UK Approves Hinkley Point C Construction—with Caveats

The $23.8 billion Hinkley Point C nuclear project has received the UK government’s green light, but the country wants to ensure that project’s ownership cannot change without government agreement.

After a “comprehensive review” of the project and a revised agreement with French power generator EDF, the UK Department for Business, Energy, and Industrial (DBEI) Strategy on September 15 confirmed plans to build the nation’s first new nuclear power plant in decades in Somerset, southwest England.

EDF will build the plant with a $7.94 billion investment from Chinese state nuclear firm China General Nuclear.

EDF made a final investment decision to proceed with construction of two EPR units (after a lengthy review process and several postponements) on July 28. But in an abrupt turn, just as contracts between EDF and the UK government were to be signed on July 29, the government signaled that it would carefully reconsider an agreement reached with EDF on key commercial terms reached in October 2013.

Back on Track

Following the UK’s historic Brexit vote on June 23 to leave the European Union, experts were skeptical about whether the project that could provide 7% of the UK’s power needs for the next 60 years would proceed.

But on September 15, the UK government relented, confirming its backing for the project. The UK gets about 20% of its power from eight nuclear power stations, and almost all are slated to permanently close by 2030. “This underlines why the Government needs to take decisions now on how we will ensure we have sufficient and diverse supply fit for future generations,” the DBEI said in a statement.

However, it stressed, EDF will need to abide by “significant new safeguards for future foreign investment in critical infrastructure.” The safeguards will ensure that the “full implications of foreign ownership are scrutinized for the purpose of national security,” it added.

This stipulation means that London could block the sale of EDF’s controlling stake in the project to CGN and other entities before it is completed if the government is not notified or does not agree with the sale. “Existing legal powers, and the new legal framework, will mean that the Government is able to intervene in the sale of EDF’s stake once Hinkley is operational,” it said.

After Hinkley, the UK government “will take a special share in all future nuclear new build projects” under the new legal framework, it said. “This will ensure that significant stakes cannot be sold without the Government’s knowledge or consent.”

“A Relaunch of Nuclear in Europe”

In a September 15 statement, EDF said it is “delighted” by the UK’s decision to confirm its agreement for the construction of the two reactors at Hinkley Point. The approval effectively marks the conclusion of 10 years of “preparation and rigorous planning,” it said.

“Areva, GE-Alstom and BYLOR as well as hundreds of French medium size businesses and [small and medium enterprises] will be committed to the success of the project.”

The UK government and EDF will now formalize discussions that have taken place over the last few days via “an exchange of letters,” EDF said.

For EDF Group CEO Jean-Bernard Lévy, the significant decision that “marks the relaunch of nuclear in Europe” also demonstrates confidence in AREVA’s EPR technology and the expertise of the French nuclear industry.

AREVA, too, lauded the decision. The French nuclear equipment giant is suffering deep-seated financial troubles that stem in part from construction of the Olkiluoto 3 EPR, whose construction in Finland is now nine years behind schedule and three times over budget. While AREVA plans to sell the majority of its reactor business to EDF, it said it will supply the nuclear steam supply system, the instrumentation and control system, and the first fuel loads to the Hinkley Point C project.

The UK Office for Nuclear Regulation validated the EPR design in 2012, and the EPR is the only Gen III+ reactor to be certified in the UK, AREVA noted in a statement.

“With four units at different test phases around the world, the EPR has a wide-ranging construction experience,” AREVA said.

 

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)