For well over fifteen years here we've periodically asserted that France has a critical strategic objective of getting other nations, not least the UK, to pay for its monstrous nuclear liabilities. As soon as EDF came away with Osborne/May's outrageously generous gold-plated deal for Hinkley Point C, they started lobbying for the next one, Sizewell C (CGI above); and - significantly - that this should be on a different contractual basis. To remind ourselves of the salient details of HPC, bad and good:
- there is no HPC completion date! In fact, EDF isn't obliged, contractually, to build it at all!
- ... but if they don't, all the ever-increasing sunk costs are for the account of the project (80% EDF, 20% the Chinese)
- any problems encountered along the way that are down to HMG, and most specifically any more-than-trivial changes in nuke-related regulations, are for the account of HMG (even if, for example, another nuke accident happens somewhere in the world that inevitably means every government everywhere will insist on a new type of widget being fitted on all nukes everywhere). In other words, EDF - arguably the world's leading nuke institution - refuses to accept fundamental nuke-risk
- the electricity sales contract strike-price (technically a CfD) of £92.50/MWh, was base-year 2012, indexed to inflation (it is now well over £100). At the time that was some three times higher than prevailing wholesale baseload electricity, although obviously it looks a lot better right now, as our good friend Mr Wendland noted BTL the other day
- the HPC deal gave EDF a put option on SZC at £89.50 (indexed) (which would then apply to them both); said (by EDF) to be a good deal at the time, since "of course" SZC would be cheaper to build than HPC, being able to call on all the HPC experience and the established construction labour force etc.
- any problems encountered along the way that are NOT down to HMG are for the project's account
- certain very mild contractual disadvantages (I won't call them penalties because they are trivial) kick in if EDF isn't finished by 2029; and the whole contract is cancelled in they aren't finished by 2035. This for a plant that EDF told us in 2008 would be operational by Xmas 2017!
But, pleased though they were to get this deal inked in 2016, this wasn't good enough for EDF - a company that is technically bankrupt, although as a recently fully-re-nationalised French state entity, this might not be as fatal as it would be for most companies being relied upon to undertake huge and critical enterprises. Why not good enough? Because EDF retains HPC construction risk, and is only remunerated (if at all ..! - see 2035 above) via electricity sales in due course, albeit at a price underwritten by HMG.
Construction risk? Well, needless to say, at HPC there have been many problems along the way. Obviously Covid wasn't expected - although hey, any firm undertaking projects with a construction period of more than a decade, and a lifespan of maybe a century, had better reckon on Shit Happening, no? But Brexit happened before the contract was signed, so no sympathy there. And likewise no sympathy for the many purely technical and design cock-ups perpetrated by EDF and its (mainly French) major contractors, e.g. getting the geology wrong on the bedrock at Hinkley, FFS. So costs have been steady rising, and timetables steadily slipping. Oh yes, there's construction risk aplenty.
So what about SZC? Surely, as we've been assured by EDF ad nauseam, just as HPC was going to be a breeze, because of the prior experience obtained with EPRs at Flamanville (France) and Olkiluoto (Finland), so SZC in its turn would be an absolute shoe-in. Hah! All three European pre-SZC EPR projects have been fiascos; and the two EPRs built in China, apparently much more efficiently and on time / on budget, are in trouble already: one is shut down and the other on limited running, due to unresolved problems that the French nuke authorities are very troubled by.
And aside from the entire history of EPRs, there are SZC-specific reasons to believe it'll be more costly than HPC. I won't bore you with the details, but every site is always different and SZC will bring all manner of new challenges, some of them pretty fundamental. Nothing that engineers can't solve, mind - at a cost ...
SO. We can easily see why EDF refuses to bear construction risk at SZC. They are "even more bankrupt" today than they were in 2016. In the next post we'll look at how HMG proposes to steam ahead with SZC anyway - and we'll ask the obvious question: FFS, why?