SLOW BUT SURE NUCLEAR GROWTH
According to the International Atomic Energy Agency world-wide nuclear generating capacity is set to expand over coming decades. The notable exception is Western Europe, where it is expected to decline. That can be attributed largely to Germany’s decision to abandon nuclear energy and continuing uncertainty over the UK’s plans.
The size and timing of the anticipated expansion in other parts of the world is difficult to predict. The IAEA talks of an increase of anything from a few percentage points to nearly 70 per cent, explaining that the wide range is accounted for by uncertainty over energy policy, licence renewals, shutdowns and future construction.
In a separate report, the IAEA and the Organisation for Economic Co-operation and Development’s Nuclear Energy Agency (OECD/NEA) estimate that the average levelised cost of electricity (LCOE) for a nuclear power station is comparable to that for a coal station and lower than that of a natural gas fired power station. LCOE is the long-term price at which the electricity produced by a nuclear station will have to be sold for investors to cover all their costs.
The competitiveness of nuclear energy was highlighted by the Chancellor, George Osborne, this month, when he met members of the House of Lords economic affairs committee. He was extremely bullish about the prospects for the Hinkley Point C project, even though he was speaking only days after EDF announced that it would not meet its anticipated and much delayed start date.
The Chancellor told the committee that, later this month, he will visit China, where he is expected to prepare the way for an agreement between EDF and its potential Chinese investment partners. This more or less confirms the widespread speculation that the financial package for Hinkley will be agreed when the Chinese President, Xi Jinping, visits the UK in October.
COUNTRY BY COUNTRY ANALYSIS
The country-by-country capacity projections contained in the 2015 IAEA report are based on national projections supplied by countries to the OECD Nuclear Energy Agency and other international organisations. These are used to produce two scenarios. The low case, “conservative but plausible,” assumes that current market, technology and resource trends continue with few policy changes affecting nuclear power. The high case assumes that current rates of economic and electricity demand growth continue.
The IAEA emphasises that its projections are not intended to be predictions and merely represent a plausible range of nuclear energy growth. The estimates should therefore be viewed as very general growth trends, the validity of which must be constantly subjected to critical review.
With this caveat, nuclear power is projected to reach 385.3 gigawatts of electric energy (GWe) by 2030 in the IAEA’ s low growth projection, compared with the
2014 figure of 376.2 GWe, an increase of 2.4 per cent. The high scenario, however, points to a 2030 nuclear capacity of 631.8 GWe, representing a growth of 68 per cent.
Low natural gas prices, renewable energy subsidies, global financial uncertainties, the implementation of safety improvements in response to the Fukushima Daiichi accident in Japan and the deployment of advanced technologies are identified as factors which affect the growth rate. With over half of the world’s 438 operating reactors now more than 30 years old, the effects of future retirements have also been factored in.
The strongest nuclear expansion is projected in the Far East, especially in China and South Korea. Strong growth is also projected in the Near East, including the United Arab Emirates’ project to build its first nuclear power plant, in South Asia and the Middle East, with six reactors under construction in India, and in Eastern Europe, with reactors under construction in Russia and Belarus.
Western Europe is the only region where nuclear capacity is projected to decrease by 2030 under both low and high scenarios. North American capacity is forecast to decrease under the low scenario but to increase slightly under the high estimate.
NUCLEAR COSTS COMPARABLE TO COAL?
The IAEA and OECD/NEA report “Projected Costs of Generating Electricity” assumes a 7 percent discount rate, the expected rate of return foregone by bypassing other potential investments. In other words, it is the rate of return
investors could potentially earn in financial markets. The highest LCOE for a nuclear power station is in Hungary, where it is $69.68 per megawatt hour (MWh) and the lowest is in South Korea, where it is $22.20 per MWh.
The report suggests that because of the high capital intensity of nuclear power stations, a 10 per cent discount rate is probably more appropriate than a 7 per cent rate. On this basis nuclear power is more expensive than both coal and natural gas-fired power stations, but not by much.
The situation changes again if the operating life-time of nuclear power stations is extended, as is happening in the UK. A large number of nuclear stations are reaching their initial design lifetimes in several countries and the report predicts that extensive refurbishments, safety upgrades and lifetime extension programmes are likely to take place within the next 20 years.
In its reference scenario the report estimates that the LCOE of a nuclear station which has undergone a lifetime extension programme is between $23 and $26 per MWh and these results compare very favourably indeed with other electricity sources.
The report also examines the future prospects of energy technologies and says that by 2030 the focus in nuclear energy will be on small modular reactors (SMRs) and prototypes of Generation IV reactors. It believe that SMRs can target niche markets and countries with small electricity grids that require baseload power.
In the best case scenarios SMRs are expected to have total electricity generation costs equal to large nuclear power stations if all the competitive advantages of SMRs are realised, the report says. Those advantages include serial production, optimised supply chains and lower up-front financing costs.
The report goes on to argue that to open up the market for SMRs, governments and industry should work together to identify target markets and accelerate the deployment of SMR prototypes in those markets,
For Generation IV technologies, the report calls on governments to assess the long-term benefits of developing such designs. It says that public-private partnerships should be put in place between governments and industry in order to develop demonstration projects for the application of co-generation technology in nuclear stations.
Co-generation is where a power station produces both electrical power and heat for residential and commercial heating requirements – so-called district heating – resulting in an increase in the station’s efficiency.
CHANCELLOR BACKS HINKLEY POINT C
The IAEA and OECD/NEA report does not compare nuclear, coal or gas-fired generation costs with those of wind or solar power or other even more exotic systems but the Chancellor of the Exchequer, George Osborne, did when he was questioned by members of the Lords economic affairs committee.
He said that nuclear energy remained “substantially cheaper than any other low carbon technology” and described it as an important part of Britain’s future energy mix. Other forms of energy, such as shale gas, would be complementary to nuclear “and not an alternative.”
The Chancellor was particularly robust in his defence of the Hinkley Point C project, claiming that Britain would be left with a “very big hole” in its electricity needs without the plant, which is expected to generate around seven percent of the country’s electricity supplies.
He said that the Government was fully behind a deal and described it as a “tragedy” that Britain had stopped building nuclear power stations. That is something SONE members have been saying for decades, of course
“I’m pretty confident that we’re going to be able to do a deal,” the Chancellor said, “but we’re still in negotiations.” Maybe, but all the signals are that the talking will soon be over.
One of the cross-bench peers, Lord Turnbull, attacked the Hinkley Point C deal, which guarantees EDF a price of £92.50 per megawatt hour, and described it as “incredibly expensive” and a “huge commitment for the Government” but he received short shrift from the Chancellor.
New nuclear power stations – and not just Hinkley Point C – would form part of the Government’s energy strategy “to make the lights stay on,” the Chancellor emphasised. “The current generation of nuclear power stations are coming to the end of their life. That is going to create a very big hole in our base electricity supply unless we do something about it.”
George Osborne’s vigorous defence of EDF’s Hinkley Point C scheme came less than a week after EDF itself had admitted that the proposed station had been delayed and would not start generating in 2023 as planned.
Jean-Bernard Lévy, chairman of the French company, declined to say when he expected the £24.5 billion power station to come on line, reinforcing speculation across a wide cross-section of the media that it might be well past 2023 and that Hinkley might be overtaken by other proposed nuclear project with far shorter build times and actual operating track records.
The NuGen consortium is planning first power from a reactor at Moorside in Cumbria, close to Sellafield, by the end of 2024, while Horizon plans to start generating electricity from reactors at Wylfa during the first half of the 2020s.
FUTURE PARTNERSHIP DEALS?
Explaining the announcement that Hinkley Point C would be further delayed, Mr. Lévy said that the actual construction time would stay the same but that the commissioning date would be updated when the final investment decision was taken. That decision will be based solely on EDF and Chinese investment, as EDF has so far failed to tie up deals with any other potential partners, although Mr. Lévy said it was possible that it would be opened up to other partners later.
Originally, EDF had planned to retain only a 45 to 50 percent stake in Hinkley, with China General Nuclear Corporation and China National Nuclear Corporation taking a combined stake of 30 to 40 percent. Areva, the reactor manufacturer, was expected to take 10 per cent and other “interested parties” were expected to take up to 15 per cent.
A couple of months ago it was announced that EDF was to take a majority stake in Areva, which is beset by financial problems and as both companies are State-owned that does not have too much of a bearing on the financing of Hinkley Point C.
The real players are the governments of France, China and the UK, hence the importance of the Chinese President’s visit to the UK next month. Coincidentally, that visit will take place a few days before SONE’s annual general meeting, where there will be much to talk about.
Even at this late stage there are still siren voices calling on the UK Government to extricate itself from any further involvement in the Hinkley Point C project. Their case was strengthened by Mr. Lévy’s announcement not only of a further delay to the start-up of the UK project but also more delay and cost escalation at th Flamanville-3 EPR reactor unit in northern France.
DELAYS TO THE PRECURSOR PROJECT
First fuel loading and start-up of the reactor unit is now scheduled for the fourth quarter of 2018 following “a comprehensive review” of the Flamanville project and project organisation, with a view to improving construction site management until commissioning has been completed. Start-up was originally intended to be sometime in 2012.
“I have reviewed the Flamanville EPR project in detail and I am absolutely confident that it will be a success,” Mr. Lévy said. “It is a priority for EDF and
of critical importance for the French nuclear industry and its success internationally. Our teams and those of our partners, particularly Areva, are working to complete this project together in compliance with the most stringent nuclear and industrial safety standards. All of the experience gained at Flamanville will be invaluable for other EPR projects, such as Hinkley Point.”
There are certainly plenty of lessons to be learned from EDF’s experience with the Flamanville EPR project in France and, for that matter, from similar projects in Finland and China.
The EDF board gave the go-ahead for construction of the Flamanville plant in May 2006, indicating that it expected to complete the unit by 2012. In November 2011 the company announced that the unit would begin commercial operation in 2016, four years later than originally scheduled. Structural and economic problems were blamed for the delay.
EPRs are also under construction at Olkiluoto in Finland and Taishan 1 and 2 in China. The Finnish station has been under construction since 2005 and has seen several revisions of its start-up date, now expected in 2018, as well as litigation over who should cover the cost of it. Taishan 1, under construction since 2009, is now expected to start up in 2016, while Taishan 2 is scheduled to begin operating a year later.
There are some positive indicators, however. According to EDF “significant progress” has been made on the construction site at Flamanville recently, with 98 per cent of the civil construction work and 60 per cent of the electromechanical erection completed. In addition, pre-stressing operations on the reactor building inner containment have been carried out and the control room has been commissioned.
The latest siren voice to seek to lure the Hinkley project down the slippery path to destruction is that of the “Financial Times,” traditionally a supporter of nuclear energy. It did so the day after the Chancellor of the Exchequer had thrown his weight behind the scheme in the House of Lords
In a first leader, it said that the UK should think again about Hinkley Point and that the economics of EDF’s nuclear project looked less and less desirable. It did accept, however, that Hinkley had one big advantage. “Once fired up, the plant’s reactors will churn out electricity at a steady price, unmoved by volatility in wholesale gas prices” and it also acknowledged that there was a case for including nuclear in the UK’s energy mix, precisely what George Osborne had said. That is as good as it gets, however.
The FT would like the Government to look at “the whole misconceived project
again,” using the weeks of uncertainty which remain until a final decision is taken by the Chinese. That strikes me as wholly unrealistic.
The FT argues that as things stand few would bet on wholesale electricity prices holding steady at double their present level for the next half century. “Some experts even hypothesise that they might fall, magnifying the scale of the subsidies and making them permanent. Meanwhile the cost of alternative low carbon sources such as solar, and better technology is falling fast.”
That is as may be, but the fact remains that there is no evidence that intermittent energy sources such as solar and wind power are capable of providing the continuous base-load electricity supply the country needs in the foreseeable future. The FT seems to agree, however reluctantly. The tenor of its piece is more anti-Hinkley Point C than anti-nuclear.
“Some argue that Britain has no option but to return to the nuclear business,” the FT leader writer says. “The country’s existing reactors are reaching the end of their lives. Its dirtiest coal plants are being closed down to comply with EU rules. Stringent carbon targets may require some of the country’s “baseload” power to come from atomic sources. But any sensible nuclear strategy must surely involve proven technology and reasonable costs. EDF offers neither.”
“RIGHT TECHNOLOGY, RIGHT PRICE, RIGHT TIME”
Despite what the Financial Times thinks, indeed what most media commentators appear to think, the Hinkley Point C project is going to be a success, according to Vincent de Rivaz, the chief executive officer of EDF Energy. What he had to say during a visit to EDF’s Dungeness nuclear pwoer plant in Kent will surprise many people but his views deserve to be heard.
It was inevitable that the Hinkley project would come under intense scrutiny as a final investment decision approached, he said. Other large infrastructure projects, such as Crossrail, the Channel Tunnel and Heathrow’s Terminal 5, had faced similar scepticism.
Discussing the much criticised strike price, set at £92.50 per MWh, reducing to £89.50 if a further plant is built, Mr. de Rivas argued that it was wrong to compare the strike price with the current electricity price.
“Today’s market price depends on fossil fuels and ageing plants,” he said. “Our project will ensure we do not need to continue to depend on them in future.
Short-term events have not changed the long-term case on which the project was based and its price deemed fair.”
So what about the technology problems, which have beset the EPR reactor design? “Hinkley Point C will be the fifth and sixth EPRs worldwide,” Mr. de
Rivas said. “It is true that there have been delays at Flamanville. The experience gained there and at Taishan in China will be immensely valuable when it comes to Hinkley Point C. For the UK we have a design that is stable.
“We are sure of what we will build before we begin construction. Our experience will ensure that the technology- which has been through a teething and somewhat challenging period will mature to deliver its full potential for the UK and around the world.”
Finally, Mr. de Rivas insisted that despite the start-up date for Hinkley going back the station would in fact be on time. “Not too early. Not too late,” he said. “When it arrives it will be welcomed and it will be needed. In a few short years, Britain will need Hinkley Point C and we are on track to deliver for when it does.” So there you have it.
The speaker at this year’s annual general meeting, to be held at the institution of Civil Engineers, Great George Street, London SW1 on Monday October 26, 2015 from 2pm is Dr. DAME SUE ION, FREng.
Dame Sue Ion is Chairman of the UK Nuclear Innovation Research Advisory Board (NIRAB). She represents the UK on a number of international review and oversight committees for the nuclear sector, including the Euratom Science and Technology Committee, which she chairs. She is the only non-US member of the US Department of Energy’s Nuclear Energy Advisory Committee, on which she has served since 2005.
Dame Sue spent 27 years with British Nuclear Fuels (BNFL), rising to the position of Chief Technology Officer, a post she held until the company was wound up in 2006. Since then she has held several senior positions in the nuclear research and engineering fields. She has been a Member of the Board of the University of Manchester since 2004 and holds visiting Professorships at Imperial College, UClan and the University of Cumbria.