Challenges in Nuclear Power industry
As generally known, UK is hoping to team up with France to build the most expensive power plant in history: A massive atomic facility with two new reactors at Hinkley Point on England’s southwestern coast to be finished in 2025. French state utility EDF is expected to build the plant and finance two-thirds of the estimated 23 billion euros cost. That price tag assumes the Evolutionary Power Reactor (EPR) technology, the next-generation model planned for Hinkley Point, “will be delivered on time and on budget”, as officials said. But that hasn’t been the case in France and Finland, where two EPRs under construction have run into multiyear delays and billions in cost overruns. The corresponding consortium’s updated schedule foresees that Finland's Olkiluoto 3 nuclear power plant will start operations in 2018, remarkable 13 years after work began on this first-of-a-kind EPR (note: the startup of the other EPR project Flamanville-3 in France has also been delayed by at least six years), the Areva-Siemens consortium building the plant has informed owner/operator client Teollisuuden Voima Oyj (TVO). Typically the erection time of conventional NPPs is in the range of four to six years.
Plans for Hinkley Point are creating turmoil within EDF, which also needs to spend 50 billion euros to renovate its network of French nuclear reactors by 2025. In March this year, EDF’s CFO wanted to quit rather than continue with the UK project. Ratings agencies have warned of a possible credit downgrade, and employee unions are threatening to strike. To rescue Areva, the leader of the Finland NPP consortium, the government broke up the company last year and is selling its reactor business to EDF. Now, French officials had expected to have a financing plan in place for Hinkley Point but they have pushed it back to autumn.
On the other hand 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 British pounds 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.
Chinese market is different
According to the World Nuclear Industry Status Report in 2015, ten new nuclear reactors were connected to the grids, more than in any year since 1990. And two reactors were closed: Grafenrheinfeld in Germany and Wylfa in the UK. As of the beginning of this year, a total of 398 reactors — eight more than a year ago, but 40 less than in 2002 — were operating in 31 countries. Two reactors, Sendai-1 and -2, were restarted in Japan, the first since the country was shaken by the triple disaster earthquake-tsunami-radioactive fallout on the coast line of Fukushima in 2011. Most of the Japanese reactors (in total 38 units) remain in Long-Term Outage (LTO).
Whereas the nuclear industry’s situation in the rest of the world continued to deteriorate, developments in China lead to a different picture. In 2015 China contributed eight out of the ten reactor startups — resulting in a total of 31 operating units — and six of the seven new building sites in the world. The other startups were in South Korea and Russia (after 31 years of construction), while outside China only one new-build project was launched, at Barakah in the United Arab Emirates. Of the 62 nuclear power plants with a combined capacity of 60 gigawatts now under construction in 14 countries, 24 units (24 gigawatts of capacity) are located in China. The world total is down 8 percent from a 25-year-high of 67 reactors in various building stages in 2013.
In 2009, China launched the construction of seven of the nine units in the world and in 2010, ten out of 15. Since the Fukushima disaster, the number of construction starts globally plunged to three in 2014. Even in Middle Kingdom construction starts slowed and over the time frame of 2011 to 2015 only 13 new projects were started, just three more than in 2010 alone. Last year, the Chinese government granted permission for the building of eight reactors, however, it remains to be seen, whether China can maintain such a high expansion speed and thus remain the exception to the global trend.
The Paris Agreement on climate change, adopted by consensus mid-December 2015, did not provide the push for nuclear power the industry had hoped and intensely worked for. The term “nuclear” does not even appear in the 32-page Agreement. While nuclear builders and the traditional utilities continue to struggle with the rapidly changing energy sector environment. The French state-controlled Areva, having announced an outlook of a further “heavy loss” in 2015, was downgraded by credit-rating agency Standard & Poor’s to B+ (“highly speculative”).
The French nuclear industry’s international competitors are not doing much better. The Russian counterpart Atomenergoprom as well as the Japanese controlled Toshiba-Westinghouse were both downgraded to “junk” (“speculative”) by credit-rating agencies during this year. The Chinese utility China General Nuclear Power Corporation (CGN), listed on the Hong Kong stock exchange, lost 45 percent of its stock value since June 2015, more than EDF in the same timeframe (-35 percent). Both companies cooperate on the Taishan project that comprises of two EPRs which is now more than two years behind schedule.
However, this is still significantly better than the already mentioned two other EPRs under construction in Europe. EDF had claimed in January 2015 that Taishan-1 would be commissioned “by the end of the year”, which did not happen. The construction schedule might slip further following the discovery of serious fabrication flaws in the forgings of the Flamanville EPR pressure vessel head and bottom, made public by the French Nuclear Safety authorities in April 2015. No final decision on the safety case is expected before the end of this year. The equivalent parts of the Taishan EPRs, forged in the same French Areva facility are likely to have identical flaws. It remains to be seen how the Chinese safety authorities will deal with the issue. Their attitude will be closely monitored by international observers as China embarks on a strategy of exporting its nuclear technology to other countries.
Read more on trends in project execution in the Power industries in upcoming issue of economicPLANT to be published in June, 2016.