By Kennedy Maize

Washington, D.C., Nov. 4, 2010 — Here’s another major blow to the increasingly problematic nuclear renaissance: France’s “European Pressurized Water” (EPR) reactor design is “in crisis,” according to a new analysis by a British economist  and nuclear energy policy analyst. The problems with the “Generation III+” reactor are so serious that they threaten its future deployment, according to the report by Stephen Thomas, University of Greenwich professor of energy studies.

In his report — The EPR in Crisis — Thomas says the Areva design, begun in 1995 to add more passive safety factors to the basic Electricity de France Generation III PWR, has not been able to deliver on promises of a new, safer reactor that is dramatically less capital-intensive than past machines. In 2001, French nuclear officials claimed the EPR could be built for $1320/KW, but the costs of the two EPR units now under construction in Finland and France are well behind schedule and running more than triple the cost estimate, at $4800/KW in 2009 for the Finnish reactor. In his report, Thomas says, “It seems unlikely that all the problems that have contributed to the delays and cost-overruns have been solved; the final cost could be significantly higher.”

TVO, the Finnish utility that will own and operate the plant at Olkiluoto, is suing Areva to recover some of the costs, which could sink the utility. Says Thomas, “It is far from clean that TVO could survive financially if it had to shoulder a significant proportion of these costs.” He notes that despite being controlled by the French government, Areva has seen its credit ratings fall to BBB+, partly as a result of the EPA problems “and it would hardly be good for business if its customer was put out of business by the purchase an EPR.”

The story in France has been much the same, reports Thomas. EDF, after years of delaying, ordered an EPR for Flamanville in January 2007. Construction began on the 1630-MW unit that December, at a cost estimate of about $2590/KW, not including the first fuel load or financing costs. In May 2008, French safety regulators halted construction temporarily because of quality assurance issues related to the base mat for the plant. Delays led Areva to put the completion date back a year to 2013, with a new cost estimate of $3,265/KW. Last July, French union officials said the plant is at least two years behind schedule, and the costs are running some 1.7 billion Euros over the original 3.3 billion Euros budget. Last month, Le Figaro reported another year’s delay, which EdF has denied.

France, realizing that EPR commercialization was faltering, in October 2009 commissioned Francois Roussely, former EdF CEO, to look at the problems in the French nuclear industry. His report was a bitter contradiction of the glowing image enjoyed by EdF and the French nuclear program. Roussely found a troubling decline in the capacity factor of French reactors, while the rest of the world has seen increases. Roussely did not address the declining capacity factor of French plants. But he concluded that major design changes to address complexity and cost are needed in the EPR after Olkiluoto and Flamanville are completed.

Thomas comments that Roussely’s recommendation probably won’t work. “The EPR was designed over a long period with the specific objective of rationalising the features of earlier designs,” says Thomas. “To assume that it would be a simple and quick process to just go through the design again to simplify it seems totally unrealistic.”

As an example of the difficulty of design changes this late in the development game, Thomas cites the EPR instrumentation and control system, which has caused regulatory heartburn in Europe and the U.S.  “This problem was first identified in 2008; yet more than two years later, a detailed solution to the problem still has not been presented to the regulators,” says Thomas. “Any redesign that was comprehensive enough to significantly reduce complexity and costs would almost certainly be so extensive as to require the regulators to make a very full re-evaluation of the design.”

The EPR reactor was the choice of the U.S. partnership of Baltimore-based Constellation Energy and Areva for an expansion of the existing Calvert Cliffs plant on the Chesapeake Bay. But Constellation has pulled out of the project, leaving it entirely in Areva’s hands. The French company is seeking a U.S. partner to continue the process of qualifying for a multi-billion dollar federal government loan guarantee for the $9.6 billion project. U.S. law forbids foreign ownership of U.S. nuclear power plants.

EdF is hoping to build as many as four units in the UK, using the EPR technology. EdF bought British Energy, the UK’s nuclear generator, for about 15 billion Euros in 2008. Thomas says, “The price seemed far above the value of the assets being acquired and only has any logic if new nuclear orders are placed.”

Thomas concludes, “The EPR design is in crisis.” He makes four major points to bolster that conclusion. First, he says, “Construction has gone dramatically wrong at the two sites in Europe where it is being built.” Second, the cost of the EPR is so high “that all contests where the EPR has been bid have either been abandoned (South Africa and Canada) or the contract has gone to a much lower bid from a competitor (UAE). Potential major markets, particularly the U.S., UK, and Italy, “all look problematic and reactor orders, if placed at all, will be much later than expected.” Finally, getting safety approved in France, the UK and the U.S. “is incomplete and, even if successful, the features needed to achieve regulatory approval may add significantly to costs.”

What to do? “From a business point of view,” writes Thomas, “the right course for EdF and Areva seems clear. They must cut their losses and abandon the EPR now. In the short term, this will require some painful write-offs, for example, of investments in the UK and the U.S.A., but in the long term, the losses will be much greater if they continue to try to make the EPR work.”

But this business case crashes against the rock of French politics. Thomas says that “from a political point of view, France has invested so much political and financial capital in being the world leader in nuclear technology, such a decision to abandon the design will be politically too painful until it becomes unavoidable.”

Outside of France, writes Thomas, “for the government of countries like the U.S.A. and the UK, which have invested little political capital in the French nuclear dream, the sensible course is clear: stop all investment of public money in the doomed EPR technology.”