Wednesday 14 November 2007

British Energy Half-Year Report – Fallout Zone (1)

Yesterday, nuclear generator BE posted a profits warning: “It is unfortunate that … ‘legacy’ Boiler Closure Unit issues at Hartlepool and Heysham 1 will have a significant impact on full year output”.

Significant and unfortunate indeed: and getting worse. Last year saw ‘unplanned losses’ of output equal to 23% of the nuclear capacity that should have been available after routine outages. This year we are invited to expect ‘unplanned losses’ somewhere between 26–35%. Legacy issues’ presumably means ‘no-one’s fault’: so that’s alright.

Actually, of course, it's pretty bad, but it illuminates the potential for something still worse. BE’s nuclear fleet is comprised of AGRs (apart from Sizewell B, a PWR), and they have been beset by legacy issues. There is the clear possibility something nasty might crop up that would cause the whole lot to be closed down at once. And we’d be on our own to fix it: unlike the PWR, the AGR is a design unique to Britain.

But CEO Bill Coley is undaunted. “We have found no factors to indicate that we can’t extend the life of these stations” beyond their design-life of 30 years, he said, adding that an extension of between five and ten years was likely.

If running properly, AGRs represent somewhat under 20% of the UK’s generation output; and these heroic assumptions on life-extensions are built into government thinking on our future sources of electricity. Is this wise ? What will happen if we wake up one day to find they must all shut down forthwith ? Don’t ask Gordon ‘Strategic’ Brown: he has no idea.

We shall return to BE later in the week with more gems from their half-year report.


Photo: British Energy Group plc


Anonymous said...

"issues": why can't the fuckers speak English rather than prattling on in this gobbleydegook? Anyway, there's another prob: practically everyone who knows anything about AGRs has retired. Hell, I'm about to retire and the only reactor I've ever known about in much detail was at Chernobyl ;).

Nick Drew said...

Glad you are still smiling, dearime ! Did you ever get close ?

We mentioned the engineer-shortage a while ago, which certainly turns the screw on the AGR situation - & it'll make building new plant problematic, too.:

CityUnslicker said...

No doubt the Eastern European immigrants with nuclear experience from from Soviet states can come to help us out of this dilemma. At least they are used to trying to keep very old equipment going....

Anonymous said...

No mention of the graphite core issues in the review. To my mind, any upside from AGR 5 or 10 year life extension is quite a punt - John Large is anti-nuke, but he does know his graphite core stuff after years of research for UKAEA:

Brief Review of the Documents Relating to the Graphite Moderator Cores at Hinkley Point B and Other Advanced Gas-Cooled Reactors

The Oldbury Magnox has certainly had a torrid time toward its end-of-life with its Graphite Core Safety Case. Interesting NII comment: "NII has made significant progress with assessing the adequacy of the [Graphite Core Safety Case] for continued operation of reactor 2, however, this work has taken longer than anticipated, mostly due to resource constraints within the organisation." - sounds expensive once you are in this space waiting for authority to restart a reactor.

Old BE said...

We can just import more from the French. They very sensibly chose one reliable design and built lots of them. We designed a new reactor from the ground up each time we wanted a new station.

A clone of Sizewell B was mooted but shelved when Blair said in 1997 that he saw no need to expand the nuclear power programme. How prudent.

Anonymous said...

Well, the French are "at least two years" behind schedule, and "more than 25 percent over its 3 billion-euro ($4 billion) budget" building the Finnish EPR. Doesn't much sound like the simpler designs + modern big-project management = predictable costs that the nuclear industry has been promising for the next generation?

And the reason we didn't have a Sizewell clone at Hinkley Point was that Sizewell was uneconomic at electricity prices at the time. Sizewell leccie costs 6p/Kwh (using 8% discount rate), about twice base-load prices at the time - even today my Economy 7 leccie costs me less that that!

I'm waiting to see exactly how the next generation is going to be justified economically.

Croydonian said...

Wildly off topic (apologies..), but a fine new name and look chaps.

Nick Drew said...

Mr C - thanks, we are always open for business of the flattering kind

(design credit to the good Mr Spark)

RWEndland - looked up your link and, well, that's spoiled my breakfast and no mistake. When I wrote "clear possibility ... whole lot closed down at once" I wasn't aware the potential cause for this could be pinpointed already.

Stick around, Mr E, we often look at energy issues on this blog. Wouldn't say we are anti-nuke here, just anti-bullshit - and quite averse to empty governmental posturing. We're waiting to see too ...

Whispering Walls said...

Funny that nuclear plants can be so affected by wires

Anonymous said...

ND: Sorry I spoiled your breakfast!

Any idea what the market expectation of AGR life extensions is? e.g. how they would react to shorter than requested life extension on the first two AGRs, with extra regular shutdown/inspection requirements? I think this is a fairly likely final outcome.

I think a total AGR fleet shutdown is unlikely, as they aren't all exactly the same design, and are of various ages. The professional thing to do would be to build a good model that could make per station graphite core lifetime predictions. Most other things can be mended, but you are pretty much stuck with your graphite core as is.

If you want to spoil your dinner tonight as well, especially if you live in Gloucester/Cotswolds/Midlands, and have 20 mins to spare, take a gander at this ppt presentation (needs slide-show mode to work) about the Oldbury Magnox station in its last year. Its aimed at the general public, so first third is a bit slow, but middle section is a really good simple presentation of graphite core issues. Oldbury is the station where peak graphite brick weight loss from neutron effects is approaching 34.5%. Keeping old gas/graphite reactors going is a lot to do with how close to the wire you dare go! It's driven by how good your monitoring, testing and modelling is, and engineering judgement - it's a bit scary if you think commercial pressure is having too much influence.

NB I'm not a nuclear professional, just read around the topic a fair bit.

Nick Drew said...

WW - for want of a nail ...

wow, Mr E, that's some .ppt, in more ways than one, nearly spilled me tea (warning for anyone not on broadband: 15.4 MB. warning for anyone living in said areas: scary information within)

market expectation of AGR life extensions ? here's what I think

- three markets to consider: equities; electricity (qua traded commodity); energy sector (qua capital deals)

(a) equities, sentiment-driven, will always twitch on any outré news, whether understood properly or not - so BE would be hurt, other generators benefit

(b) electricity: the sector has come to expect magical, logic-defying life-extensions (e.g. Magnox !), and has already assumed lengthy extensions for the AGRs. (It's beginning to assume the German 'early decommissioning' programme will be scrapped, too.) So power prices would rise on such news, and gas too (see below - and they tend to move together in the UK, though mostly driven by gas of late)

(c) capital energy: from there, who knows where things go ? Obviously there are a number of winners from a sustained power-price rise. (There will also be cunning, vulture-type end-games for a 'political' stock like BE.) But the sheer infeasibility of the UK's position gets thrown into new relief.

I personally think that when push comes to shove there is a lot less political will behind environmental concerns than security-of-supply. So gas & coal would quickly be the large-scale beneficiaries, being the only way to plug the looming gap with certainty.

CityUnslicker said...

ND - quite right. With China building a coal fire station a day then what effect will another dozen or so really have?

The argument is ready made for them...

I wish they would just get on with it now already!

Anonymous said...

ND: If the market really expects the life-extension to go through like a breeze, someone could make serious money evaluating the likelihood more seriously.

Just to pick some quotes from NII reports:

[graphite] core lifetime is probably the dominant station life-limiting feature ... The current safety case will expire during the PSR2 period (July 2006)

the assessor needs to assume worst case consequences of graphite core damage unless the licensee is able to provide robust arguments. I Judge that ... the Precautionary Principle should be adopted for assessment of graphite core safety cases. (June 2005)

BE claim that weight losses as high as 70% at the fuel channel wall are tolerable.... BE expressed concern regarding NII graphite resource and possible impact on return to service dates (June 2006)

Looking at the recent BE full statement, I can't see any clear evidence that BE is investing now in sorting out the boiler problems that restrict output to 60-70% at Hinkley Point B and Hunterston B, ahead of them deciding (by March 2008) if they are going to apply for life-extension for these 2 AGRs. It's all a bit unclear, but the clearest BE line seems:

Investment in plant over the medium term is likely to be affected by the outcome of our boiler management strategy and life extension decisions for Hinkley Point B and Hunterston B.

This doesn't suggest to me that they have great confidence they will get a full lifetime extension. These 2 AGRs have a current closure date of 2011, so if the boilers were fairly cheap to fix you'd expect them to get on with it regardless of the life-extension issue. To me this suggests BE has less confidence in a long lifetime for these 2 AGRs than the market has. Even if the other AGRs are in a better state, probably the first news from these 2 will drive the market.

Nick Drew said...

Not much transparency, is there? Formally, BERR and the White Paper stick to the official decommissioning dates, while indicating extension requests may be forthcoming. They couldn't show anything else publicly, could they? But there is reason to believe they are very nervous about capacity margins and I would judge there is quite a lot of benefit-of-the-doubt on offer.

The NGC 7 Year Statement only goes out, errr, 7 years: but interestingly it shows Hinkley and Hunterston still at full capacity in 2013/14 (not closed in 2011 per the 'formal' position); and NGC only knows what it's been told.

Exactly what the market thinks is inevitably guesswork but as I said before, I think it expects extensions. The big boys have all got their free options (S36's) on gas & coal lined up in case it goes the other way, of course.

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