Read more: The folly of Hinkley
The recent troubles at Toshiba concerning their US nuclear arm, Westinghouse, for which costs have substantially overrun, demonstrate again that nuclear construction is an economically risky business. Since most of the cost of nuclear power goes on building the machine in the first place, anything that results in overruns in the initial schedule, in terms of time or cost, represents a serious threat to the finances of the scheme and indeed its investors.
The building of the first new UK nuclear power station in over twenty years is now underway at Hinkley Point in Somerset, to be financed by EDF Energy and CGN from China at a total projected cost of £18bn. It is to use the Evolutionary Power Reactor (EPR) designed and built by Areva, the French nuclear plant service company. Hinkley Point C will represent the fifth and sixth such reactors to be ordered, behind one for each of Olkiluoto (to be operated by TVO, Finland), Flamanville (EDF, France) and two at Taishan in Guangdong Province, China (CGN). The two European schemes are heavily over time and budget, while a further six-month delay in commissioning the two Chinese plants has just been announced.
So—what lessons can be learnt from the existing EPR projects, and especially Olkiluoto, the first to be ordered and the first to be under construction?
For background, fifteen years after the first “dash for gas” the UK is getting rather short of reliable electricity capacity. In recent months we have seen some extremely high power prices in the “balancing” market which plays a vital role in keeping the lights on from one moment to the next—£2,500 per MWh in early November against a normal price of around £35 over the last couple of years. The challenge will grow as most of our existing coal and nuclear power plants come to the end of their lives over the next decade or so.
So the Hinkley Point C nuclear project—as well as its proposed “twin” at Sizewell in Suffolk—represent two key infrastructure projects. Each would generate about 7 per cent of the UK’s electricity demand, a total of 6.4 GW of low-carbon output which will not depend on favourable weather conditions to make its contribution. A prompt start would just about allow these plants to take over from the present fleet in an orderly fashion—if the projects can be managed successfully.
Construction at Olkiluoto unit 3 began in 2005, making it the first new reactor construction project in western Europe for over a decade. It was to be built at a fixed price from vendors Areva of €3bn, with an expected completion date of 2010. A variety of problems has pushed the commissioning date back, currently to 2018, and increased projected costs to €8.5bn. The scheme has been subject to claim and counterclaim between Areva and owners TVO. Construction at Flamanville-3 began in 2007 and the project hit similar difficulties, compounded recently by concerns over the integrity of key components, most importantly the reactor pressure vessel (RPV). Site work at Taishan also began in 2007 and full operation of the two units is now expected late this year and early next year, four to five years behind original plans: a further delay has just been announced.
Valuable lessons can be drawn from each of the existing EPR projects. China, one of the funding partners behind Hinkley C, may have the first two EPRs in operation (though this is not certain). However, the Chinese environment is a very different one from that pertaining in western Europe, not least in the fact that China has been building large numbers of nuclear power stations for two decades now while the west has to restart an industry which had effectively died out. Flamanville, being managed by EDF, the main partner in the UK reactors, has offered direct experience to the Hinkley project management team but the RPV issue may result in further delay.
Olkiluoto, however, also offers a number of uniquely relevant messages for the UK government and the Hinkley C project team. In both the UK and Finland nuclear power is an important but not dominant contributor to the electricity generation mix—21 per cent in the UK, 34 per cent in Finland (against 3 per cent in China and 76 per cent in France). Both countries have a mature liberalised electricity market dating back to deregulation measures in the 1990s; both intend to phase out coal in the middle years of next decade (as does France); both import most of their natural gas. Most currently operating nuclear power stations in both countries were connected to the grid in the late 1970s and early 1980s. The regulatory structures of the two countries are similar: both have well-developed systems of “spot check” inspections of the effectiveness of the self-evaluation measures within their respective nuclear industries. They also have strong informal as well as formal contacts with each other.
Delays such as have been experienced at Okliuoto-3 are not inherent in nuclear technology; the world has built hundreds of reactors, many of the most recent of which have come in broadly to time and cost or have been subject to overruns no more serious than are typical of many heavily capital intensive industries. However, it is vital that all lessons available from experience of the first EPR to be commenced are fully applied to new projects such as Hinkley C and indeed any of its successors.
Some of these lessons have clearly already been heeded. A major problem at Olkiluoto was that the design had not been finalised when the contracts were signed: at Hinkley there are 4D models of the entire construction phase, designed to ensure that points where it is particularly important that different strands of the project reach the right stage together are seen in advance. Since Olkiluoto was the first there was no experience of the particular construction challenges of the EPR, nor was there a supply chain with recent experience of nuclear construction: this is less the case now that four have been largely completed. Further, the management team at Hinkley C is aware that the sheer complexity of a project like the EPR was underestimated at Olkiluoto, at least in the early days.
However, there are other elements which will need to be kept in mind as the project proceeds. At Olkiluoto, vendor Areva-Siemens did not pay sufficient attention to the specific national needs of the Finnish nuclear regulator. Regular tripartite discussions involving vendor, purchaser and regulator will be fruitful. Too often the quality of individual components was not properly monitored—a certificate of fitness was sometimes accepted rather too easily and manufacturers were not always as aware as they needed to be about the importance of the standard of key components, resulting in some having to be remade. Experience of the project has also emphasised the importance of ensuring that a robust dispute resolution process is in place between vendor and operator to reduce the risk that time may be lost in legal disputes.
Finland has an impressive record in operating its four existing nuclear power stations—indeed over their lifetimes its stations have been the best-performing in the world, with an “availability factor” (the amount of electricity generated against a theoretical maximum) of 91.3 per cent. With completion of Olkiluoto now finally on the horizon there is clearly a very strong argument for the UK government to build close ties with Finland to make sure that similar problems do not beset the British new build projects which have such national importance. Implementing what is in effect a “new” technology always carries risks and challenges. Experience is simply the name we give our mistakes, as Oscar Wilde put it. A proper appraisal of the TVO story at Olkiluoto should ensure that Hinkley and its successors become the successful operating plants that the UK clearly needs. Olkiluoto-3 offers a valuable and distinct reference point against which the UK government can gauge progress at Hinkley Point.
The recent troubles at Toshiba concerning their US nuclear arm, Westinghouse, for which costs have substantially overrun, demonstrate again that nuclear construction is an economically risky business. Since most of the cost of nuclear power goes on building the machine in the first place, anything that results in overruns in the initial schedule, in terms of time or cost, represents a serious threat to the finances of the scheme and indeed its investors.
The building of the first new UK nuclear power station in over twenty years is now underway at Hinkley Point in Somerset, to be financed by EDF Energy and CGN from China at a total projected cost of £18bn. It is to use the Evolutionary Power Reactor (EPR) designed and built by Areva, the French nuclear plant service company. Hinkley Point C will represent the fifth and sixth such reactors to be ordered, behind one for each of Olkiluoto (to be operated by TVO, Finland), Flamanville (EDF, France) and two at Taishan in Guangdong Province, China (CGN). The two European schemes are heavily over time and budget, while a further six-month delay in commissioning the two Chinese plants has just been announced.
So—what lessons can be learnt from the existing EPR projects, and especially Olkiluoto, the first to be ordered and the first to be under construction?
For background, fifteen years after the first “dash for gas” the UK is getting rather short of reliable electricity capacity. In recent months we have seen some extremely high power prices in the “balancing” market which plays a vital role in keeping the lights on from one moment to the next—£2,500 per MWh in early November against a normal price of around £35 over the last couple of years. The challenge will grow as most of our existing coal and nuclear power plants come to the end of their lives over the next decade or so.
So the Hinkley Point C nuclear project—as well as its proposed “twin” at Sizewell in Suffolk—represent two key infrastructure projects. Each would generate about 7 per cent of the UK’s electricity demand, a total of 6.4 GW of low-carbon output which will not depend on favourable weather conditions to make its contribution. A prompt start would just about allow these plants to take over from the present fleet in an orderly fashion—if the projects can be managed successfully.
Construction at Olkiluoto unit 3 began in 2005, making it the first new reactor construction project in western Europe for over a decade. It was to be built at a fixed price from vendors Areva of €3bn, with an expected completion date of 2010. A variety of problems has pushed the commissioning date back, currently to 2018, and increased projected costs to €8.5bn. The scheme has been subject to claim and counterclaim between Areva and owners TVO. Construction at Flamanville-3 began in 2007 and the project hit similar difficulties, compounded recently by concerns over the integrity of key components, most importantly the reactor pressure vessel (RPV). Site work at Taishan also began in 2007 and full operation of the two units is now expected late this year and early next year, four to five years behind original plans: a further delay has just been announced.
Valuable lessons can be drawn from each of the existing EPR projects. China, one of the funding partners behind Hinkley C, may have the first two EPRs in operation (though this is not certain). However, the Chinese environment is a very different one from that pertaining in western Europe, not least in the fact that China has been building large numbers of nuclear power stations for two decades now while the west has to restart an industry which had effectively died out. Flamanville, being managed by EDF, the main partner in the UK reactors, has offered direct experience to the Hinkley project management team but the RPV issue may result in further delay.
Olkiluoto, however, also offers a number of uniquely relevant messages for the UK government and the Hinkley C project team. In both the UK and Finland nuclear power is an important but not dominant contributor to the electricity generation mix—21 per cent in the UK, 34 per cent in Finland (against 3 per cent in China and 76 per cent in France). Both countries have a mature liberalised electricity market dating back to deregulation measures in the 1990s; both intend to phase out coal in the middle years of next decade (as does France); both import most of their natural gas. Most currently operating nuclear power stations in both countries were connected to the grid in the late 1970s and early 1980s. The regulatory structures of the two countries are similar: both have well-developed systems of “spot check” inspections of the effectiveness of the self-evaluation measures within their respective nuclear industries. They also have strong informal as well as formal contacts with each other.
Delays such as have been experienced at Okliuoto-3 are not inherent in nuclear technology; the world has built hundreds of reactors, many of the most recent of which have come in broadly to time and cost or have been subject to overruns no more serious than are typical of many heavily capital intensive industries. However, it is vital that all lessons available from experience of the first EPR to be commenced are fully applied to new projects such as Hinkley C and indeed any of its successors.
Some of these lessons have clearly already been heeded. A major problem at Olkiluoto was that the design had not been finalised when the contracts were signed: at Hinkley there are 4D models of the entire construction phase, designed to ensure that points where it is particularly important that different strands of the project reach the right stage together are seen in advance. Since Olkiluoto was the first there was no experience of the particular construction challenges of the EPR, nor was there a supply chain with recent experience of nuclear construction: this is less the case now that four have been largely completed. Further, the management team at Hinkley C is aware that the sheer complexity of a project like the EPR was underestimated at Olkiluoto, at least in the early days.
However, there are other elements which will need to be kept in mind as the project proceeds. At Olkiluoto, vendor Areva-Siemens did not pay sufficient attention to the specific national needs of the Finnish nuclear regulator. Regular tripartite discussions involving vendor, purchaser and regulator will be fruitful. Too often the quality of individual components was not properly monitored—a certificate of fitness was sometimes accepted rather too easily and manufacturers were not always as aware as they needed to be about the importance of the standard of key components, resulting in some having to be remade. Experience of the project has also emphasised the importance of ensuring that a robust dispute resolution process is in place between vendor and operator to reduce the risk that time may be lost in legal disputes.
Finland has an impressive record in operating its four existing nuclear power stations—indeed over their lifetimes its stations have been the best-performing in the world, with an “availability factor” (the amount of electricity generated against a theoretical maximum) of 91.3 per cent. With completion of Olkiluoto now finally on the horizon there is clearly a very strong argument for the UK government to build close ties with Finland to make sure that similar problems do not beset the British new build projects which have such national importance. Implementing what is in effect a “new” technology always carries risks and challenges. Experience is simply the name we give our mistakes, as Oscar Wilde put it. A proper appraisal of the TVO story at Olkiluoto should ensure that Hinkley and its successors become the successful operating plants that the UK clearly needs. Olkiluoto-3 offers a valuable and distinct reference point against which the UK government can gauge progress at Hinkley Point.
