Friday, 1 August 2008

BE / EDF: The Fat Lady is Still in the Wings


We’ve been following this one for a while, and the main points haven’t changed. BE is a massive decommissioning liability (as well as falling to pieces) but with some excellent brownfield sites: EDF is an even bigger liabilityand Sarkozy is playing a devious game in the strategic interests, naturellment, of La France.

Notwithstanding French protestations that the UK isn’t perhaps all they hoped it would be for new nuke developments, it seems more likely the institutional investors’ veto is the main reason for the current hiccup. If, as it seems, they are taking a punt on UK electricity prices rising still further, well, that’s not a particularly contrarian speculative view. Wholesale power price increases go straight to a nuke’s bottom line, because of course their fuel costs aren’t correlated, unlike those of gas and (to a lesser extent) coal.

Here’s some other points to bear in mind:

· Strange to relate, there really is a shortage of really good UK brownfield power-plant sites, and not just for nukes: it’s to do with cooling water requirements. Both E.on and RWE would love to get their hands on some ...

· Centrica is a really important player in all this, with lots at stake. They’ve made a lot of £££ since 2002 through very adroit dealings with BE, and need more of the same

· Schadenfreude aside, we can’t be indifferent to all this governmental ineptitude: the lights really will start going out in the next 6-8 years …

PS, for a truly fatuous commentary, how’s this from the FT ?


"The fact that [EDF] is owned by the French state is of no importance. EDF can be trusted to behave like a conventional commercial enterprise and there is no strategic reason to prevent a French company from running UK nuclear power plants"

With suckers like that writing for prestigious financial papers, what hope do we have that Brown and his sorry, distracted crew will think any more clearly ?


ND

13 comments:

Blue Eyes said...

Many people seem to think that there is a silver bullet and that we neither need new nukes nor conventionals. All we need is wind.

When are people going to wake up and smell the cold coffee?

CityUnslicker said...

when the light go out BE.

I was thinking this morning when reading about this on the train that perhaps now is the time to install some solar power and batteries in Slicker Castle to power us into 2014 - because the grid either won't or we will have £5000 annual leccy bills to deal with.

Costly as solar is, it will win on this cost/benefit analysis.

dearieme said...

Get yourself a diesel generator and run it on chip-shop oil.

Anyway, how in God's name can we be short of cooling water - we are surrounded by sea.

John East said...

It seems that the government were under the impression that an EDF takeover would solve all of their nuclear worries. Just let EDF do the dirty work for them and take all of the flak from the greenies.

It's a pity the government have simultaneously been talking up energy windfall taxes. If I was EDF I'd have run away too, particularly as the French know that a dithering UK with no real energy policy is at the mercy of French nuclear generators whether the French have a stake in the UK or not. The French are in a win-win position whatever they do.

Nick Drew said...

dearieme - as I said, strange to relate: I am no engineer but it seems to be true, the exact conditions needed are not as common as you'd (or I'd) imagine and even less so when you want to site the plant near to where the demand is

Perhaps Mr Wendland is listening ..?

John - yes, if the putative windfall tax is to be on utilities rather than just oil co's, we will not get our much-needed ne power plants, for certain

( BTW, I see lefties goading GB to get on with a windfall tax by reminding him that he invented it. NOT SO ! Geoffrey Howe imposed a windfall tax ('Supplementary Petroleum Duty' - nice euphemism) on the oil co's in 1980 or 1981, from memory )

Blue Eyes said...

It is also preferable to not use seawater as maintaining the pipes is harder. Nukes have to (under UK policy) be in lightly populated areas hence Cumbria, North Scotland, Suffolk and that bit of Kent. Oh yes and if you are going to build something on the coast which will still need looking after in 100 years time, you better make sure it is built somewhere which isn't being rapidly eroded by the sea!

dearieme said...

Look, you run coal-fired stations pefectly well with sea-water. (Naturally, you have a cooling circuit with fresh water and you cool that with a secondary circuit of sea water.) I've visited the Cockenzie power station and watched the seals enjoying the fish attracted by the warmth ejected. There's no magic in being a nuke. I'll grant you that the only nuke I've ever studied in detail was Chernobyl, which wasn't beside the briny, but still!

rwendland said...

I dunno why finding cooling water by the sea is hard either. I thought getting a good grid connection location was the tricky/expensive problem - maybe finding somewhere good for both is the big problem. If you need a cooling tower you waste about 5% of power running that - so best avoided if poss.

You notice how most of the proposed sites are in the south? That's because power stations transmission losses are about 10% less from there compared to north England - there is a north to south power flow and loss-wise it is best to reduce this.

ND: As well as a punt on UK electricity prices rising, could the shareholders be taking a punt on the AGR life-times being longer than generally appreciated?

BE only considers nominal life-extensions 3 to 4 years before current stated closure date. Three AGRs have had life extensions lately to 40 or 35 years. The others have potential for life-extension.

Here's a list of AGR power station with a) current closure date b) grid connection + 40 years c) full commercial operation + 40 years

Hinkley Point B: 2016 2016 2016
Hunterston B: 2016 2016 2016
Hartlepool: 2014 2023 2029
Heysham 1: 2014 2023 2029
Dungeness B: 2018 2023 2025
Heysham 2: 2023 2028 2029
Torness: 2023 2028 2028

As you can see, quite a bit of BE value probably hinges on the view you take on AGR life-times, and if they can do the full life-time at the full power rating. Do you know if anyone has published any predictions on this?

Nick Drew said...

Mr W - maybe: I recall we've discussed this before (including the downside that all the AGRs hit an unforseen problem simultaneously!) but I don't remember what we said then. The 'official consultants' reports (RedPoint, Ilex et al) use the 'current' schedule you cite.

Obviously the Magnox extension story must present a very tempting 'analogue' - in the abstract. Personally I'd be very nervous of the technical downside and the power-price upside looks the more attractive punt (I plan to post shortly on the implications of last week's WWF/Greenpeace report)

rwendland said...

ND: Very poor show that the 'official consultants' don't give any consideration to life-time extensions. Current AGR closure dates give 58 plant-years of life remaining. 40 year life time since first grid connection (as the first two grid connected AGRs already have authorised) gives 101 plant-years of life left, and 40 years from full commercial operation gives 116 plant-years left (double). Even after discount rate reduction, and that some will only go 35 years, this is substantial.

The technical downside is large, but as the AGRs were built by multiple suppliers many problems would not be fleet-wide. Though if we had a partial graphite collapse that could have them all shut-down. And if someone flies a large plane into a nuc, would we shut all old nucs on the planet down, or just shut down the airlines?

not an economist said...

I find this para odd:

"The fact that [EDF] is owned by the French state is of no importance. EDF can be trusted to behave like a conventional commercial enterprise"

The whole point of holding a company in the state sector is that you (i.e., the govt, the electorate, vested interests) DON'T want the company to behave in an exclusively commerical manner. You want other, political factors to take a more prominent role in the company's decision making processes. So to conclude by saying that ...

"there is no strategic reason to prevent a French company from running UK nuclear power plants"

....is not necessarily true.

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