Thanks for an excellent report. I would like to add :
Dieter Helm, Professor of Energy Policy at the University of Oxford told the BBC in 2018 :
“Hinkley Point C would have been roughly half the cost if the government had been borrowing the money to build it at 2%, rather than EDF's cost of capital, which was 9%."
Cameron, Osborne and Davey selected Chinese capital.
The Chair of the HoC Energy Security & Net Zero Committee at an oral evidence session for “Keeping The Power On: Our Future Energy Technology Mix HC116” on Wednesday 15/11/2023 Q142 quoted the price of electricity from Finland’s Olkiluoto 3 nuclear reactor, which uses exactly the same EDF EPR technology as Hinkley Point C ,as being £52.27/MWhr. Admittedly also many years late….
We should have kept building copies of Sizewell B which appears to have been very successful and would not only have given us affordable power but would have kept the UK nuclear engineers and supply chains intact. I believe the high cost of UK nuclear is political and is designed to promote renewables as the only form of Net Zero electricity.
having traversed among various podcasts and blogs, i often see commentary related to unshuttering of nuclear plants that were 'too late' to extend. but i dont hear about the potential to revive abandoned builds\projects in various stages of completion. can author\anyone here help?
am wondering of there is any hope for the abandoned north american builds.
korea seems to be on a streak with the apr1400, but now wants to cut out (paying for) IP used from westinghouse. i wonder what the agreement was for UAE?
An argument for the larger SMR’s is that if they can be constructed in a more consistent cost and timeline than the bigger plants, they would be able to get a lower cost of capitol due to the lower risk premium.
And in a multi unit site, they can have the first units hitting revenue earlier while continuing on construction.
The RAB approach would work decently in a steady buildout plan. Over a 30-40 year buildout there will be a similar number of units under construction at any given time. Carrying the construction (and later refurbishment or replacement costs) will have a similar impact to rate payer bills as carrying the interest later, but be immune to interest rate fluctuations.
The government building the first round on their books, and then switching to a rate base model might be more palatable.
As an example, OPG (Ontario) is doing the CANDU refurbs on a pay as they go or rate bate basis. That’s a $24B project, so in the scale of new build programs.
Anouther model might be for the public utility to build the plants, and when they are fully commissioned lease them out to private operators to avoid having to keep them entirely on their books. This is a model like Bruce Power in Ontario. Bruce is conducting refurbs as well, but it de-risks is the initial construction, which can get the cost of capitol down.
I suspect the cleanest way of reducing the WACC is to for HMG to provide a guarantee on the debt issued by the relevant entity (GBN maybe?). I believe TfL may have previously issued govt guaranteed debt, so the markets are v familiar with this type of product. Many quasi government entities globally do this to reduce their funding costs.
This should, all else equal, significantly reduce the premium over gilt yields and therefore lower the WACC. Would likely mean the project could carry a higher level debt too.
Thanks for an excellent report. I would like to add :
Dieter Helm, Professor of Energy Policy at the University of Oxford told the BBC in 2018 :
“Hinkley Point C would have been roughly half the cost if the government had been borrowing the money to build it at 2%, rather than EDF's cost of capital, which was 9%."
https://www.bbc.co.uk/news/business-44363366
Cameron, Osborne and Davey selected Chinese capital.
The Chair of the HoC Energy Security & Net Zero Committee at an oral evidence session for “Keeping The Power On: Our Future Energy Technology Mix HC116” on Wednesday 15/11/2023 Q142 quoted the price of electricity from Finland’s Olkiluoto 3 nuclear reactor, which uses exactly the same EDF EPR technology as Hinkley Point C ,as being £52.27/MWhr. Admittedly also many years late….
https://committees.parliament.uk/oralevidence/13815/pdf/
We should have kept building copies of Sizewell B which appears to have been very successful and would not only have given us affordable power but would have kept the UK nuclear engineers and supply chains intact. I believe the high cost of UK nuclear is political and is designed to promote renewables as the only form of Net Zero electricity.
Great article David!
having traversed among various podcasts and blogs, i often see commentary related to unshuttering of nuclear plants that were 'too late' to extend. but i dont hear about the potential to revive abandoned builds\projects in various stages of completion. can author\anyone here help?
South Korea announced they were restarting construction of two plants last year.
https://edition.cnn.com/2022/07/06/asia/south-korea-nuclear-plants-renewable-energy-intl-hnk/index.html
am wondering of there is any hope for the abandoned north american builds.
korea seems to be on a streak with the apr1400, but now wants to cut out (paying for) IP used from westinghouse. i wonder what the agreement was for UAE?
FYI...decouple just did a 1hr.+ podcast on the u.s. fleet.
great framing of the value of experienced workforce over technology.
but still managed to avoid discussion of salvaging abandoned projects.
Work on Calder Hall, the World's first grid scale nuclear power station began in 1953 and the station opened 17 October 1956.
The station was closed on 31 March 2003, the first reactor having been in use for nearly 47 years.
So what has gone wrong?
Here's another view on the speed of building nuclear power plants.
https://jackdevanney.substack.com/p/nuclear-power-is-too-slow
ThorCon expects 2-year construction time for shipyard built 500 MW power plants, to deliver electric power under $0.035/kWh. Reasons include
High temperature, low pressure molten salt fission heat source, ergo 46% efficiency.
Designed specifically for construction by skilled, experienced, competitive shipyards in Asia.
Efficient regulation in developing markets yearning for more, ample, reliable, cheaper electricity.
Please explore website pages including ThorConPower.com/news
An argument for the larger SMR’s is that if they can be constructed in a more consistent cost and timeline than the bigger plants, they would be able to get a lower cost of capitol due to the lower risk premium.
And in a multi unit site, they can have the first units hitting revenue earlier while continuing on construction.
The RAB approach would work decently in a steady buildout plan. Over a 30-40 year buildout there will be a similar number of units under construction at any given time. Carrying the construction (and later refurbishment or replacement costs) will have a similar impact to rate payer bills as carrying the interest later, but be immune to interest rate fluctuations.
The government building the first round on their books, and then switching to a rate base model might be more palatable.
As an example, OPG (Ontario) is doing the CANDU refurbs on a pay as they go or rate bate basis. That’s a $24B project, so in the scale of new build programs.
Anouther model might be for the public utility to build the plants, and when they are fully commissioned lease them out to private operators to avoid having to keep them entirely on their books. This is a model like Bruce Power in Ontario. Bruce is conducting refurbs as well, but it de-risks is the initial construction, which can get the cost of capitol down.
I suspect the cleanest way of reducing the WACC is to for HMG to provide a guarantee on the debt issued by the relevant entity (GBN maybe?). I believe TfL may have previously issued govt guaranteed debt, so the markets are v familiar with this type of product. Many quasi government entities globally do this to reduce their funding costs.
This should, all else equal, significantly reduce the premium over gilt yields and therefore lower the WACC. Would likely mean the project could carry a higher level debt too.