Wednesday 24 January 2024

Government introduces its stellar defence procurement skills to energy sector!

+ + UPDATED + +   - see below

Defence projects are the bane of the taxpayer's existence.  (Along with NHS IT projects, PPS procurement etc etc etc).  Astonishing delays, budget over-runs, faulty products - all followed by rinse-and-repeat with exactly the same contractors.  Learn nothing; repeat; and get the same results.  Never fails.

And now we have HMG's pathetic attempts to get a new generation of nukes up and running.  I say 'new', but the EPR is by now a pile of discredited and distinctly old crap.  And yet, conned by EDF, stitched up by George Osborne, bullied by Francois Hollande and betrayed by her own personal weakness of character, in 2016 Theresa May signed up for the Hinkley Point 'C' contract, the exact terms of which we may never learn: but we know enough to say they are awful.  All the optionality - and it's very great indeed - lies with EDF.  What's more, EDF knows that if it huffs and puffs and lies a bit more, it can get unilateral, favourable changes to this one-sided contract that are even further in its favour.  For example, not long ago it obtained a three-year relaxation to the back-stop date for start-up, from 2033 to 2036.  That's for a project it initially said would start up by year-end 2017! (sic)

So after this week's update from EDF, where are we now?  Start-up-date maybe 2031 or 2032 ... cost, well anyone's guess really, but wildly higher than any number floated before.  And this just days after HMG put around £2.5 bn cash (that's c.a.s.h., upfront, not just a high HPC-type electricity price) into Sizewell 'C', the next monstrous would-be product of EDF's nuclear fantasy.  The big difference with SZC being that, unlike HPC where EDF has to swallow the over-runs, with SZC the taxpayer will do that because EDF has no intention of taking on any construction risk at all.  And Boris signed up for that (not just May, then, who's an airbrained git).  

Did I say EDF has to swallow the over-runs on HPC?  Well, thus far, that's what the contract says and that's how it looks.  But, lo!  The contract doesn't commit them to finish the project at all !  They just don't get to sell that pre-priced electricity if they don't.

However, we can all picture the scene.  It is 2034.  HPC looks sort-of finished, but beneath those big domes and concrete silos, vital bits are not yet ready - and EDF knows full-well they ain't gonna be finished by 2036.  So there will be no juicy, HMG-underwritten, 35-year electricity contract.  They've been cap-in-hand to President Le Pen for more money, but she's sent them away empty-handed.

They know what to do.  "Get Starmer in here" they shout, and he's duly brought in to hear their story.  

"Look here, Starmer, we've run out of money.  But you need the electricity really badly, right?  This HPC delay, and the parallel delay at SZC, have already scuppered your energy strategy, which assumed that BOTH plants would be up and running by 2030! (aside: hah!  that Ed Miliband, eh?  Sucker!!)  You've had three years of patchy blackouts already.  So: we need another, errr, let's say £4bn - well, make it £5bn, what's that between friends, hmm?  Now.  Cash.  And then - we PROMISE - we'll be up and running by Xmas 2037, just, errr, 20 years late.   And we'll have another little meeting - about SZC - next month.  Whadya say?  You don't really want to leave this thing standing here like a radioactive white elephant, do you??"

Watch and wait...


UPDATE     ... but you won't be waiting for long!  See this story - published after I wrote the above post.  You (maybe) read it here first


Anonymous said...

We must remember how we got in this mess, Blair's 1998 "No New Nuclear" decision, the Guardian and Greens loved it.

I seem to remember the CEGB could build power stations, but after that Blair decision who would start a career in nuclear?

You'd be just the chap to write a big piece on our disastrous "go all out for electricity while not actually being able to generate or transmit it" strategy - our "plans" aka fantasies about doubling electricity production - while world coal and oil burning is at record levels. You could mention "green steel", too, a great idea if you have cheap electric capacity but that's just what we don't have. No more Anglesey Aluminium, though I see the Indians (GFG) now have the Lochaber smelter.

Pity about the Frogs. Turns out their new technology is crap and by the time it's not crap it'll be old technology.

In a sane world we'd get Rosatom to build them if we can't. I think the Turkish one is around $22bn for around 4.5 GW for 60 years. It should be going soon but I think GE may be playing sanctions sillies with the steam turbines. After all, another NATO country got their pipelines blown up!

Sobers said...

Who cares what nukes we do or don't build? The entire UK electricity generation policy for the next 25 years is based on research that would shame the most dodgy university professors - 'I know, lets base our assumptions of how much electricity wind turbines can generate from just one years wind data. And while we're at it, lets assume that demand doesn't go up in the future, despite the fact that all domestic heating and personal transport is planned to be converted to electric over the same period. Hey look, the sums all add up, so lets get to it!'

Basically the UK is going to hit the buffers hard at some point in the next few decades if this Net Zero policy is not reversed. Lots of people are going to die, and tens of millions will suffer, and whichever set of political place holders are in charge at the time are going to need some serious security, because people will be pissed off at them in a way we haven't seen in this country for over 150 years.

jim said...

Having been involved in a couple of big construction projects I feel the builders are on top every time. 'Open your wallets, repeat after me - Help Yourself - is the mantra'. This all goes back to Samuel Pepys finding that the King's ships always took longer to build and cost more than commercial boats. Indeed I seem to remember nuclear power stations always having problems with concrete and welding all the way back to Noah.

I suppose the only way to avoid this is to have a department or company specialising in project management - all the time, not just a few 'wet behind the ears consultants' got up for the presentation. Instead a group of hard nosed commercial lawyers, engineers and cost accountants with muddy boots on - not shiny shoes. But when big enough to be useful they are not free of corruption or arm twisting or politicking - look at the big US contractors.

However, any effective control system has to have a continuous stream to work on, to train new entrants and to build a reputation for punishment. We don't have that and cannot have that when we build one power station once in a blue moon and dicker over should it be coal, sunshine, unicorn farts or nuclear. No competition and no experience base and suppliers who say 'talk to the hand, the face ain't listening'. The government has no clout and everyone knows it.

As for military, I remember PROMPT etc. Supposed to lock down the suppliers and commit to targets. Never really worked, the best bit was when one General moved on (after a cockup) and a new General sat in the chair and all targets were reset and old sins forgotten. Nothing to see here chaps - sign the invoice.

Wildgoose said...

It's not just electricity generation, it is the entire National Grid needs upgrading. That's a lot of substation transformers to build along with a lot of cables to lay.

The Net Zero plans are simply insane. The only way they can meet them is by driving more of our industry either out of the country or into insolvency.

Port Talbot's closure makes the UK the only G7 nation lacking first-class steel manufacturing and the "Green" fifth column won't allow us to dig for coking coal.

Over in Germany, BASF have just made a $10 billion investment in a new state-of-the-art complex. But they are building it in China - in Germany itself they are shutting down plants because of the high costs of energy.

It's not just insane, it is deliberate. The Lamp-posts and piano-wire will be genuinely deserved.

Jeremy Poynton said...

Simple. Government has always been incompetent. Now it gets more and more incompetent. Starmer's Labour will easily out do this utterly useless anything BUT Conservative government, and will simply increase the national debt even more.

Time to realise folks. We're fucked and all we have to look forward to is getting more fucked.

Tammly said...

God all these doom and gloom merchants. And they're all right godammit!

Nick Drew said...

Blackmail - haha! - see update to post

Matt said...

The fault of course is not the useless politicians who made all these moronic decisions.

Rather it's the electorate who didn't care to do anything but vote for the party that promised them the most cash thrown in their direction.

You reap what you sow as the saying goes.

Clive said...

I’d be interested in thoughts from the cheap seats about which is the best reactor design. The updated PWRs seem proven and robust (for nuclear, anyway). The EPR seems good on paper, so I don’t know why the builds are such a nightmare.

rwendland said...

Clive, on EPR build nightmare the site managing director excuse was that EDF had "found civil construction slower than we hoped and faced inflation, labour and material shortages, on top of Covid and Brexit disruption". Remarkably uninformative!

Of course the French won't build EPR reactors at home now, that's only for the UK at Sizewell C. They are busy redesigning a simpler to build EPR2 for home use, learning from the foreign part-funded attempts. The big simplification is not building a double skin containment safety dome, but a single skin one - I guess it will no longer bounce off any big planes hitting it! They are also hugely simplifying the pipework and valves, and removing the fourth emergency cooling system. Not entirely convinced that this will make it cheap enough.

My back-of-envelope spreadsheet reckons the most economic PWRs appear to be the Russian, Chinese and South Korean designs, which have gone for gradual improvements rather than a super-duper big step forward into Gen III+ designs. But you will notice those are all heavily state backed, and the key driver to nuclear economics is cheap cost of capital, so you really want a government giving you lots of 5% interest rate capital to make the economics sing, rather than ~12% the private sector wants for the risk. Which I don't think is a runner in the UK for the next decade at least.[*] So I'm not convinced they are really more economic, if you use private sector cost of capital and risk premiums.

And don't hold out hope SMRs will be the cost salvation the industry has promised. The first SMR plant to be built in the US by NuScale has been cancelled because the electricity price will be too high to sell, despite $1.4 billion DOE construction support plus $30/MWh generation subsidy from the US IRA (Inflation Reduction Act). That's real SMRs producing 77MWe each - they had planned to build 6 of them producing 462MWe - not Rolls Royce's spinned not-really-SMR producing 470MWe from a single reactor.

NuScale was (still is? - share price a fifth of 18 months ago) the SMR leader by years, with lots of US govt subsidy for over a decade. If that suddenly turns out to be seriously uneconomic just ~two years before they were due to start pouring concrete, I don't hold out great hopes for the rest of the SMR crowd (about 80 designs out there).

[*] ND, do you fancy doing a proper explainer of the UK's new Regulated Asset Base (RAB) nuclear financing model? It is remarkably difficult to understand in some detail, especially where all the risks slide to, and I have tried! But clear to see that electricity consumers pay up-front many years before the electricity becomes available - if the Telegraph so hates the "ECO tax" why don't they hate this larger charge?

Nick Drew said...

Yeah, challenge accepted - another time

PS, among the actual delaying factors at Hinkley is an astonishing cock-up which probably lies behind "found civil construction slower" as cited by Mr W above. EDF failed to conduct an adequate geo-survey of the exact site of the HPC facilities. When they drilled & dug down for the foundations - which need to be pretty secure - they found the bedrock highly faulted: which could readily have been determined beforehand by a proper survey. (These things are conducted '000s of feet BELOW THE SEAFLOOR for offshore oil & gas work, never mind onland in peaceful Somerset, under land you own.)

This required epic extra quantities of concrete to resolve, = time, money, civils on site for longer

One symptom of EDF's multi-dimensional project management failings has been that onsite labour force. They built a portacabin city for around 5,600. That number has steadily grown, on an unplanned basis, to around 10,000 today - and rising: there are hints of a couple of thou more required. But this is rural Somerset. Every (non-EDFF) short-term tenant for tens of miles in all directions (out to Bristol) has been evicted by opportunistic landlords to cram in more construction workers. Their daily logistics, instead of being "walk down the road from the portacabin", are chaotic, as can easily be imagined. It's the exact opposite of efficient

Just one symptom of when a mega-project team starts panicking and throwing money

PS, in order to try to SAVE money they are (e.g.) actively fighting a 2021 ministerial decision and a 2022 Final Decision at Appeal, that they must fit an Acoustic Fish Deterrent system to minimise what will otherwise be literally billions of fish being ingested into the very large intakes of the seawater-based cooling system (I'll dig out a link to give an idea of how big they are). AFD features in their planning consent, I.e. they've always known about it, right from the start.

HMG, ever pathetic, has obligingly given them a third crack at the whip - a sort of irregular second appeal (despite the definitive nature of the first Appeal according to the law) on the AFD, which is out to consultation right now. It means a lot to EDF: (a) AFD is quite costly, both in capital and operating costs; and (b) they should also be fitting AFD to Sizewell C, so a "victory" against the fish at Hinkley will serve them well there, too, in due course

Nick Drew said...

PS, on the subject of Sizewell, the geo-survey shortcomings of EDF at HPC are very troubling. SZA and SZB are built on solid rock. Around a third of the SZC site - you can see it on aerial photos - is an old riverbed, now swampy flatlands prone to flooding. The foundations required here will be DEEP. On the opne hand. it's just an engineering challenge. On the other ,,, engineering challenge ... EDF ... penny-pinching ...

Did I mention, EDF is refusing to accept construction risk at SZC? But that's for the next episode

jim said...

Sorry off topic. Ordered peanuts - marked as dispatched - no show - apparently they are somewhere between the Red Sea and the UK, expected sometime.

Send a gunboat? Funny old business model when you can dispatch to DPD stuff you haven't got. So, different supplier, next day delivery - magically transforms into next week. So we go on.

Clive said...

@ rwendland

Thank-you, I certainly found that very informative. A bit of me wonders if it might have been just a good idea (or least-worst idea anyway) to keep similarly updating and building out the AGR design. Having, of course, spent a fortune getting the bugs out of it. The AGR fleet seemed to have exceeded that (granted, very modest) expectations after 30 years in operation.

Oh, and yes, SMRs are a similar money pit and will almost inevitably promise more than they deliver.

rwendland said...

ND> 2022 Final Decision at Appeal, that they must fit an Acoustic Fish Deterrent system ... HMG, ever pathetic, has obligingly given them a ... irregular second appeal

That's really fascinating ND, thanks for that info. I've only read the nuclear industry rags on this topic, where they often just lightly edit EDF PR releases! So my incorrect understanding was that nice old EDF was kindly planning to provide the community:

* "800 acres saltmarsh on the River Parrett in Somerset"
* "new habitat for fish and animals, improve local water quality and help prevent flooding"
* "proven way to increase and protect biodiversity"
* "plans are being developed with Natural England, Natural Resources Wales and the Environment Agency as a natural alternative"

to "replaces a proposal" that very horribly "would use 280 speakers to continuously make loud noises [louder than a jumbo jet] during the plant's planned 60-year operation. The impact of such systems on porpoises, seals, whales and other species is unknown".

So EDF is being very kind, not grubbily saving money through killing many fish (no mention at all of ministerial decision or appeals):

Peter MacFarlane said...

Just out of interest, what percentage of all these hair-raising cost overruns is actually caused by over-regulation (in all senses, planning and everything) ?

Nick Drew said...

Mr W - you'll also have read, then, about how AFD would be a safety hazard because it would need continual subsea maintenance by divers, and the waters are very muddy, and safety safety safety (did we mention safety)

the manufacturers of the AFD point out that (a) there are hundreds of these things around the world, it is very conventional tech; and (b) divers, my arse! - everyone uses robots these days

Anonymous said...

Back on the dull stuff at the other end of energy production, like steel and semiconductors - Tata to open huge new coal-fired blast furnace in India:

"The Welsh job cuts have been more than a decade in the making, as Britain’s steel industry has struggled to compete with cheaper Chinese imports and European rivals with lower energy costs."

The Chinese steel is cheaper because they use coal as well as having cheap staff. ND, why are our energy costs higher than in Europe? Coal again? Germany are keeping lignite power going!

PS - what happened to BritishVolt?

"Labour has criticised “dither and delay” from the government over a decision on a proposed takeover of the UK’s largest semiconductor facility by a US company, warning that it could lead to further job cuts at the Welsh factory. The fate of Newport Wafer Fab in south Wales has been unclear for nearly two years since the UK government first indicated it had concerns over a 2021 takeover by the Chinese-owned Nexperia firm. The national security concerns related to the ownership of semiconductor technology by a company with links to China. The government in November 2022 ordered Nexperia to sell the factory, raising questions over its future."

Do we actually own anything of value here now, or is it all in foreign hands?