1. Time to cancel Hinkley Point C
Time to cancel Hinkley Point C? The German Energy Transition and Future UK Energy Policy September 11, 2017
Steve Thomas
Emeritus Professor of Energy Policy
PSIRU ( Business School
University of Greenwich

2. The Hinkley project
A recent study estimated that Hinkley would be the most expensive ‘object’ built on earth. Yet it would use the EPR, a technology unproven in operation & which has run into appalling problems of cost & time overruns in the 3 projects using it. EPR would be supplied by Areva NP, which is in financial collapse & might not be saveable & has been found to be falsifying quality control records for safety critical items of equipment for up to 50 years. This bizarre situation begs at least four urgent questions:
What are the costs and risks of going ahead?
What will it cost for Britain to pull out of the deal?
What would cancellation mean for the rest of the nuclear programme?
Is Hinkley needed to keep the lights on?

3. What are the costs and risks of going ahead? (1)
Main cost is high cost of power purchase. If wholesale price does not rise, extra cost over the 35 years would be about £50bn. If wholesale price rises to, say £70/MWh (latest off-shore wind price), the cost would be about £27bn.
But construction hasn’t started. It would be surprising if more delays & cost increases did not occur. Is EDF’s claim it will take the risk of cost increases credible or will costs fall on electricity consumers & taxpayers?
Without sovereign loan guarantees to EDF worth about £14bn, the project cannot be financed. If the project fails, UK taxpayers will repay the loans
EDF must raise about £6bn in equity (profits, sale of assets etc). Does it have this? If it runs out of cash, what happens?

4. What are the costs and risks of going ahead? (2)
EDF expected to take-over Areva NP, but its conditions are: ‘obtaining favourable conclusions from the ASN regarding the outcome of the tests on the primary circuit of the Flamanville 3 reactor; completion and satisfactory conclusions of the quality audits at the Creusot, Saint-Marcel and Jeumont plants; approval from the relevant merger control authorities [the European Commission].’
These conditions cannot be met till end 2018 esp QC audit. Who will pay the liability if Flamanville (& Taishan) vessel lid must be replaced in 2024? Who will pay if safety critical equipment sold around the world must be replaced? French taxpayer will probably have to pay up to €5bn compensation for Olkiluoto, will they be willing to pick the QC liabilities?
If Areva is saved it could still fail again. 4 part-built reactors in USA may be abandoned after 4 years construction because Westinghouse is bust

5. What will it cost for Britain to pull out of the deal?
EDF & French & UK gov’t will want to suggest it is too late to stop & talk up the costs already incurred
But start of construction, first structural concrete is poured, is 2-4 years away. Preliminary works are conspicuous but relatively cheap
Up to 10/15 & perhaps 10/16, expenditure by EDF & UK was at their own risk
Expenses incurred post signing of SoSIA & CfD in Oct 2016 may be compensatable but these costs are dwarfed by costs of going ahead

6. What would cancellation mean for rest of the programme?
Government claims 4 other projects (Sizewell, Wylfa, Oldbury & Moorside) also on line by But other projects appear as problematic (technology, vendor weakness, prices etc). Fast-tracking these is not the answer. Bradwell is behind these projects
If all 5 projects were built, cheaper renewables would be forced off-line at times of lower demand
If all 5 projects went ahead at same price as Hinkley, additional costs to electricity consumers would be £135bn to £250bn

7. What would cancellation mean for rest of the programme?
NuGen: Westinghouse is bankrupt, AP1000 has failed badly
Horizon: Hitachi has no experience outside Japan, experience with ABWR (30 year old design) reliability is poor & version offered is untested
NuGen & Horizon say they hope their projects will be cheaper but hopes are not bankable
If Hinkley is cancelled, other projects should also be cancelled. But government could make it clear it will not pay more than renewables prices (<£70/MWh) & subsidies not offered to renewables, eg loan guarantees, not offered to nuclear

8. Is Hinkley needed to keep the lights on?
Hinkley is 10 years late & costs 5 times the government estimate of Relying on nuclear to fill a capacity gap would be reckless
Gov’t claims retirement of nuclear in 2023 & coal in 2025 shows need for new capacity
But 2 AGRs likely to be retired in 2023, 5 AGRs expected to continue to 2030 or beyond & Sizewell PWR expected to operate beyond 2050
In 2016 coal supplied <10% of electricity. Plant closed before 2025 as not needed
Energy efficiency is best option. Quick to do & well-targeted programme would help with fuel poverty
Renewables can be built in 2 years so renewables on-line long before nuclear could be