As Britain races to replace its aging nuclear reactors and coal generators, it’s hoping to team up with France to build the most expensive power plant in history—a massive atomic facility with two reactors at Hinkley Point on England’s southwestern coast. It could provide 7 percent of the country’s electricity by 2025. But the design, intended to showcase the latest French reactor technology, poses engineering and financial problems that could create a costly morass for both countries.
State utility Électricité de France (EDF) is expected to build the plant and finance two-thirds of the estimated £18 billion ($26.2 billion) cost. That price tag assumes the Evolutionary Power Reactor (EPR), the next-generation model planned for Hinkley Point, will be delivered on time and on budget. But that hasn’t been the case in France and Finland, where EPRs under construction have run into multiyear delays and billions in cost overruns.
Plans for Hinkley Point are creating turmoil within EDF, which also needs to spend €50 billion ($56.5 billion) to renovate its network of French nuclear reactors by 2025. In March, EDF’s chief financial officer quit rather than continue with the U.K. project. Ratings agencies have warned of a possible credit downgrade, and employee unions arethreatening to strike. Private investors, who own 15 percent of EDF shares, are spooked: The stock is down 50 percent over the past year. On April 22, EDF said it plans to sell €4 billion in new shares to raise cash. News of the plan caused shares to drop even further.
Construction problems on EPRs in Finland and France led to billions of euros in losses at Areva, the French state-controlled nuclear group that designed and is helping to build the reactors. To rescue Areva, the government broke up the company last year and is selling its reactor business to EDF. French officials had expected to have a financing plan in place for Hinkley Point by May but have pushed it back to September, Economy Minister Emmanuel Macron told the newspaper Journal du Dimanche on April 24. China has pledged £6 billion in financing in exchange for a one-third stake in the plant.
Even those in the nuclear industry say, “We must come up with a plan B”
If EDF can deliver the Hinkley site’s two reactors, the payoff would be rich. In 2012, Britain agreed to pay at least £92.50 per megawatt-hour for 35 years for the power they would generate. At the time, the rate was more than twice the average wholesale cost of electricity; today it’s more than three times the average, as cheaper oil and gas and tumbling renewable energy prices have pushed down electricity rates. The project could lock British consumers into some of the highest power prices in the world for decades.
The British government says Hinkley Point is essential to its goal of closing all coal-fired electric plants and retiring eight of the country’s 15 nuclear reactors by 2025. Wind and solar generation can’t guarantee reliable supply in all weather conditions. “Hinkley can provide clean, affordable, and secure energy that families and businesses can rely on now and in the future,” says a spokeswoman for the U.K.’s Department of Energy and Climate Change, who declined to be identified in keeping with government policy.
Still, critics question whether the EPR, an ultrapowerful, super-reinforced reactor containing about twice as much concrete as existing models, is the right choice for either Britain or France. “It has turned out to be extremely difficult to build,” says Simon Taylor, a professor at Cambridge University’s Judge Business School who specializes in energy finance. “The industry trend is toward smaller, more flexible designs.” Westinghouse Electric and GE Hitachi Nuclear Energy are marketing smaller reactors, as are manufacturers from South Korea and Russia. Even in France, Taylor says, “there are voices in the nuclear industry saying, ‘We must come up with a plan B.’ ” Public support for the project in Britain has fallen to 33 percent, down from 57 percent in 2013, according to a YouGov poll released on April 26 commissioned by New Nuclear Watch Europe, a pro-nuclear group.
Britain can offset the closure of old nuclear and coal plants and put off the need for new reactors for another decade by increasing its investment in renewable energy, says Deepa Venkateswaran, a utility analyst at Sanford C. Bernstein in London. New, less expensive technologies might be developed to store energy from wind and solar, helping to ensure reliable supply. Building Hinkley Point now, she says, “is not make-or-break.”
In the end, politics could trump finance and technology. France wants to protect thousands of well-paying jobs in its nuclear industry. And British Prime Minister David Cameron, who in March joined French President François Hollande in reaffirming support for Hinkley Point, is keen for a project that would create jobs in an economically depressed region. “The decision-makers on both sides are totally underestimating” the risks, says Mycle Schneider, an independent nuclear analyst in Paris. “But the farther they go on, the more difficult it is to pull out.”