Hinkley: Twist, stick, or China?

The government is in something of a hole over Hinkley C.

It’s a hole entirely of its own making, because since David Cameron and George Osborne came to power they have had numerous hints that it resembled a turkey more than a golden goose.

And they’ve chosen to ignore them all.

The estimated cost rose to a staggering £18bn. Project overruns and costs multiplied at Flamanville and Olkiluoto, the only two places where European Pressurised Water Reactors (EPRs), the same design as Hinkley C's, are under construction.

Ambitions to secure a final resting place for Britain’s nuclear waste came to naught after years of planning. Costs of renewable energy fell, rendering Hinkley’s economics ever more fantastical. Attempts to find private sector backers met a blank wall, necessitating a cap-in-hand approach to China.

Already, five years ago, it looked more like a politically driven project than a sound policy choice.

But even the politics are making less and less sense, with a range of high-profile Conservative thinkers including the Chancellor’s father-in-law Lord Howell ('one of the worst deals ever'), Boris Johnson ('disgraceful'), and now Matt Ridley ('white elephant') condemning the project’s earth-wateringly high cost.

Insecurity of supply

For EDF too, the stakes have risen in tandem as the problems at Flamanville and Olkiluoto have stoked its financial woes. Now Hinkley has claimed the scalp of its chief financial officer Thomas Piquemal, and Standard and Poor’s has threatened to downgrade the company’s credit rating if Hinkley goes ahead.

This must be the least secure ever foundation for a project that government rhetoric still insists is essential for security of supply.

And the government is painting itself into a corner here: the more it protests that it needs Hinkley for security of supply, the harder it becomes to let the project go.

The security of supply argument is, to use the technical term, balls. Even in an impossibly optimistic world it’s impossible to see the first current flowing before 2025 – and by then, all of the UK’s coal-fired power stations will have closed, assuming the coal phase-out decision announced last year is confirmed.

That’s the security of supply issue – and it can’t be solved by a power station that’s still being built.

Other things, however can solve it – and at diminishing cost. The Committee on Climate Change has calculated that building renewables instead of nuclear would put about an extra £10 per year on the average bill.

That’s a tiny amount – less than three pints of beer, if you live in the somewhat extortionate south of England – and in any case could well be an over-estimate, given that the Committee has historically been conservative with its renewables forecasts and that costs of storage, for example, are coming down quickly.

And as the heads of both the UK’s and China’s national grids have said, the era of baseload generation may rapidly be coming to an end anyway, which makes the government’s plan of securing Hinkley as a source of baseload electricity until 2085 (60 years of operating life after completion in 2025) seem suspect at best.

Finally, if the government really does want to secure a number of nuclear stations for decades ahead, why is it hooked on the EPR? There’s evidence that both of the other designs slated for the UK, Hitachi’s Advanced Boiling Water Reactor (ABWR) and the Toshiba-Westinghouse AP1000, could come in cheaper [pdf link].

And operating ABWRs actually exist, which one might think an important factor in deciding which of the new designs to build.

Whither Hinkley, if Hinkley withers?

As outlined above, Hinkley is where it is because it’s a political project, not because it’s a sensible policy option.

And if you ask the ‘whither Hinkley now?” question from a political point of view, it points in one direction: China.

Conservative heir-apparent George Osborne’s visit to Beijing in September and Chinese President Xi Jinping’s trip to London the following month were key in securing China’s one-third stake in Hinkley C.

It was wrapped up with lots of other warm words about, for example, Chinese investment in Heathrow Airport and the ‘Northern Powerhouse’.

But the real prize for President Xi is not Hinkley, but Bradwell. On this Essex peninsula, adjacent to the Magnox station that ceased operating in 2002, China is to build its first nuclear reactors in Western Europe, provided they meet safety standards.

Securing the approval of western regulators is of course very helpful if China is to become the dominant international supplier of nuclear reactors, just as it plans to dominate the global wind turbine and solar panel markets.

In a flap

By now, David Cameron and George Osborne must know that Hinkley looks like a turkey, if not quite yet a dead duck.

Simply carrying on as though nothing had changed risks yet more opprobrium even from their friends over huge subsidies, handing money to foreign governments, and so on.