The Chinese are planning to come to the rescue of a European nuclear industry so short of money that it cannot build any new stations without outside help.
The problem is that EDF, the giant electricity utility owned by the French government, does not have the £25 billion (US$38.5bn) needed to build the two huge nuclear reactors in England that it has already agreed to construct, because it is in debt and its partners have pulled out.
The British government, despite its critics’ accusation that the proposed power station atHinkley Point in the west of England will be an expensive white elephant, still wants to go ahead and is to sign an agreement with the Chinese to finance the deal.
China’s President, Xi Jinping, is due in London in October and is expected to agree with David Cameron, the UK’s Prime Minister, to fund the deal.
The Chinese generosity in helping out is because they will gain an important toehold in Europe, and hope to build their own nuclear reactors on British soil.
This extraordinary reversal in fortunes for the European nuclear industry − which always looked to sell its nuclear reactors to China, rather than the other way round − has come about because new-build nuclear in the west has become impossible to finance in a free market, where it is seen as too risky by investors wanting an early return on capital.
In contrast, the Chinese, have large reserves of foreign currency and no shortage of capital − particularly when there is a strategic aim of getting entry into new markets and gaining new spheres of influence.
The station planned for Hinkley Point is made up of two European Pressurised Reactors (EPR). They are a new design by the French company Areva, which is so badly in debt that it is being taken over by EDF in a merger. This was forced on the two companies by the French government, which owns an 80% stake in both.
These French companies are the only ones left in Europe offering to build large nuclear plants. Their current competitors are in Russia, China and the US.
Both of the French firms are in difficulties because the EPR prototypes they are building in Finland and in France are years behind schedule, costs have escalated, and neither is likely to be producing power any time soon.
Construction of the Finnish reactor began in 2005 and was due to be completed in 2009, but is still continuing. It will not now be finished until 2018.
The French reactor was started in 2007 and was due to be operational two years ago, but is also delayed until at least 2017.
The original programme for Hinkley Point was to have the reactors producing power by 2018, but this has already been put back to 2023, and a more likely date is 2030.
Foolish to start
There are doubts among those who oppose the reactors that they will ever be made to work. They believe the British government would be foolish to start building two new ones in the UK until at least one of those in France and Finland was seen to be producing power.
However, the government is so confident that new nuclear capacity will be built that it has already cut back on wind and solar power.
This optimism about overcoming the technical and cost difficulties of building the stations continues despite other potential setbacks.
The government is being challenged in the European Court by the Austrian government and by a raft of renewable companies that see the EDF deal as a distortion of the European energy market. They base their case on European rules that ban direct state subsidies for nuclear power.
The UK seeks to avoid these rules by giving EDF a guaranteed price for electricity for 35 years as an inducement to build the station, as well as guaranteeing the loans needed to build it. This would make nuclear electricity nearly double the price that consumers currently pay for power in Britain.
Despite all these difficulties, Amber Rudd, the UK’s Energy and Climate Change Secretary, insists that the new nuclear stations are essential for Britain’s energy supply.
She says that the two reactors − at 1650 megawatts each, they will be the largest in the world and will produce 7% of the UK’s electricity − are needed to provide base-load electricity for the country because wind and solar renewables are unreliable.
She told a parliamentary committee this month: “I think we need as much investment as we can procure in order to support new nuclear going forward. We have to secure base-load, so you should not be surprised that we are prepared to pay more for that.
Part of the mix
“The requirement for nuclear is absolute, particularly in terms of wanting to have renewables as part of the mix, because, until we get storage right, renewables are unreliable.”
Critics of the government’s policy include Alan Whitehead, an opposition Labour party Member of Parliament and a member of its climate change committee.
He said the government’s plans for a new raft of nuclear stations by 2025 had as much likelihood of success as a “snowball’s chance in hell”. The Hinkley Point plant had already been delayed five years, and would probably be delayed further.
.“Time, you might think, for a plan B,” he said.“What about filling in the now almost certain low-carbon generation gap, at the very least, with much more easily deployable, speedily buildable, better financeable, lower subsidisable real renewables?”
The problem is that the government has just dismantled the wind and solar building programme. “A bit of a mess then, really,” Whitehead said.