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Hinkley nuclear costs climb as deadlines slip again

June 26, 2017
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By Paul Homewood

 

I won’t say I told you, but!

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Jillian Ambrose reports:

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EDF is bracing for a multi-billion euro rise in costs at its Hinkley Point C nuclear site after a fresh evaluation of the project revealed yet another likely delay. An internal review of the troubled project by senior executives at EDF’s French headquarters is expected to confirm fears that the state-backed energy giant will not be able to deliver Hinkley on time or in line with its £18bn budget.

The French newspaper Le Monde reported over the weekend that sources close to the review have said no one believes it can be delivered by 2025.

Instead, the start-up date is likely to be 2027 and pile a further €1bn (£870m) to €3bn euros on to the construction costs of the £18bn project.

The review is being led by Jean-Michel Quilichini, the group’s audit director, and is expected to be made public later this summer.

A UK spokesman for the company declined to comment.

The latest delay is likely to fuel concerns that Government has locked energy bill payers into “a high cost and risky deal” that could fail to deliver on its economic promises.

 

Hinkley Point C

To guarantee the project’s revenue, EDF will be granted a top-up payment to reach £92.50 per megawatt-hour, more than double the current wholesale market rate, through a levy on energy bills.

The National Audit Office warned last week that consumers could be locked into paying a higher than expected price for a high-risk gamble and uncertain economic benefits.

It is the second stark warning from the public spending watchdog, which reported last year that EDF’s top-up payments have quadrupled from £6bn to £30bn as wholesale market prices continue to slip.

 

Chief Executive Officer of EDF Energy, Vincent de Rivaz

Outgoing chief executive officer of EDF Energy, Vincent de Rivaz Credit: AFP

 

The latest climb in costs will not change the agreed “strike price” energy consumers must meet, but it is expected to reignite concerns that the project is a political gamble not worth taking. In 2007 Vincent de Rivaz, the chief executive, said he hoped the new Hinkley Point reactors would provide electricity for Britons to cook their Christmas turkeys in 2017.

At the time, Hinkley had an estimated cost of £12.5bn. These projections have slipped several times in the last 10 years and its latest estimate pinpointed 2025 as the expected start date for the first new nuclear power plant in a generation.

The latest blow to the project comes weeks after EDF made the shock announcement that Mr de Rivaz will step down in September.

http://www.telegraph.co.uk/business/2017/06/25/hinkley-nuclear-costs-climb-deadlines-slip/

  

Jillian Ambrose still does not appear to understand that all strike prices, including this one for Hinkley, are at 2012 prices.

Consequently the price of £92.50/MWh is approximately £100/MWh now, and will continue to inflate each year.

Also interesting is the fact that she emphasises the cost of subsidies for Hinkley, with statements such as more than double the current wholesale market rate, through a levy on energy bills.

I cannot recall her making similar comments about offshore wind and other renewables. Mind block?

  

Just to clarify a couple of matters, which some of the Telegraph commenters are confused about:

1) Any cost overrun will be stood by EDF. There is no provision under the contract to pass this on in higher prices, as the Strike Price is already set in stone.

2) Slippage on the start up date is unlikely to affect the contract one way or another, and won’t be penalised, unless the date is delayed until after November 2029.

Andrea Leadsom explained this in answer to Parliamentary questions last year:

Hinkley Point C Power Station

To ask the Secretary of State for Energy and Climate Change, what the anticipated date is for the Hinkley Point C reactor to start transmitting electricity to the National Grid; and whether the proposed contract for that reactor includes punitive measures for delay beyond that date.

Answered by: Andrea Leadsom

Answered on: 13 April 2016

EDF have said that they expect Hinkley Point C to start generating electricity in 2025. The Contracts for Difference (CfD) payment term in the proposed contract is 35 years with a target commissioning date of 2025 for each reactor. The target commissioning window for each reactor is four years from its target commissioning date (subject to Force Majeure). In the event that either reactor is not commissioned by the end of its target commissioning window, the CfD payment term for that reactor is shortened commensurately for each day of delay through to the long stop date. If neither reactor has been commissioned by four years after the last day of the target commissioning window for reactor 2 i.e. November 2033 (the longstop date), the Low Carbon Contracts Company (LCCC) has the option to terminate the contract.

http://www.parliament.uk/business/publications/written-questions-answers-statements/written-question/Commons/2016-04-08/33084/

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29 Comments
  1. AlecM permalink
    June 26, 2017 12:04 pm

    So, the project delay is to end after the tsunami as Gran Canaria’s volcano slips into the N. Atlantic? Or will it be after Ed Davey is ejected from Parliament on account of his economic stupidity and embarrassing financial links?

  2. Richard permalink
    June 26, 2017 12:20 pm

    Utter lunacy

    • Gerry, England permalink
      June 26, 2017 1:04 pm

      Accurate description of government policy. Not specifically energy either.

  3. Dung permalink
    June 26, 2017 12:40 pm

    We do not need nuclear energy and certainly not at these costs, we do not need renewables, what we do need is gas and a government that even half understands what it is doing. Get f*****g fracking!

    • A C Osborn permalink
      June 26, 2017 1:07 pm

      We do need Nuclear, but not at those prices, there are much cheaper alternatives around and with no subsidies, get rid of them all.
      We should also be looking at using Coal as well, in line with the Japanese gasification process.

  4. Gerry, England permalink
    June 26, 2017 1:05 pm

    And this is the design that has yet to work.

    • Derek Buxton permalink
      June 27, 2017 10:32 am

      But it was known that EDF had problems in France when the contract was placed. It should now be cancelled, and compensation claimed. As for Davy, he should be investigated for his role in the whole stupid idea.

  5. Green Sand permalink
    June 26, 2017 1:24 pm

    Dear Jillian Ambrose is also fretting about “….the UK Government risks sleepwalking into a £23bn tax black hole…….” because of electric vehicles. No need to fret we all know who will pay! The cost of owning a vehicle and the cost of electric will simply increase. Bigly!

    http://www.telegraph.co.uk/business/2017/06/25/uk-must-face-falling-road-emissionsto-avoid-23bn-tax-gap/

    • Dung permalink
      June 26, 2017 1:28 pm

      That is a great word you just invented Mr Green sand – bigly ^.^

      • Robert Jones permalink
        June 27, 2017 6:54 pm

        It was invented by D Trump (POTUS).

  6. martinbrumby permalink
    June 26, 2017 2:05 pm

    I wonder if our beloved leaders are actually engaged in a covert game.
    A bit like those who play Business Meeting Bingo, where whoever first introduces an agreed word into the presentation or the discussion (‘marmalade’ is a favourite) wins a small prize.

    In the present case, the prize presumably goes to the member of “The Elite” who can first come up with an energy “policy” that is so brazenly lunatic (and extortionately expensive) that even the fawning Beeb & the rest of the legacy media spot that a prank is being paid.

    Despite the best endeavours of Miliband, Huhne, Davey, Rudd and Greg Clark, no-one yet is the undisputed winner.

  7. John F. Hultquist permalink
    June 26, 2017 3:26 pm

    In 2007 Vincent de Rivaz, the chief executive, said he hoped the new Hinkley Point reactors would provide electricity . . . in 2017.

    This man seems to have smashed his head with a heavy Champagne bottle, instead of drinking the stuff. When was the first planning meeting held for this pig? Well before 2007?

    Now the end date seems to have slipped to 2025 or November 2029.
    Note that Takata, the air bag company, made an error and has now filed for bankruptcy. Is Hinkley Point the project that just keeps on draining wealth from companies, tax payers, and electricity users or is there a way of stopping this?

    • Old Englander permalink
      June 26, 2017 5:12 pm

      Somehow I doubt it. Unless the contracting parties go belly-up for different reasons. I suspect feeders on taxpayer money will just continue feeding and have contracts written so they can. My personal first doubts as to Chairman May’s resolve were when she kicked HPC into touch for a “think again” period – and then “bottled out” (as we say in England).

  8. June 26, 2017 3:26 pm

    ‘In 2007 Vincent de Rivaz, the chief executive, said he hoped the new Hinkley Point reactors would provide electricity for Britons to cook their Christmas turkeys in 2017.’

    No turkeys, but the goose is cooked 😉
    http://idioms.thefreedictionary.com/one%27s+goose+is+cooked

  9. Rowland H permalink
    June 26, 2017 3:32 pm

    No mention of the possible alternative of Small Modular Reactors which could be strategically dispersed around the countermand and are claimed to be much quicker to build, simpler and safer. Which beggars the question why is the new aircraft carrier not nuclear powered?

    • Curious George permalink
      June 26, 2017 6:30 pm

      Where can I buy one?

    • Dung permalink
      June 26, 2017 6:45 pm

      @Rowland H
      Well if you are going to change the engines:

      What about a steam driven launch and recovery system since no other fixed wing aircraft (apart from the F35B) will be able to operate from our carriers.
      THEN we could build the naval version of the Typhoon ^.^

    • Ross King permalink
      June 26, 2017 7:36 pm

      FLONUPS (Floating Nuclear Power Stations) are tsunami proof (if moored in deep-enough water offshore), e’quake proof (dito), Out-of-Sight, Out-of-Mind, and on-land approvals processes are largely mitigated, NIMBYism evaporates …. and Fukushima WOULD NEVER HAVE HAPPENED IF MY (albeit retrospective and seminal) ADVICE HAD BEEN FOLLOWED.

      • June 26, 2017 9:23 pm

        Great idea. Even better if they are Gen IV Molten Salt Reactors operating without massive pressure vessels.

    • Robert Jones permalink
      June 27, 2017 7:01 pm

      Precisely, this is the UK’s opportunity to glide gracefully away from under the confirmed fiasco that Hinkley increasingly looks like being and stocking up on SMRs instead, together with fracking with is equally important. In due course the Green Blob needs to be punished and banished, preferably in my life-time.

  10. Rowland H permalink
    June 26, 2017 3:35 pm

    Correction – …around the country….

  11. NeilC permalink
    June 26, 2017 3:43 pm

    This is another fine mess you got us into Mrs May, you’re supposed to be looking out for the JAMs.

    Well this isn’t going to help, is it. what do you reckon the final price will be, any bets? I’ll take £25bn.

    How many fracking wells can you get for that? And at a price nearer £45/MWh

  12. Ross King permalink
    June 26, 2017 7:53 pm

    And let’s not forget the Bolshie Unions…… I lived and worked thro’ the early construction of Fidler’s (sic!!!.. to be pedantic and respectful of Mr. Fidler [sic]!]) Ferry in early 1960’s. A primary criterion for its location there was JOB CREATION in a high-unemployment area. Turns-out, hi-unemployment for very good reason…… no entrepreneurial industrialist in their right-minds would go anywhere near the place on account of the notorious Commie-lead Unions.
    True-to-form, the Unions bit-off their noses to spite their faces and perpetuate the reputatiuon. Strikes were the norm … one Union or another, playing tag-team to ramp up wages …. and the CEGB were doubtlesssly & necessarily underwritten by the gov’t fror bail-outs… that’s you and me, folks!… otherwise the job will never have got finished.
    I digress ….. with a big project like Hinckley, I daresay that the Unions are ‘out’ to make the job as expensive as possible for their own narrow-minded interests.
    Someone …. PLEASE tell me times are different and Bolshie Unions, hell-bent on destroying the Capitalist system (as I was told many times over by shop-stewards) are a thing of the past.
    with Jeremy Corbyn lurking in the wings, singing the Siren-Call of the Glorious Revolution and Workers’ Nirvana, I wonder ….
    “Who rules Britain?” redux?

    • tom0mason permalink
      June 26, 2017 10:04 pm

      Well said!

  13. tom0mason permalink
    June 26, 2017 9:59 pm

    Heck Britain like most of Europe is going to hell in a wobbly 3 wheeled handcart.

    In the early 1950s till the late 1980 Britain (with American help) designed, built, and operated their own nuclear power stations. Back then Britain had real ‘world class’ scientists, engineers, technicians, administrators, and dare I say it, bureaucrats. By the late 1980s (and Sizewell B) Britain started to buy ‘off-the-shelf’ designs, and also began disassembling through neglect, its pool of home-grown talent and resources. Now the British government can’t even buy a nuclear power plant without making a total hash of it. What a bunch of to$$ers!

    In past times British people were viewed as lions led by donkeys, these days they’re ignorant but well connected greedy pigs led by a band of avaricious snake oil sales-people (socialist dressed as conservatives).

    Today’s young greedy pigs hope the future will be more socialist so the ‘environment will heal itself’ — whatever all that populist guff means. They haven’t the ability to look on their shiny devices and see how socialism wrecked things and impoverish more folk in the past.

    • tom0mason permalink
      June 27, 2017 12:54 pm

      But wait what light through yonder …

      A British company in the nuclear industry?
      A British company looking at BREXIT as a opportunity?
      A British

      Engineering firm Cammell Laird … company said the funding from the Department of Business, Energy and Industrial Strategy (BEIS) would go toward a project that aims to work out the best way to build and test large modules at off-site locations before transporting them to nuclear sites for installation….

      Cammell Laird energy division managing director Jonathan Brown (pictured) said there are many advantages to building off-site including cost savings, more efficient build and schedule times and not having to recruit a large temporary workforce to build on-site.


      “If we can make a success of building modules for the domestic nuclear sector we can spin that expertise out to export markets as the UK looks to ramp up exports post-Brexit.”

      In March the firm announced a partnership with the Nuclear AMRC to open a development centre for modular manufacturing methods for new-build reactors of all sizes, drawing on “a host of innovative technologies to significantly reduce costs and lead times for nuclear new build”.

      More at http://www.powerengineeringint.com/articles/2017/06/uk-funds-off-site-nuclear-module-construction-project.html where you’ll see a nice comparison in tax-payer money for bleached pachyderm projects and funding to this project.

  14. It doesn't add up... permalink
    June 28, 2017 7:20 pm

    The latest climb in costs will not change the agreed “strike price” energy consumers must meet, but it is expected to reignite concerns that the project is a political gamble not worth taking.

    Really? Surely it is only a matter of when we get the ransom note demanding higher prices or the project will never be finished.

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