New-build projects are making progress, but governments are still struggling with finding the right financing package for large reactors The delayed Flamanville-3 is one of three EPR units under construction in Europe. The others are at Olkiluoto in Finland and Hinkley Point in the UK. Photo courtesy EDF. Western Europe

The UK is facing a major challenge to replace its aging fleet of Generation I nuclear power plants, many of which are scheduled to shut down in 2023.

The project by French state utility EDF to build two Generation III EPR units at Hinkley Point C in Somerset is on track for connection to the grid by 2025. Once in commercial operation the two units will provide up to 7% of the total electricity demand. Two similar units are planned for the Sizewell site in Suffolk.

However, press reports have suggested EDF is in “a race against time” to secure a funding deal for Sizewell C as delays risk making the project prohibitively expensive.

According to The Times newspaper EDF has hired Rothschild as financial adviser for the project and says it wants a “definitive way forward” from the government this year so it can start construction in 2022.

The problem is the nature of the financing. The government says it wants to support new nuclear projects, but only if they can be delivered at a competitive price and each individual project represents value for money. The problem with new build is the amount of capital needed up-front and the long wait for any return on investment while the project is completed and becomes revenue-generating.

The government is working on a new financing model, the regulated asset-based, or RAB model, which it says will provide regulated returns to investors and reduce the cost of raising private finance. According to government documents the RAB model will reduce consumer bills and maximise value for money for consumers and taxpayers.

The RAB model, typically used for funding UK monopoly infrastructure, involves an economic regulator who grants a licence to a company to charge a regulated price to users of the infrastructure. It essentially aims to lower overall costs by having consumers fund future nuclear projects before they are built.

If the RAB model is implemented in the UK – and the government has not yet made a decision – it could be adapted for use by other market economies. It could be instrumental in reviving the prospects for the Moorside, Wylfa, Newydd, and Oldbury nuclear projects, all of which have stalled because of a lack of financing.

France, like the UK, has an aging fleet of nuclear plants but it has more time, at least a decade or more, to work on replacements.

The country gets over 70% of its electricity from nuclear, but the government has plans to reduce this to 50% with solar and wind technologies making up the difference.

EDF is deeply invested in completing first-of-a-kind EPRs at Flamanville in France and Olkiluoto in Finland, to prove the basic value of the design, which it developed in partnership with Framatome and Siemens. Both projects have seen significant delays and cost overruns. The startup date for Hanhikivi-1, a Russian-supplied plant also under construction in Finland, has been pushed back to 2028, four years behind the original schedule and eight years later than the proposed start when the government approved the project in 2010.

The French government has asked EDF to work on a project for the construction of six new next-generation EPR 2 units, the successor to the EPR.

Recently, however, a government minister said no decision will be taken before the end of 2022, pushing it beyond the date of the country’s next general election.

The French nuclear industry has said that to realistically replace retiring nuclear capacity in the 2040s and secure a balanced mix based on nuclear and renewable energies, it needs a decision by the French government about a programme of new units by 2021-2022.

In Germany, Belgium, Spain and Switzerland the sector is dominated by plans to phase out nuclear. Germany plans to shut its plants by 2022, Belgium by 2025 and Spain some time after 2025. Switzerland’s four commercial reactors will remain in operation as long as the regulator considers them safe to do so

Questions are being asked in all four countries about the consequences of losing baseload generation if renewables cannot be brought online quickly enough to replace it.

Environmental think tank Agora Energiewende warned in a study that a slowdown in the installation of wind turbines and solar panels in Germany could put the country’s carbon reduction targets at risk.

A second study said the phaseout is increasing Germany’s power prices. It estimated that shutting down nuclear plants has increased wholesale power prices by nearly 4%.

The International Energy Agency said Switzerland’s nuclear phaseout will create an energy gap of at least 20 TWh a year that will need to be replaced with other generation technologies, possibly including new fossil fuel capacity.

Belgian grid operator Elia said Belgium will need around 3.9 GW of new power generating capacity in order to cope with the shortage which is expected to arise from the country’s plans to phase out nuclear energy in 2025.

Eastern Europe

The Czech Republic, Romania, Poland and Bulgaria have all announced plans to build new nuclear power plants. Their plans got a boost when the EU reached an agreement that nuclear is not blacklisted under new criteria to determine whether an economic activity is environmentally sustainable. The so-called “taxonomy regulation” stipulates that a number of environmental objectives should be considered when evaluating how sustainable an economic activity is.

The Czech Republic said a supplier for a new unit at utility ČEZ’s Dukovany nuclear power station should be chosen by the end of 2022. The government has approved a preliminary plan for a ČEZ subsidiary to build a new unit at Dukovany. Czech energy policy calls for one new unit at Dukovany and possibly three more either at Dukovany or the country’s other nuclear station, Temelín.

The Czech government, which owns 70% of ČEZ, has been in discussions with the utility about how to expand nuclear power and to replace aging commercial reactors that are scheduled to be permanently shut down in the decades ahead.

ČEZ chief executive Daniel Benes said the company should have a tender ready by June 2020 and expects offers in 2021 from up to five bidders.

He said market estimates for the new unit’s cost ranged from about $5.9bn to $6.9bn, but a final price would come out of the tender.

According to media reports, six firms have shown interest in building the new nuclear unit or units. They are China’s CGN, Russia’s Rosatom, South Korea’s KHNP, France’s EDF, Westinghouse, and the Atmea consortium of Mitsubishi Heavy Industries and EDF.

Romania is moving ahead with plans to complete Cernavodă-3 and -4 having signed off on an agreement in May 2019 with China General Nuclear for the two Candu-6 type reactors. In September 2014, CGN submitted the sole non-binding bid for the contract and was declared a “qualified investor”.

Ramona Manesco, the country’s minister for foreign affairs, told a forum in Brussels that Romania’s objective is to refurbish Cernavodă-1 and by 2030 to build a new unit on the same site, although beyond 2030 the country is considering new Generation IV reactors including small modular reactors.

Her comments appeared to contradict previous announcements that national nuclear company Nuclearelectrica is planning two new units at Cernavodă.

In Poland, financing has also been a problem. The government published a national nuclear power programme in 2014 which included the construction of up to 6 GW of capacity by 2035, but the succeeding administration has been delaying a final decision since taking over in 2015.

Poland is reluctant to finance the construction of nuclear power stations with debt. Instead, it wants a model based on capital. In November 2019 the government said it had made progress in its effort to establish a basis for financing. It plans to set up a special-purpose company in which it will own a 51% stake, with the remaining 49% to be held by one or more foreign partners. State-owned power company PGE could be a shareholder in that special-purpose company.

The first nuclear plant could be in commercial operation by 2033, according to the draft energy policy. The policy outlines plans for six reactors providing 6-9 GW of nuclear capacity by 2043, accounting for about 10% of Poland’s electricity generation.

There has been significant progress in Bulgaria, where the government shortlisted five companies which will be invited to participate in the revived two-unit Belene nuclear power station project.

A call for binding tenders will be extended to four state-owned companies: Russia’s Rosatom, China National Nuclear Corporation (CNNC), Korea Hydro and Nuclear Power Company (KHNP) and Framatome, a subsidiary of France’s EDF. The fifth company is US-based General Electric.

Rosatom, CNNC, and KHNP will be invited to bid as investors in the project, while Framatome and GE will be offered the opportunity to supply equipment for the project.

Slovakia, which has four existing units at Bohunice and Mochovche, is building two 440-MW Russia-supplied VVER units at Mochovche, about 100 km east of the capital Bratislava. According to the IAEA Unit 3 is expected to be connected to the electrical grid next year.

Hungary’s new-build plans are also expected to progress in 2020, with documentation for the licence application for two new reactors units at the Paks nuclear station on schedule to be ready in spring, in time to be submitted to the regulator for approval in the summer.

The Paks station already has four units in commercial operation, but the government has said that without the two new units it would not be able to reach its climate goals.

A longer version of this article appears on the Neutron Bytes blog by Dan Yurman. You can follow Dan on Twitter @djysrv

Date: Friday, 17 January 2020
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