Hinkley nuclear costs climb as deadlines slip again

via NOT A LOT OF PEOPLE KNOW THAT
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By Paul Homewood

I won’t say I told you, but!

Jillian Ambrose reports:

EDF is bracing for a multi-billion euro rise in costs at its Hinkley Point C nuclear site after a fresh evaluation of the project revealed yet another likely delay. An internal review of the troubled project by senior executives at EDF’s French headquarters is expected to confirm fears that the state-backed energy giant will not be able to deliver Hinkley on time or in line with its £18bn budget.

The French newspaper Le Monde reported over the weekend that sources close to the review have said no one believes it can be delivered by 2025.

Instead, the start-up date is likely to be 2027 and pile a further €1bn (£870m) to €3bn euros on to the construction costs of the £18bn project.

The review is being led by Jean-Michel Quilichini, the group’s audit director, and is expected to be made public later this summer.

A UK spokesman for the company declined to comment.

The latest delay is likely to fuel concerns that Government has locked energy bill payers into “a high cost and risky deal” that could fail to deliver on its economic promises.

To guarantee the project’s revenue, EDF will be granted a top-up payment to reach £92.50 per megawatt-hour, more than double the current wholesale market rate, through a levy on energy bills.

The National Audit Office warned last week that consumers could be locked into paying a higher than expected price for a high-risk gamble and uncertain economic benefits.

It is the second stark warning from the public spending watchdog, which reported last year that EDF’s top-up payments have quadrupled from £6bn to £30bn as wholesale market prices continue to slip.

Outgoing chief executive officer of EDF Energy, Vincent de Rivaz Credit: AFP

The latest climb in costs will not change the agreed “strike price” energy consumers must meet, but it is expected to reignite concerns that the project is a political gamble not worth taking. In 2007 Vincent de Rivaz, the chief executive, said he hoped the new Hinkley Point reactors would provide electricity for Britons to cook their Christmas turkeys in 2017.

At the time, Hinkley had an estimated cost of £12.5bn. These projections have slipped several times in the last 10 years and its latest estimate pinpointed 2025 as the expected start date for the first new nuclear power plant in a generation.

The latest blow to the project comes weeks after EDF made the shock announcement that Mr de Rivaz will step down in September.

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Jillian Ambrose still does not appear to understand that all strike prices, including this one for Hinkley, are at 2012 prices.

Consequently the price of £92.50/MWh is approximately £100/MWh now, and will continue to inflate each year.

Also interesting is the fact that she emphasises the cost of subsidies for Hinkley, with statements such as more than double the current wholesale market rate, through a levy on energy bills.

I cannot recall her making similar comments about offshore wind and other renewables. Mind block?

Just to clarify a couple of matters, which some of the Telegraph commenters are confused about:

1) Any cost overrun will be stood by EDF. There is no provision under the contract to pass this on in higher prices, as the Strike Price is already set in stone.

2) Slippage on the start up date is unlikely to affect the contract one way or another, and won’t be penalised, unless the date is delayed until after November 2029.

Andrea Leadsom explained this in answer to Parliamentary questions last year:

Hinkley Point C Power Station

To ask the Secretary of State for Energy and Climate Change, what the anticipated date is for the Hinkley Point C reactor to start transmitting electricity to the National Grid; and whether the proposed contract for that reactor includes punitive measures for delay beyond that date.

Answered by: Andrea Leadsom

Answered on: 13 April 2016

EDF have said that they expect Hinkley Point C to start generating electricity in 2025. The Contracts for Difference (CfD) payment term in the proposed contract is 35 years with a target commissioning date of 2025 for each reactor. The target commissioning window for each reactor is four years from its target commissioning date (subject to Force Majeure). In the event that either reactor is not commissioned by the end of its target commissioning window, the CfD payment term for that reactor is shortened commensurately for each day of delay through to the long stop date. If neither reactor has been commissioned by four years after the last day of the target commissioning window for reactor 2 i.e. November 2033 (the longstop date), the Low Carbon Contracts Company (LCCC) has the option to terminate the contract.

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