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Yes folks, it鈥檚 Groundhog Day. Weary observers of the international nuclear industry could have been forgiven for feeling an uncanny d茅j脿 vu at the late September announcement by French power giant EDF of a near 拢3bn cost overrun on its two huge under-construction reactors at Hinkley Point, Somerset. 

Why? Each of EDF鈥檚 four attempts at building similarly designed reactors have been delayed and over-budget, with its plants in Finland and France not yet operational more than a decade after work on each began. This project has a similar history: when EDF first started promoting this scheme in 2008, the government priced it at around 拢4bn, for completion by 2017. After last month鈥檚 announcement, the price tag is up to 拢22.5bn.

鈥淭he French tried to design out safety risks by building this hugely complex machine. The upshot is it鈥檚 generally understood to be too complex to build鈥�

Dr Paul Dorfman, UCL

However, this time, says EDF, it鈥檒l be different: lessons have been learned, particularly from the construction problems besetting the French reactor at Flamanville. While there are increasing risks of a delay, the firm says it is still on schedule for Hinkley to generate power in 2025. Meanwhile, it says the cost increases are due, primarily, to unforeseeably difficult ground conditions rather than design or build problems.

• In context: What happened at Hinkley? And other late nuclear projects
• Read: Queries raised over Hinkley cost hike

Unsurprisingly, many in the industry remain sceptical about delivery of this undeniably impressive megaproject, amid signs the economic climate could be turning decisively away from the technology. Despite this, the government has pushed ahead with a consultation, closing this month, on how to fund further projects. So, what is really happening down at Hinkley, and what do these cost increases do for the chances of further nuclear power projects once Hinkley is done?

Shaky ground

EDF鈥檚 statement laid most of the blame for forecast cost rises of 拢1.9bn-拢2.9bn on 鈥渃hallenging鈥� ground conditions 鈥渨hich made earthworks more expensive than anticipated鈥�. But it also said revised targets and the design tweaks required by the UK nuclear regulator had contributed. Clearly, ground conditions can be a huge issue in a scheme requiring the excavation of 2.3 million m³ of rock across a site the size of 240 football pitches. 

A statement by EDF said faulting in the mudstone and limestone rock underlying the site was 鈥渕ore extensive than originally envisaged鈥�, requiring 鈥渁dditional excavation, additional ground nailing and additional concrete鈥�.

鈥淏aseload or firm power remain the fundamental of the energy network. We have a fleet of nuclear power stations which are all going out of service 鈥� they need replacing鈥�

Tom Greatrex, Nuclear Industry Association

Notwithstanding all this, EDF said, it had hit its June target for completing the foundation (or 鈥渃ommon raft鈥�) for the first reactor, and remained on course to complete foundations for the second by its June 2019 deadline. Tom Greatrex, chief executive of the Nuclear Industry Association, says the cost rises, while challenging, should be seen in a wider context. 鈥淲hen you鈥檙e doing these huge projects there is always a big difference between the desktop exercise and the reality that you can鈥檛 exactly predict,鈥� he says. 鈥淭hese challenges exist in all infrastructure projects.鈥� 

Of course critics say the relevant context is actually EDF鈥檚 other power station projects. The reactors planned for Hinkley will be the fifth and sixth built by EDF to a pressurised water design known as EPR. Only two, both in Taishan, China, are operational, and even these took twice the expected time to build. Nuclear critic Dr Paul Dorfman, senior associate at UCL鈥檚 Energy Institute, says the problems are simply 鈥減art of a pattern of increasing delays and cost overruns that happen in all EPRs. 鈥淭he French tried to design out safety risks by building this hugely complex machine,鈥� he says. 鈥淭he upshot is it鈥檚 generally understood to be too complex to build.鈥�

EDF of course rejects this, as does the NIA鈥檚 Greatrex, pointing to the fact the Taishan EPRs are operational. 鈥淚t鈥檚 not uncertain and unproven,鈥� he says, 鈥渨e鈥檝e got two generating power stations鈥�.

EDF also denies any implication Hinkley is suffering from the same problems that hit the yet-to-open plants at Olkiluoto and Flamanville, both of which suffered from faulty parts and construction failures. 

A spokesperson said: 鈥淭his is very very different indeed from Olkiluoto and Flamanville. We鈥檝e learned those lessons.鈥� 

The spokesperson cited as an example the planned extensive use of factory prefabrication in the project of large and critical elements designed to avoid quality problems stemming from on-site construction exposed to the elements. To this end, EDF last month brought in the world鈥檚 largest crane 鈥� the 250m tall 鈥淏ig Carl鈥� 鈥� to lift in to place large modularised elements such as the reactor domes. 鈥淚t鈥檚 entirely different,鈥� he said. 鈥淲e鈥檙e not going to make the same mistakes.鈥�

Certainly, the project hasn鈥檛 got far enough along to have encountered the same problems as Flamanville, which suffered faulty reactor pressure vessels, concrete quality problems and faults with vital welds in the reactor cooling circuits. Hinkley, by contrast, has only just had the foundation laid. 鈥淚t鈥檚 still relatively early in the process,鈥� says the NIA鈥檚 Greatrex. 鈥淏ut we鈥檝e hit milestones so far. It鈥檚 better than a lot of naysayers would have predicted.鈥�

Either way, one former industry insider finds the idea that groundworks are responsible for the bulk of a near 拢3bn cost overrun unconvincing. The former contractor, who bid for and worked on Hinkley contracts before leaving his role, says EDF鈥檚 ownership of the site for around 10 years prior to start on site makes it hard to credit that it didn鈥檛 have time to do extensive ground investigations prior to commencement. 

The bulk of the groundworks was contained in a single 鈥渆arthworks鈥� contract, let to a Kier-Bam joint venture for a price of just 拢203m. While it is rumoured that costs on the job subsequently rose to nearer 拢300m, and while there was additional groundworks activity wrapped up both in the main civils job undertaken by Bouygues-Laing O鈥橰ourke and the large 鈥渕arine works鈥� given to Balfour, the source says it is implausible that just groundworks problems could have led to a 拢3bn cost rise. 鈥淭he entire civils package was only in the region of 拢3bn,鈥� he says. 鈥淵ou鈥檇 have to double that. It must be more than groundworks.鈥�

Impossible?

Instead, he blames general construction cost inflation and high labour costs alongside a failure to take account of the specific requirements of nuclear construction 鈥� such as the high grade of concrete. Cost-reimbursable contracts mean any additional spend flows to EDF鈥檚 budget directly.

鈥淭here are very few people in the industry who鈥檝e worked on nuclear power station projects before,鈥� the source says. 鈥淎nd everyone was warned repeatedly it was going to be much more difficult, but nobody believed us.鈥�

There is also scepticism as to whether EDF can hit its 2025 deadline to start commercial generation. EDF鈥檚 statement admitted that the risks of a delay of up to 15 months had risen since its last update, but that so far it was sticking to its target. But UCL鈥檚 Dorfman says other EPRs have taken at least 10 years to get from construction start to generation. 

鈥淚t鈥檚 completely impossible,鈥� he says. 鈥淓verybody knows this. It鈥檚 like a kind of Trump dream.鈥�

Even EDF itself doesn鈥檛 sound totally sure. Paul Spence, strategy director for EDF鈥檚 UK arm, told BBC Radio 4鈥檚 Today programme at the end of  last month that it was currently on track but that 鈥淚 can鈥檛 say today what will happen over the course of the rest of the construction.鈥� 

Uneconomical 

Whatever the reason for the cost increases and potential delays, the wider question is whether they reduce the chances of any further power stations being built. While projects by rivals at Moorside and Wylfa have been mothballed, EDF still plans to build another power station, Sizewell C, immediately after Hinkley, with its joint venture partner China General Nuclear lined up to build Bradwell B.

Under the deal EDF agreed with the UK government in 2013, which guaranteed it receiving 拢92.50 per MWh 鈥� index linked 鈥� for power for 35 years, there will be no effect upon bill payers of Hinkley鈥檚 higher construction costs. 

But this kind of deal, at twice current wholesale prices, is widely regarded as too expensive an exercise to repeat. In recent years the cost of renewable power projects has been falling precipitously, with offshore wind schemes last month agreeing deals based on a guaranteed energy price of less than 拢40 per MWh 鈥� pricing nuclear out of the market. 

Unsurprisingly, perhaps, solar and wind generation capacity grew by 35% and 17% respectively in 2017, while nuclear grew by just 1%, according to the International Energy Agency. 鈥淓verything has changed in the last 10 years,鈥� says Dorfman. 鈥淚nvesting in nuclear is uneconomical.鈥�

In this environment, any increases in cost make it ever-harder to make nuclear schemes viable. But nuclear鈥檚 promoters argue that its ability to provide low carbon 鈥渇irm鈥� generating capacity makes it worth paying more for than intermittent renewables. The NIA鈥檚 Greatrex says: 鈥淏aseload or firm power remain the fundamental of the energy network. We have a fleet of nuclear power stations which are all going out of service 鈥� they need replacing.鈥�

Hence the government is exploring whether a different financing system, known as the Regulated Asset Base model, can get nuclear projects built. The problem is that under this system 鈥� essentially that which UK water companies operate under 鈥� consumers would foot at least part of the bill for cost overruns. In fact, they could even end up paying if a project was started, then abandoned. 

Suddenly, therefore, construction costs could become a big political issue affecting voters鈥� energy bills. 

Alasdair Reisner, chief executive of the Civil Engineering Contractors Association, says: 鈥淭he government won鈥檛 want to expose consumers to uncontrolled cost escalation. There鈥檚 no getting away from the fact the cost is piled on to the consumer.鈥� 

Likewise, Stephen Thomas, emeritus professor of energy policy at the University of Greenwich, says the cost increases just make the RAB deal harder to pull off. 

鈥淭his demonstrates to investors how risky these projects are economically. If virtually all the risk isn鈥檛 landed with the taxpayer or consumer, then you鈥檙e not going to find anyone to fund it.鈥�

For those hoping for a steady flow of nuclear projects into the foreseeable future, this may be a big hurdle to cross.