to shoulder 100%. EDF wants it shared pro-rata to shreholding. This one could run and run.
A monstrous white elephant poison pill
With political cartoonists depicting the two planned 1,600 megawatt reactors at Hinkley Point as a giant white elephant, it is clear that most people believe it is only the political will of governments that is keeping the project afloat. Opposition to the project on both sides of the English Channel is strong.
In France, the nuclear industry employs 100,000 people, and the trade unions that represent many of them oppose the building of new British reactors because they believe it will jeopardise French jobs. EDF needs to spend billions on its ageing fleet of 58 reactors at home to bring them up to modern safety standards. And the unions' views matter because they have six seats on the EDF board.
In the UK, there is also growing unease because of the very high cost of the Hinkley C deal, which as pointed out by Greenpeace Chief Scientist Doug Parr could still be costing today's school leavers dear as they prepare for retirement. This extraordinary deal looks even worse with the recent revelation that if for any reason the contract is terminated before 2060, the UK will be liable to pay EDF £22 billion in damages.
Caroline Lucas, a British Green Party member of parliament, called the damages a "poison pill" for taxpayers. She told the Guardian newspaper: "Hinkley represents a terrible deal for taxpayers and a huge burden on bill payers too. This flies in the face of relentless ministerial rhetoric on value for money for consumers, especially compared to the costs of wind and solar power, which are cheaper than nuclear and continue to fall."
The UK government's position remains that the new station will bring 25,000 jobs during its construction phase and will be a much-needed boost to energy supply, providing 7% of the country's electricity needs.
EDF also claimed in a statement that it and partner CGN are taking all the risks. British consumers, it says, will not pay a penny until the plant produces electricity. And in a way it's true - the biggest risk for the UK is if the project is completed and the country is forced to pay throug the nose for it until 2060 or beyond.
When, if ever, the plant will produce electricity remains the great unanswered question of the whole saga. EDF is aiming for 2025, seven years later than its original target of 2017. But to judge by other EPR projects the chances of construction being completed by then are remote.
Over cost, behind schedule
The reactor design is untried, and all four of the prototype reactors under construction at present are years behind schedule and massively over budget. The first, at Olkiluoto in Finland, is nine years late, and the second, at Flamanville in France, is six years late and counting.
Neither is expected to start up for at least another two years. And it's looking increasingly likely that Flamanville, which is suffering from a faulty pressure vessel and head, may never be completed.
But some believe that the building of the nuclear power stations is not about economic reality, or even about producing electricity for the UK.
Green campaigner Jonathan Porritt, who chaired the UK's Sustainable Development Commission for a decade, says Hinkley is "a deal that has nothing to do with market reality. Nothing to do with affordability ... and nothing to do with addressing our climate change responsibilities.
"By contrast, it's got everything to do with political leaders in three nations (the UK, France and China), all of which ‘need' Hinkley Point to happen for grubby geopolitical interests of their own."
Paul Brown writes for Climate News Network.
Oliver Tickell edits The Ecologist.
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