Vincent de Rivaz, the CEO of EDF Energy, said today that the Hinkley Point C (HPC) project will “clearly and categorically” go ahead. Giving evidence to the UK parliament’s Energy and Climate Change Committee, de Rivaz confirmed that, according to the French economy minister, the repeatedly postponed final investment decision on the project to build two EPR units at the site in Somerset, England would finally be made “by early May”. He would not himself give a specific date and said the decision would be made “very soon”.
The Committee announced on 17 March that it had called EDF Energy, and other energy companies planning to build reactors in the UK, to Parliament to give evidence on the future of the nuclear industry. Chair of the Committee, Angus MacNeil, said that day that the government is “counting on” new nuclear to supply a significant proportion of the UK’s demand for low-carbon baseload power in future. “The focus right now is on Hinkley Point C but there are other important projects in the pipeline. Serious questions are being raised about the cost and viability of the Hinkley project and the value for money for taxpayers,” MacNeil said.
At the meeting today, de Rivaz said: “I can say clearly and categorically that Hinkley Point C will go ahead. That’s good news for the UK. It has been a long road. The project has passed a huge number of regulatory, political, commercial and operational milestones and it will go ahead because we have the expertise, the supply chain, the team, including our long-standing partners CGN [China General Nuclear] to build HPC on time and on budget.”
He added: “We are confident in the EPR technology and the volition to achieve the highest standards of safety of the well-established and reliable PWR [pressurised water reactor] technology. The EPR is a modern design which has already been proven by the UK’s [nuclear] regulator. It will go ahead because we have the strong support of the UK government and of the French government. It will go ahead because we are confident regarding the financing of this project. In a nutshell we are confident and proud to be able to deliver this project because it meets the UK’s need for reliable, affordable low-carbon electricity,” he said.
Earlier this month, the European Commission approved the partnership between EDF and CGN for the development, construction and operation of three new nuclear power plants in the UK. Under the Strategic Investment Agreement signed last October, CGN agreed to take a 33.5% stake in the HPC project, as well jointly develop new nuclear power plants at Sizewell in Suffolk and Bradwell in Essex.
Final investment decision
De Rivaz confirmed that EDF had invested £2.4 billion ($3.4 billion) in the HPC project to date and spends £55 million each month on the site. He also reiterated that the total cost of the project would be £18 billion.
Referring to comments made yesterday by the French economy minister, Emmanuel Macron, that EDF will now make a final investment decision on HPC in early May, de Rivaz said, “I can confirm that [a final investment decision] will be very soon. Nobody should doubt our commitment to the project.”
Asked about the remaining barriers between the EDF Group and that decision on HPC, de Rivaz said the group’s chairman, Jean-Bernard Lévy, is “working on solutions” to improve the financial health of the whole group “for the next decade” with its shareholder, the French state. “What is the challenge that we are facing as a group? A huge investment in existing nuclear power plants in France, in networks, in energy services, in all sorts of activities that we have in France and other countries. HPC will represent 15% of this investment,” de Rivaz said.
“At the same time, power prices in the wholesale market have dropped dramatically in six months, by 35% since last October, which puts more strain on the finances of the group, so we are discussing actively with our shareholder, the French government, to find a solution to this question. These discussions are now at the final stage, which has allowed the French finance minister to say what he has said [about HPC].”
Solutions under consideration, he said, include increasing the capital of EDF, divestment of non-strategic assets, reducing costs and increasing operational performance. “I am 100% confident that a solution will be found shortly.”
De Rivaz was a ‘witness’ at the Committee meeting today, along with EDF Energy’s managing director of nuclear new build, Humphrey Cadoux-Hudson, NuGeneration CEO Tom Samson, Horizon Nuclear Power COO Alan Raymant and CGN’s general director of UK nuclear projects, Zhu Minhong.
EDF has been offered a contract for difference (CfD) at a strike price of £92.50/MWh for the HPC project. Wholesale electricity prices are half that currently. This price will be guaranteed for 35 years after the HPC units start operating and will increase in line with inflation. The agreement states that the strike price would be reduced to £89.50/MWh if EDF committed to construction of a second plant at Sizewell C.
De Rivaz stressed at today’s meeting that this was a “fair deal” that lay “at the heart” of the HPC project. “It is fair for the customers and fair for the investors. The customers will not bear any risks during the construction of this project. We will bear those risks because we are confident in our ability to deliver.”
In France, critics of the CfD agreement argue that it is “too risky for investors”, but in the UK, critics argue that it is “too generous”, de Rivaz said. “That sends me a strong signal that it is a fair and balanced deal.” He added: “The consumer will pay absolutely nothing until electricity is produced in 2025.”
Other witnesses at the meeting today were Simon Taylor, lecturer in finance at Cambridge University’s Judge Business School, Douglas Parr, chief scientist and policy director of Greenpeace UK and Peter Atherton, managing director at investment bank Jefferies.
Atherton had told the Committee earlier that the HPC deal could be considered fair if the price of oil is around £230/barrel when the plant comes online. Asked for his response to this, de Rivaz said: “You cannot take one isolated element of the whole energy equation. It’s true that electricity prices are very low today and that they can be much higher tomorrow as they have been in the past – in 2008, for example, the wholesale price of electricity was £80/MWh. What is true is that we have to compare the price between 2025 and 2016 to what would be the price of alternative low-carbon energies in a world where clearly the push for governments [on climate change actions] will be even stronger than it is today and very probably the carbon price worldwide will be higher.”
The CfD for the HPC project was agreed after a long process that has been “scrutinised and challenged here in Britain and in Brussels”, de Rivaz said, “and both have concluded that it is a balanced deal because it reflects the costs of building the plant, the cost to operate it for 60 years, a fair return for investors commensurate with the risks they are going to take with construction, and commensurate with the need to attract investors in a world where the UK government decided a long time ago that taxpayers would not pay for the construction costs and would not invest directly in the project.”
Asked whether EDF had been as confident in the Flamanville project at the early stage of its development as it is now for HPC, de Rivaz said, “EDF is confident in the EPR. It’s a technology that has been developed to meet the highest standards of safety. It is an evolution in the PWR technology. So, in terms of the EPR being the technology to meet the highest standards of safety absolutely, we are confident. In terms of our ability to deliver HPC on time and to budget, absolutely. As part of our faith in this project we have organised ourselves to learn all the lessons from our previous projects – at Flamanville in France as well as at Taishan in China.”
Construction work began on the new Flamanville unit, adjacent to two existing PWRs, at the Normandy site in northern France in 2007, when capital construction costs were estimated at €3.3 billion (2005 values) with commercial operation pencilled in for 2013. The cost and completion of the project has since been revised a number of times. The unit had previously been scheduled to begin operating by the end of 2017, but the loading of fuel and start-up of the reactor is now expected to take place in the last quarter of 2018.
Meanwhile cold function tests were completed at unit 1 of the Taishan nuclear power plant in China’s Guangdong province last month. The unit is expected to start up in the first half of next year and will be the first EPR reactor to begin operating.
Asked how CGN would react to EDF’s failure to make a final investment decision by early May, Zhu told the Committee: “We have confidence that HPC will go ahead. We can only look at the deal on the table, we can’t look at hypotheses.”
He stressed that CGN is “progressing well” with construction of an EPR at Taishan. “We hope the first EPR unit will come into production in 2017 and, alongside this success, we have planned to construct more EPRs in China.”
Asked whether China would lose interest in the UK’s nuclear power program should the government pull out of the HPC project, he said: “China has the biggest number of units under construction [in the world] and CGN has 12 under construction, which is two units per year on their way. We hope we can bring our expertise to this country […] The EPR project at Taishan is at an advanced stage and we are happy to share our experience for HPC.”