UK Nuclear financing comes unstuck

The Prime Minister Rishi Sunak says that nuclear power is the ‘perfect antidote to the energy challenges facing Britain’, but things seem to be going a bit amiss with nuclear finance. Basically, not many want to fund new nuclear projects any more, as costs and delays escalate along with political sensitivities. 

For example, China’s CGN has halted funding for UK’s part-built Hinkley Point C European Pressurised-water Reactor. CGN may yet restart payments, but, if not, its developer, the French company EDF, will have to fund the completion of the plant alone. Some portrayed CGNs withdrawal from Hinkley as due to China being ‘miffed’ by its exclusion from the Sizewell project. The UK government had earlier taken over CGN’s initial stake in EDF proposed next project, Sizewell C, after concerns about over-reliance on Chinese funding. That would not have gone down well in China. But it was also claimed that CGN was upset by the large Hinkley overrun costs and delays. Well maybe that’s true too, but CGN was within its rights to exit.  It was contractually allowed to only meet any cost overruns on a voluntary basis. And it’s evidently decided not to. Though of course it will still own a share of any profits, if the project still goes ahead. However, Hinkley prospects now looks even more uncertain, with EDF saying its start date could be delayed from 2027 to 2031 and it cost expand to £35bn or even more, with knock-on effects also likely for Sizewell C.  

So some plans seem to be coming adrift, with France and the UK potentially falling out over what happens next. France has already called on the UK to pay more for Hinkley. It could even be that it will pull out of financing Sizewell. Certainly, even if that is avoided, nuclear funding all looks a bit uncertain, with China out of it and EDF strapped for cash. Under the UK’s proposed RAB funding  system, consumers are set to be tapped to in effect provide some of the up-front  capital needed for Sizewell, thus talking on some the risk faced by this investment. But as Alison Downes of the Stop Sizewell C campaign group said: ‘It would be madness to give Sizewell C the final go-ahead while the questions of whether Hinkley C can be finished, and who pays, are not resolved. Sizewell C is bound to take longer and cost more, but this time it would be we consumers who would bear the risk and pay the price through the "nuclear tax" on our energy bills.’

However, new private investors are still being sought, and to keep the show on the road the UK government has provided an extra £1.3bn, bringing the proposed UK tax payers funding so far to £2.5 bn.  But will it still happen? As Utility week noted ‘The Sizewell C plant, which has yet to receive a final investment decision by the government, will not be fully commissioned until 2038’. And that could be rather optimistic. More like 2040! All of which could mean that future security of supply may also be uncertain. With Hinkley delayed, EDF now says it wants to keep its old AGR plants running (even) longer, despite their safety issues, to maintain output and its cash flow! It is also talking about running the (already existing) Sizewell B PWR an extra 20 years. 

It all seems a bit desperate. Prof. Rob Gross, director of UK Energy Research Centre, said the delays to Hinkley made increasing gas burn in the meantime ‘almost inevitable’. He added Wind or solar are unlikely to plug the gap because the UK is already ‘struggling to connect all the renewables schemes already in the pipeline for 2027/28’.  But surely we can do better than that - if we stop wasting money on nuclear dead ends and focus instead on linking up new renewables. 

For example, there are new grid technologies which can help green power network integration, including advanced composite-core conductors which, according to a US study, ‘can cost-effectively double transmission capacity within existing right-of-way (ROW), with limited additional permitting’. It claimed that ‘this strategy unlocks a high availability of increasingly economically-viable RE resources in close proximity to the existing network’, and it could upgrade the system very cost effectively. However, it’s not just a matter of better grid technology, or even less money. It also about reducing bureaucracy and getting rid of policy blocks, for example, in the UK context, in relation to on shore wind, which, despite pronouncements otherwise, is still in effect, being blocked. 

Cost over-runs and delays with nuclear projects are of course not just British issues. As Counterpunch noted, reactor construction delays and costs hikes are also common elsewhere. ‘The cost of EDF’s EPR reactor being built in France at Flamanville and still incomplete, has more than quadrupled to close to $15 billion. Another EPR, at Olkiluoto in Finland, went from $3.2 billion to more than $12 billion and launched 12 years late. On U.S. soil, two AP 1000 reactors at the Vogtle nuclear power plant site in Georgia, will likely come in at a total price tag of at least $35 billion, $20 billion more than originally estimated, with the second of the two reactors still not on line’.

All in all, despite attempts to talk it up at COP28, nuclear seem to be facing a real problem with finance, if nothing else, a problem not shared by renewables- they are mostly getting cheaper. The nuclear lobby’s last ditch hope is small modular reactors- still a very long shot, with none yet in existence. So far SMR’s look likely to be an expensive diversion. And too late to be much help meeting climate/energy targets. For example, the chair of the UK’s Environmental Audit Committee has said that ‘the first SMR is unlikely to be in operation by 2035, the date ministers have set for decarbonising the electricity supply. So, what role will SMRs have in an energy mix dominated by renewables and supplemented by existing and emerging large-scale nuclear?’ 

Arguably, ‘big nuclear’ is also unlikely to be favoured for new capacity in many places: potential financiers are more likely to stick with what already works well and is cheaper ...At COP28, 22 countries, including the UK, talked about tripling nuclear by 2050. But over 117 committed to tripling renewables by 2030. Arguably a much more credible and useful target.