EDF's 4x900MW Nuclear power plant at Dampierre-en-Burly, commissioned in 1980, will soon turn from a money machine into a monstrous financial drain. Photo: Pymouss via Wikimedia Commons (CC BY-SA).
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EDF facing bankruptcy as decommissioning time for France's ageing nuclear fleet nears
16th March 2017
Soon EDF will have to start the biggest, most complex and costliest nuclear decommissioning and radioactive waste management programme on earth, writes Paul Dorfman. But whereas Germany has set aside €38 billion to decommission 17 nuclear reactors, France has set aside only €23 billion to decommission its 58 reactors. When the real costs come in, they could easily bankrupt the company.
Any significant change in the cost of decommissioning would have an immediate and disastrous impact on EDFs credit rating - something that the debt-ridden corporation can simply not afford.
How much will it really cost to decommission the ageing French nuclear fleet? It's a question that EDF and its partners are fretting over, with good cause.
Because the issue of decommissioning costs is key to whether nuclear is viable or not - every bit as much as the original construction costs.
Perhaps surprisingly, a recently published French Governmental report on Faisabilité technique et financière du démantèlement des infrastructures nucléaires, from Le Commission du Développement Durable et de l'Aménagement du Territoire, Assemblée Nationale, has just blown a significant hole in the French decommissioning strategy.
In late January this year, on the last day of the Commission's work, the Committee took evidence from the EDF head of decommissioning and me. Given the Commission had been working on this for months, and had listened to mounds of complex data, I decided to cut to the chase and make as clear an argument as I could. What follows is that evidence.
How much has France, Germany and UK set aside for decommissioning ?
Whereas Germany has set aside €38 billion to decommission 17 nuclear reactors, and the UK NDA estimates that clean-up of UK's 17 nuclear sites will cost between €109 - €250 billion over the next 120 years - France has set aside only €23 billion for the decommissioning of its 58 reactors.
To put this in context, according to the European Commission, France estimates it will cost €300 million per gigawatt (GW) of generating capacity to decommission a nuclear reactor. That's far below Germany's assumption at €1.4 billion per GW and the UK's of €2.7 billion per GW.
EDF maintain that because of standardisation of some of the reactors and because there are multiple reactors located on single sites, they can decommissioning at a low cost.
Does this claim stack up ? Well, probably not. Reactors are complex pieces of kit, and each has a differing operational and safety history. In other words, nuclear reactor decommissioning is essentially a 'bespoke' process.
In France, EDF has to pay. But can it?
Germany has made multiple provision, enrolling the reactor owners involved - EnBW, EOn, RWE and Vattenfall - to pay into a state-owned fund for decommissioning of the plants and managing radioactive waste. The UK Government will pay most of the costs for nuclear decommissioning and existing waste.
But in France, EDF must pay for it all. For the French, the big question is: Has EDF set aside enough money to cover the huge cost of dismantling and cleaning up its existing nuclear power stations?
Well, EDF say they want to set aside a €23 billion fund to cover decommissioning and waste storage for an estimated €54 billion final bill - and the difference between these two figures will be closed through the appreciating value of its equities, bonds and investments - in other words, 'discounting'.
Discounting involves hoping that the value of these equities, bonds and investments will increase over time. Unfortunately, recent experience has taught us that markets can go with up and down over time - especially the very long-time periods involved in radioactive waste management.
Why has EDF underestimated the costs of decommissioning
and waste storage ?
Even EDFs €23 billion limited provision for decommissioning and waste storage is a large sum of money for a company that has huge borrowings and enormous debt, which is currently running at €37 billion.
Already, Standard and Poor and Moodys (the two biggest international credit rating agencies) have downgraded EDF's credit-worthiness over the corporation's potentially ill-advised decision to go ahead with attempting to construct two more of the failing Areva reactor design (the EPR) at Hinkley Point, UK.
And any significant change in the cost of decommissioning would have an immediate and disastrous impact on EDFs credit rating - something that the debt-ridden corporation can simply not afford.
EDF are already in financial trouble. Along with bailing out the collapsing French nuclear engineering design company (Areva), not only must EDF bear the huge financial burden of their failing reactor new-build at Flamanville, but also pay for extending the life of France's existing nuclear power stations (to 2025), at a cost of €55 billion.
Meanwhile, the estimated cost of radioactive waste management is steadily rising. There are three elements to the waste costs: decommissioning, spent fuel and waste storage (and conditioning) prior to disposal, and spent fuel and waste disposal.
The French nuclear regulator (ASN) says that storing and disposal are much bigger and costlier problems than just dismantling the reactors. This is because nuclear waste (high and medium level waste, including spent fuel) must be dismantled and moved to a new facility, which has not even begun to be built yet.
And the French authority tasked with disposal of all the country's vast and increasing waste burden (Andra) has recently ramped the estimated cost for the planned national nuclear waste repository at Cigéo, to €25 billion - and EDF must pay for most of Cigéo's construction.
Although €5 billion more than EDF anticipated, it still seems a gross underestimation, and the costs are likely to rise considerably.
Spent nuclear fuel build-up - and EDF's 'excessive optimism'
Then there's EDF's existential problems at France's high-level waste storage and reprocessing facility at La Hague, where spent nuclear fuel stores are reaching current cooling capacity limits. This means La Hague may now have to turn away spent fuel shipments from Frances reactor fleet.
In any case, since ASN have identified safety problems with some spent fuel transport flasks, spent fuel transport to La Hague has substantially slowed. All this means the build-up of spent fuel at nuclear sites across France, with the associated problem of cooling the spent fuel at nuclear sites during dry summer periods, with all that means for further escalation of rad-waste costs.
Happily, and perhaps unexpectedly, when the Commission published it's final key findings last month, they came down on the side of those who voiced concerns about EDFs provisioning for reactor decommissioning and waste management - noting that, there is "obvious under-provisioning" regarding "certain heavy expenses" - such as taxes and insurance, remediation of contaminated soil, the reprocessing of used fuel and the social impact of decommissioning.
The Commission found that the clean-up of French reactors will take longer, be more challenging and cost much more than EDF anticipates.
The Commission reported that EDF showed "excessive optimism" in the decommissioning of its nuclear power plants:
- "Other countries have embarked on the dismantling of their power plants, and the feedback we have generally contradicts EDF's optimism about both the financial and technical aspects of decommissioning";
- "The cost of decommissioning is likely to be greater than the provisions";
- The technical feasibility is "not fully assured";
- And the dismantling work will take "presumably more time than expected."
Critically, the Commission's report says that EDF arrived at its cost estimate by extrapolating to all sites the estimated costs for decommissioning a generic plant comprising four 900 MWe reactors, such as Dampierre (see photo), noting that:
"The initial assumption according to which the dismantling of the whole fleet will be homogeneous is questioned by some specialists who argue that each reactor has a particular history with different incidents that have occurred during its history."
So what now?
Soon EDF will have to start the biggest, most complex and costliest nuclear decommissioning and radioactive waste management programme on earth.
It seems very likely that (for various reasons not unassociated with it's current bank balance) EDF may have seriously underestimated the real challenges and costs, with serious consequences for its already unhealthy balance sheet.
This will have profound consequences for the French State, who underwrite EDF.
Dr Paul Dorfman is Honorary Research Fellow at The Energy Institute, University College London (UCL); Founder of the Nuclear Consulting Group (ncg); Nuclear Policy Research Fellow at Joseph Rowntree Charitable Trust (JRCT).
This article was originally published in Nuclear Monitor #839 and is reproduced here by kind permission of the author.
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