“ACHIEVING NEW NUCLEAR CONSTRUCTION” IS one of the “great challenges” in combating climate change, according to Daniela Lulache, head of policy at the Nuclear Energy Agency. She was speaking at New Nuclear: a Response to Electrical Changes, organised by French non-governmental organisation Entretiens Europeens. Lulache said, “nuclear has been declining lately, at least in the advanced economies. We need to ensure the success of new [nuclear] technologies, generation four and SMRs.”
A new financing framework for nuclear, potentially including SMRs, is needed to enable the construction of a series of new units globally, as “without nuclear power, carbon dioxide emissions from power generation would have been 50% higher over the last 50 years,” NEA said.
One example of slow completion of a new nuclear power plant is the 3.2GW Hinkley Point C project (HPC) in Western England, where cost overruns occurred due to slower than expected technology adaptation.
The UK currently plans to replace its existing nuclear capacity with new-build and developing a new regulated asset base (RAB) funding model.
Guy Buckenham, head of generation policy at EDF Energy, said that the company had “not fully accounted the cost of adapting a first of a kind EPR technology to the UK.” He said that this was one of the factors that had caused costs to increase at Hinkley Point C. In addition, unexpected ground conditions had contributed to the cost increase and delays.
Earlier, in a 25 September statement, EDF Energy said that Hinkley Point C faced potential cost overruns of between £1.9 billion and £2.9 billion, bringing the total construction cost for the two-unit plant to up to £22.5 billion, compared to its cost estimate in 2016 of £19.5 billion.
Because the project is funded by a Contract for Difference (CfD) with a fixed electricity price, Buckenham said the cost overruns will not affect the UK consumer or taxpayer. Instead they will reduce profits for the developers EDF, with a 66.5% share and China General Nuclear Corp (CGN), with 33.5% stake. He now expects that the first unit will be operational by the end of 2025.
UK’s new RAB funding model
As a result of these challenges, the UK government and energy regulator Ofgem are looking at a new funding model for new nuclear construction in the UK, the RAB.
The RAB model envisages the establishment of an estimated allowable cost for a new nuclear project, which will, from that estimate, lead to a fixed rate of return for investors from power sales. That revenue would enable a company to recover approved costs and generate a return on capital to cover construction cost financing. Key to the funding stream is that payments from UK retail power consumers would be made during construction and operation to the project company. This is a structure used for other infrastructure and it means that the funders do not incur compound interest during the pre-operation phase — unlike the CfD model, where the first repayments will not be made until the plant begins generating.
The Department of Business, Energy and Industrial strategy (BEIS) has already conducted a consultation on the RAB model.
The planned Sizewell C nuclear plant in Eastern England will replicate the Hinkley Point design so they will not carry the ‘first of a kind’ cost burden.
Buckenham said construction cost of Sizewell C will be 20% less than Hinkley Point as a result of replication.
Sizewell C, a twin EPR station, will be 80% owned by EDF Energy and 20% owned by CGN, contributing roughly 7% of the UK’s total power production.
Buckenham told the conference that given the RAB model, there “are UK pension funds and insurance companies who would be willing to invest in new nuclear.” Where such private funds are not easy to find, SMR deployment in the EU is expected to dominate discussions over new nuclear, most likely looking for a fresh formula of private and state investment.
European nuclear share to fall to 15%
Nuclear power will provide around 15% of the EU’s power mix in 2050, according to all European Commission scenarios, compared to 25% to 26% of the EU’s power mix now — a considerable reduction in nuclear power’s share. “Very few” of the reactors currently in operation in the EU will be operational in 2050, and the average age of EU power reactors “now hovers around 28 years,” said Massimo Garribba, director of nuclear energy and safety at the European Commission. The “other question is where do you put these [new] plants. This creates the question of life extension or replacement and the resulting social tension and legal challenges,” he said.
Garribba noted a successful legal challenge brought in July by environmentalists in the European Court of Justice who challenged Belgium over life extension work at Doel 1 and 2. The court ruled that an environmental impact assessment should have been undertaken prior to the start of that work.
Garribba said that the EC must submit an ambitious green transition strategy by 2020. The new EC took office on 27 November, so it might be that a new vision may materialise with parallel strategies meet challenges of sufficient and low-carbon energy production. “We know by now that there is no silver bullet for climate change, so we need to use all technologies, as well as recycle and reuse things in the so-called circular economy,” Garribba said, adding that as a lot of renewable power sources are very intermittent, we need to integrate back up power sources.
Need for EC standards and investment?
“The increase in electricity is the key scenario in all this, power production in Europe must also increase”, he said. “We have a lot of subsidies in the European power market. These subsidies need to be targeted where investment is needed.” One such key area of investment is carbon capture and storage, Garribba said. Another is supply chain.
Garribba said the EC should consider looking at a regulatory playing field in which different energy types can compete on their own merits. “The European Treaty says that member states decide on their own energy mix”, he said. “Imagine it said you had to use one or other technology, then everyone would say Europe is telling you what to do”.
But for now, the choice of energy technology is one that divides the EU.
Garribba said that European legislation on nuclear safety, rejected by member states in 2002 and 2004, was finally approved in 2008. As long as there is not a pan-European acceptance of nuclear power as a sustainable energy source, then you have a problem, he said. Currently, at least three member states are against any nuclear energy.
Garribba noted that there was a huge discussion ongoing over the European Investment Bank (EIB) lending criteria, but he expected that the EIB will fund nuclear-related projects. “We have the precedents for approved state aid — for HPC and Paks in Hungary — so there should not be obstacles for such funding,” he said, adding, “In 15 years in this job, I don’t remember EC giving a negative opinion on any of these projects”.
The EC had considered whether there should be general state aid guidelines for new nuclear construction, but decided there were not enough new projects in EU to justify them. “As a result, now we have four reactors under construction in Europe, which are all late and over budget, Olkiluoto 3 in Finland, Flamnaville 3 in France and Mochovce 3 and 4 in Slovakia.”
Tarmo Pippati, president, FinNuclear, the Finnish nuclear power industry trade association, said that nuclear power is a solution for increasing power demand. “But even so, we need to look at SMRs and follow the experiments with this technology around the globe very carefully”, said Ilkka Tykkilainen, CEO, TVO, the owner of Olkiluoto 3. Consequently, “a standardised regulation for their deployment round the globe is key”.
One way to support nuclear across the EU is for municipalities to gain more strength collectively, according to Roland Palmqvist, president of GMF, the group of municipalities with nuclear utilities in EU.
In either case, a common ground on building new nuclear power in Europe seems to be paramount, according to Garribba, as EU needs 100-120GW of power in 2050 — an investment of €400 billion.
Author information: Rumyana Vakarelska is a journalist covering the energy and environmental sectors
