New UK Prime Minister Delays Decision on Hinkley Point

Citing security concerns about the role of Chinese state-owned nuclear energy firms as investors, Britain’s new Prime Minister Theresa May has put off a decision until September to build the 3300 MW facility. She must also grapple with the track record of schedule delays and cost overruns at two EPRs under construction in Finland and France.

may hollande in paris

UK PM Theresa May (left) meets with French President Francois Hollande (right) in Paris

One day after surviving a month’s long and difficult battle over the investment decision to move forward with the Hinkley Point nuclear project, France’s EDF got a message that rocked them back on their heels.

British Prime Minister Theresa May, who came to the post after heading the nation’s equivalent of the homeland security portfolio, said she is concerned about the security issues associated with having investors from China involved in building two Areva EPRs at the coastal site. She scheduled a review of the project which could take “until early autumn” to complete.

While EDF said it had no warning that the door to progress would be slammed shut, even temporarily, a spokesman for PM May said that she told French President Francois Hollande nine days earlier in a face-to-face meeting in Paris that she intended to review the project.

It is unclear why Hollande did not then inform EDF about the discussion, but it may be that he didn’t want to spook the EDF board which still had its investment decision in the future at the time of Hollande’s meeting with May. It approved the investment decision for the $24 billion project late last week by a vote of 10-7.

Security Concerns About China

At the heart of May’s concerns is a plan for China General Nuclear Power Corp (CGN) to take a 33% equity position in the $24 billion project which when complete by 2025 will provide about 7% of all electricity used in the UK.

Nick Timothy, May’s Chief of Staff, has been widely quoted in UK news media as saying that security concerns are that the Chinese firms will have access to computer systems that control critical UK energy infrastructure.

He pointed out that one of the aspects of the deal with CGN is that after the Hinkley Point site is complete, that firm will be in line to build two new Chinese Hualong One 1000 MW PWR type reactors at the Bradwell site.

Timothy went further telling the Telegraph (UK) that the Chinese could “build weaknesses into computer systems which would allow them to shut down Britain’s energy production at will.”

He added that the UK government’s intelligence service, MI5, had voiced concerns to PM May about China’s government’s efforts “to work against our interests at home and abroad.” He did not elaborate.

According to the Telegraph and other media reports, Timothy, and other government officials, have said that it would be “irresponsible” for the new prime minister not to review the massive project.

Government officials also expressed doubts about EDF’s ability to control costs.  An EPR under construction in Finland is nine years behind schedule and (euro) 5.2 billion over budget. It is mired in cross cutting claims between Areva, the Finnish utility that is the customer for the plant, and Areva’s partner German industrial giant Siemens. The claims are in arbitration and it may be years before there is a resolution that satisfies all parties. In France an EPR under construction is six years late and (euro) 7.2 billion over budget.

EDF Surprised by Review Decision

These remarks came after EDF officials expressed surprise by May’s decision not to sign off on the project one day after the French firm’s board approved the investment decision by a vote of 10 for and 7 against. One board member resigned in protest over the project.

EDF CEO Jean-Bernard Levy told the Irish Times his company, which is 85% owned by the French government, is ready to sign contracts “as soon as all parties involved are ready.”

For their part, CGN said that it “respects” the UK government decision to review the project, but it also said it is standing by its commitment to invest in the reactors assuming the project is approved for development.

Business and Labor Groups Alarmed by Delay

Business and labor groups were stunned by the sudden public announcement of a four-to-eight week government postponement of the award of the contracts to start construction.

Justin Bowden, a leader for one of the major unions who’s members will be involved in building the plants, told the news media the decision to delay and even consider cancelling the project “endangers 25,000 jobs” involved directly at the site or through suppliers.

He called it “a gross error of judgment,’ and added for good measure that the decision by May to study the project instead of approving following EDF’s investment decision “was bonkers.”

“What is required is decisive action not dithering and more delay.”

The Confederation of British Energy (CBI), which represents nearly 200,000 business in the UK, told the Bloomberg wire service that it understands how the government will want to understand the details of the project, but it urged the PM May “to finalize the deal as soon as possible.”

CBI Deputy Director General Josh Hardie told Bloomberg, “The UK is facing a major investment challenge to ensure a low carbon and affordable energy supply. It is crucial that we see clear and timely decisions, and send a definite message that the UK is open for business.”

World Nuclear News cited a statement by Tom Greatrex, CEO of the UK Nuclear Industry Association, who urged government ministers to “quickly endorse the decision to show they are serious about . . . creating low carbon energy supplies of the future.”

He added that with the investment decision by EDF finally being a done deal that the UK supply chain stands ready to ramp up its capacity and train people to build and operate the Hinkley Point reactors.

May Asserts Due Diligence is her Right

May will have her review despite all the media excitement about her decision not to sign off on it immediately after taking office. The Bloomberg wire service cites an interview with Joel Kenrick, a political consultant who works on energy matters. He told the wire service there are three somewhat interlocked issues associated with May’s concerns about the reactors.

One is skepticism about Chinese involvement in the project and security concerns that inevitably are raised by their role. Two is that the UK is facing a rapidly changing energy landscape with the decline of output of the North Sea oil and gas fields and the planned retirement of the nation’s existing nuclear reactor fleet. The third element is that May is now in charge and that since it is her decision she will put her stamp on it one way or another.

May’s point man for the review will most likely be Greg Clark newly appointed as the head of the new  Department for Business, Energy, and Industrial Strategy. The ministry combines the Department of Energy and Climate Change and the Department for Business Innovation and Skills.

PM May said the reorganization is focused on “a proper industrial strategy to get the whole economy firing.”

Yet, the demise of the Energy & Climate Change office has raised questions about May’s commitment to advancing low carbon energy sources like nuclear energy.

Complicating matters is the recent BREXIT vote which will plunge the UK into complex negotiations with European Union nations, including France, over decarbonization strategies.

For his part, Clark, age 48, has previously worked on energy and climate policy issues at the national level for the Conservative Party. He was elected to Parliament in 2005. He holds a degree in economics and worked previously for the BBC.

Stark Risks of Cancelling Hinkley Point

In conducting the review, May will have to take into account the risk of enraging the French government which has bet the ranch on the Hinkley Point project most recently increasing the capitalization of EDF by (euro) 4 billion.

If May cancels the project, she must come up with alternative energy sources for the 3300 MW that would not come online in about nine years. Given the UK’s commitment to responding to the challenges of climate change, finding equivalent sources of low carbon baseload power will be nearly impossible.

There is also the fact that a huge baseload power plant like Hinkley Point, and the other new reactors that the nation plans to build, are crucial to keeping the grid stable to support renewable energy sources like wind, solar, and tidal power.

Bob Ward of the Grantham Research Institute, told the Guardian newspaper, “Coal and gas plants – which also supply baseload power – will no longer be viable in the future because of CO2 emissions, which cause global warming. You are then left with nuclear.”

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