Much has been said over the last few years about the Hinkley C project, very little of it positive. It was ill-conceived from the start, the CfD system used to fund it isn’t going to work and by all accounts its likely to become the whitest of white elephants. However, there is another nuclear energy project in the UK, Hitachi’s plans to build a power plant, consisting of two ABMR’s (Advanced Boiling Water Reactors) at Wylfa in North Wales on the Island of Anglesey. Based on the s the site of an old Magnox plant, it will have a peak power output of 2.9 GW’s.
I’ve not talked much about Wylfa for sometime because I’d assumed that this was an entirely paper project that would never go anywhere. Hitachi’s decision to pick up the project (the Horizon project, after the other party’s pulled out back in 2012) was something of a shotgun wedding. Given the virtual halt to nuclear projects in Japan, Hitachi was desperate for someone to sell reactors too. And given the Tories obsession with nuclear (and hatred of renewables), they were anxious for further nuclear energy projects.
Well anyway we seem to be getting mixed signals as to whether or not the plant is actually going to go ahead. Word is that Hitachi is thinking of pulling the plug, much as Moorside was recently cancelled by rival firm Toshiba (some work on site has apparently been halted). But I’m also hearing noises from my sources suggesting that actually it might be going ahead regardless. Which presents something of a problem. Because if you think Hinkley C was crap sandwich, Wylfa is much worse.
Firstly the choice of reactors, Boiling water reactors are a type which has never before been built in the UK. So its going to be slow process in terms of getting them certified, built and commissioned. Also BWR’s are considered to be slightly less safe than PWR’s (or gas cooled reactors) as well as costlier per installed kW.
Now its a minor difference in safety, but you try telling that to the Irish, whose capital (Dublin) is the opposite side of the Irish sea. The Irish could make life very difficult for the British (recall that they’ll need to negotiate a trade deal with the EU post-brexit, which the Irish can veto). So it will be crucial that all safety concerns are addressed without any corners cut. This will naturally delay the project.
Then there’s the more serious issue with the ABWR reactor. To be blunt, they don’t work properly. They’ve shown very poor reliability in service, with capacity factors ranging from 40-70%. As I mentioned in a previous post nuclear is very sensitive to cost increases per MWh if the capacity factor of the plant falls below 90% (which thus rules out using nuclear for anything other than baseload). At 70% the cost per MWh is 25% higher. At 60% its 50% higher and at 50% its 74% higher (ouch!). So this low reliability of the ABWR would make the power from Wylfa cripplingly expensive.
Which is why I’d assumed it would never get built. The UK government’s strike price for nuclear energy is deeply flawed. Largely because it was based on the assumption that renewables such as offshore wind and solar would be significantly more expensive than the strike price and that fossil fuel prices would rise. Neither has turned out to be true. Oh and here’s the kicker, even at the time of peak demand when the price of electricity exceeds the strike price, they have to refund that money to offset the higher price they are normally charging for power.
Hence its possible Hinkley C will lose money on every kWh it generates. Now given that it will be operated by EDF and build by Areva, both state owned companies which the French government sees as basically a jobs program, this isn’t such a big deal. Assuming it is able to achieve a decent enough capacity factor, the losses should be reasonable. And in any event, all EDF UK has to do is go bankrupt once or twice and they can offset those losses (British Energy, who operated the UK’s nuclear reactors before EDF came along, were in and out of the bankrupt courts so often they were practically on first names basis with the judges).
However, for Wylfa this would be crippling. And I mean the investors could easily lose more than their original investment under a similar strike price. Which, again is why I’d assumed it would never go ahead. However, it now turns out the UK government has quietly agreed to put £5 billion worth of taxpayers money into the project.
What’s wrong with that? Well firstly, this represent a significant U-turn, both by the government and the nuclear industry. For years we were told that the nuclear industry didn’t want a subsidy and that none would be provided. Now, have run out of ways to discreetly slip the nuclear industry a few bob, we’ve gone full circle.
And don’t for one minute fool yourself into thinking this subsidy will be limited to £5 billion. In fact, the word coming out of Hitachi (article here in Japanese on this) suggests that they will almost certainly need more money from the UK government (the article even seems to imply 2/3’s of the cost of the plant will be picked up by the UK tax payer) as they are struggling to raise private capital.
Secondly, there has been a lack of debate on this issue. Direct subsidies for one industry over another is blatant favouritism (and would be subject to a possible trade dispute under WTO rules, which recall becomes a big deal if the UK is operating under them alone post-brexit). A similar amount could go a lot further if invested into renewables or energy storage. But with brexit consuming all attention, this one is passing under the radar with no awkward questions asked.
Thirdly, what effectively the Tory government is doing here is privatising profits while socialising risk. The plant will still be owned by a private firm who can charge whatever they like for the electricity (the saving grace for French nuclear plants is that a state own utility owns them, who can be leaned on by ministers to keep electricity prices low). And if the plant ends up a financial failure (which given the reliability issues and likely delays I mentioned is a distinct possibly), its the government who will be out of pocket. How can anyone whose even vaguely familiar with how free markets work (or nuclear power) be in favour of this! But such is the Tories deluded fantasies as regards nuclear.
So by all appearances it looks likely Wylfa will be started, but it will turn into a complete fiasco. With long delays (as it stands it was supposed to be finished and generating power by now!), cost overruns and reactors that when finished will likely prove to be unreliable. And given the falling costs of renewables, its questionable if there will be any market for the power it generates when it comes online in the 2030’s.
Wylfa is a shining example of everything that’s wrong with nuclear energy projects, pushed through by greedy corporate sharks and deluded, ill informed politicians. And neither will ultimately be paying the bill and won’t be living near the mess that they are creating.