The all-new EU consultation on Hinkley C
Posted: 16 Mar 2014, 19:44
by RenewableCandy
http://eur-lex.europa.eu/LexUriServ/Lex ... 098:EN:PDF
Interested parties may submit their comments within one month of the date of publication of this summary and the following letter, to:
European Commission
Directorate-General for Competition
State aid Registry
Rue de la Loi/Wetstraat 200
1049 Bruxelles/Brussel
BELGIQUE/BELGIË
Fax No: (32-2) 296 12 42
E-mail:
stateaidgreffe@ec.europa.eu
These comments will be communicated to the UK. Confidential treatment of the identity of the interested parties submitting the comments may be requested in writing, stating the reasons for the request
It was published on 7th March, so we have 'til 7th April. It's hefty stuff but the most relevant bits are near the top. My guess is that, as the poor saps who'd be paying for this dubious enterprise,
we constitute "interested parties".
Posted: 19 Apr 2014, 10:00
by alex
This is from The Ecologist. Might seem long winded but an excellent summation of the state of affairs.
This article is based on a multi-signatory submission to the European Commission on Hinkley C, written by Paul Dorfman. which is available on the UCL website.
As the European Commission considers the £100 billion subsidy package the UK has offered EDF to build and operate Hinkley C nuclear power station, Paul Dorfman explains why the 'deal' is illegal, anti-renewables, and ruinous to energy users and tax payers.
EDF could earn a return on equity well in excess of between 20-35%, with cash dividends of between £65-80 billion payable during the life of the deal.
The result of the EC State Aid investigation into the two planned EDF nuclear reactors at Hinkley Point C will set an important precedent and have consequences not just in UK but through the EU.
Taken across the full range of public and private actors engaged in energy systems, annual commitments worth many billions of pounds rest on the results of this EC policy appraisal.
The EC has published its initial findings about UK State Aid plans for new nuclear at Hinkley Point. The Commission has taken a very considered position and posed some very deep questions about whether UK plans make economic or environmental sense.
When is nuclear subsidy a 'market correction'?
The government had promised the public electorate that new nuclear will only be built on the condition that it receives no public subsidy. It's now adapted its position to say that State Aid for nuclear is not a subsidy if it is available to other energy technologies.
But the thing is, the Hinkley C deal gives very significant extra support and special conditions for nuclear, exceeding any support for renewable energy.
The government now say that these public subsidies are justified because new nuclear performs a 'Service of General Economic Interest'. In other words, subsidies for Hinkley C are aimed at:
security of supply,
diversity of generation,
decarbonisation,
electricity price stability, and
affordability.
However, it seems very unlikely that Hinkley C can be said to realistically address any of these issues in a timely manner.
Security of supply
Putting aside inevitable construction cost and time over-runs, the two proposed Hinkley C reactors wont help with our security of supply problem - because the reactors are not projected to come on-stream until 2023 at the earliest.
And the electricity regulator Ofgem have made it clear that any 'generation gap' will come well before 2020. So the real security of supply challenge occurs well before Hinkley C could begin generation - and other more cost effective and sustainable options can be up and running well before then.
EDF has said that it will apply for life extension for other nuclear stations, which would operate to 2027-31 and longer. So the idea that we're facing a 'nuclear gap' is simply misplaced.
Unfortunately, the European Pressurised Reactor (EPR) design planned for Hinkley C has problems - it's just not that good a piece of kit. The EPR is a high-risk construction project with a marked tendency for significant delay, cost growth and investor risk.
Olkiluoto & Flamanville - do we really need a third dead duck?
The Olkiluoto EPR in Finland was originally planned to go online early in 2009, but expected completion won't be before 2018. The 1.6 GW Areva designed EPR, originally priced at €3 billion, was estimated at €8.5bn in 2012 and rising.
This fixed price turn-key Contract is subject to ongoing legal dispute between the French and the Finns with the former claiming compensation of €1 billion for alleged failures, and the latter demanding €2.4 billion in compensation for delays.
Areva have now reduced its workforce at the Olkiluoto site and it's not clear what construction work is still being carried out.
Similarly, in France, EDF have confirmed that their EPR new build at Flamanville is experiencing significant time and cost over-runs. Originally scheduled to start operating in 2012, EDF now hope that the reactor may be operational by 2016. Originally priced at €3.3 billion, the reactor is currently estimated at €8.5 billion - and rising.
(See David Toke: 'UK taxpayer will be liable for Hinkley C billions'.)
Diversity of supply
The Government say the Hinkley C deal will be signed by a new 'Counterparty Agency' with a budget of about £1.5bn per year to spend on low-carbon projects up to 2020. Although no budget commitments have been made beyond that date, the UK will be contractually obliged to pay for ongoing costs at Hinkley C.
The cost of this nuclear State Aid will depend on the prevailing electricity wholesale price - but it's likely to be around £1.2bn a year for the two reactors.
Given the government wants more nuclear, then very little money will remain for other low-carbon renewable energy - as the Counterparty Agency budget will be devoted to nuclear commitments. This means that nuclear energy will crowd out renewable energy investments.
This is a great shame since serious energy efficiency policy scenarios show that the UK economy could flourish whilst using significantly less energy. And there is no question but that, with purposeful demand side policies, GDP can increase with energy consumption significantly decreasing.
Decarbonisation
Reduction of carbon emissions either by energy efficiency measure or development of low carbon energy generation is imperative in a warming world. The key question is whether Hinkley C will work as compared to other routes.
Nuclear has been re-framed as a significant response to climate change. But any new reactors, together with radioactive waste stores including spent fuel, will be on the coast, vulnerable to sea-level rise, flooding and storm surge.
The Institute of Mechanical Engineers clearly state that nuclear sites based on the coastline will need considerable investment to protect them against rising sea levels, or even abandonment or relocation in the long term.
So, given predicted sea level rise, shoreline erosion, coastal storms, floods, tidal surges and the evolution of 'nuclear islands' stand out as primary concerns at coastal locations - it's unsettling to note that future likelihood and consequences of flooding risk has not yet been fully assessed by our regulators.
Nuclear's CO2 emissions - too big to ignore
It's also true that nuclear life-cycle CO2 emissions happen through uranium mining and milling, transport, fuel enrichment, plant construction, operation, plant decommissioning and waste management.
Whilst the reported range of emissions for nuclear energy over the lifetime of a plant is from 1.4 g of carbon dioxide equivalent per kWh (g CO2e/kWh) to 288 g CO2e/kWh, the mean value is 66 g CO2e/kWh.
The contribution of nuclear power to decarbonisation is also a problem, taking into account declining Uranium ore grades. Nuclear emmission values are significantly higher than for wind (2.8-7.4 g/kWhel), hydropower (17-22 g/kWhel), photovoltaic (19-59 g/kWhel), and energy efficiency measures (which are 10 times more cost-effective).
Given that the commercial history of nuclear power goes back more than 50 years and that the EPR is clearly evolved from existing designs (rather than being a revolutionary new design), nuclear is simply not a developing technology.
By contrast, renewable technologies like solar and wind power, are rapidly developing with significantly real-cost reductions.
Affordability and price stability
It's difficult to comprehend how Hinkley C might contribute to affordability, price stability and least-cost for the UK - when the agreed price consumers will pay will overwhelmingly contribute to significantly higher energy prices.
However, it does remain true that the deal would prove very profitable to EDF during the very lengthy 35-year Contract Period. And very generous government proposals for 35-year inflation indexing of the deal will grant EDF further significant financial returns.
The bulk of the financing of Hinkley C will be through government Loan Guarantees which will not be available to renewable energy, putting renewable energy at a considerable disadvantage. So, any investment in Hinkley will crowd out investment in renewable energy.
In the process, progress towards achieving overall EU targets for renewable energy will be compromised.
EDF's £65-80 billion payoff
Even nuclear proponents agree that the deal will be extremely costly. A recent report by 'Carbon Connect', a think-tank chaired by former Conservative energy minister Charles Hendry, concludes that financial returns for EDF and other investors in Hinkley C would be much higher than for other projects, with expected equity returns at around 19-21%.
These returns are substantially higher than expected equity returns on even Private Finance Initiative (PFI) projects and regulated electricity network assets.
Further analysis suggests that EDF could earn a return on equity well in excess of between 20-35%, with cash dividends of between £65-80 billion payable during the life of the deal. This would still allow EDF to pay off all construction cost debt within the terms of the deal.
Taking as read current construction costs at £8 billion per reactor, this translates to £5 per MW - making HPC the most expensive nuclear power station ever built.
Market distortion
Rather than arriving at the deal through transparent and objective means, it seems clear that it's been tailored to the requirements of EDF. Proof of this is that this kind of deal is not available for renewable energy. Here, government dealings with EDF seem deeply discriminatory.
The deal seems specifically designed to develop Hinkley C at the expense of other low carbon investments. Given this level of financial support is unavailable to other low carbon technologies, it is certain to significantly distort competition and strongly impact on energy trade across the EU.
The thing is, to facilitate the participation of renewable energy technologies in energy markets, the EU relies on price mechanisms rather than directly planning specific outcomes for specific technologies.
For this approach to work, it is essential that distorting subsidies are not allowed to appear, since a subsidy in one country will impact across the whole EU in terms of access to the electricity market.
Hinkley subsidies will undermine renewables, Europe-wide
Increased renewable energy pooling will allow for more European-wide balancing between technologies such as solar in the south of Europe, hydro electric power in the north and wind in the west.
The implication is that nuclear subsidies will reduce the size of the available market for these technologies to participate in, and increase the difficulty of establishing new renewable generation capacity across the whole EU, not just in the UK.
So UK State Aid for Hinkley C will severely distort market dynamics, precisely because it shields EDF from risks that other market operators are subject to. Thus, since there exists a competition failure in electricity generation in respect to planned UK State Aid for Hinkley C, it cannot represent a genuine 'Service of General Economic Interest'.
UK plans to give State Aid through price support mechanism to guarantee profitability are simply incompatible with EU State Aid rules, and the proposed deal will give EDF a clear selective advantage.
Very high 'tail-end risks'
Nuclear is subject to unparalleled and extreme 'tail-end risk' - that is to say, low probability events that have enormous impacts. Examples of this in the nuclear include the Chernobyl and Fukushima accidents.
Key to regulatory nuclear 'Safety Cases' is the modeling tool, Probabilistic Risk Assessment (PRA). The trouble is that PRA has failed to predict the cascade of unexpected 'beyond design-base' accidents that happened in Fukushima and all other previous major nuclear accidents.
The radiological inventory for each EPR at Hinkley C is enormous - twice that of the largest nuclear reactor currently operating in the UK. So it's unsettling to reflect that the EDF 'Safety Case' - based on their PRA - claims that for the very worst reasonably foreseeable accident / incident (including terrorist attack), the maximum radiation release would not exceed 0.03% of the reactor core inventory per day. That may be a small percentage, but it's still a huge amount of radiation!
At this point I should note that all UK civil nuclear infrastructures are uniquely implicated in all four 'tier-one threats' identified in the UK National Security Strategy, and all that implies.
Meanwhile, recent events at Fukushima show that reactor accidents are the single largest financial risk facing the nuclear industry, far outweighing the combined effect of market, credit, and operational risks.
Nuclear accident liability - another one for taxpayers
Currently, European nuclear accident liability for any one accident is capped at €169 million. This means that if we had a major nuclear accident in the UK, then EDF only has to pay costs up to about £164 million - and after that it's up to taxpayers.
The new pan-EU Paris Convention on Nuclear Third Party Liability and Brussels Convention aims to raise operator liability to €1.5 billion for one major nuclear accident if the Convention is eventually ratified.
However, the Institut de Radioprotection et de Sûreté Nucléaire (IRSN - a French governmental radiation research institute), conclude that a serious accident would cost France about €120 billion, or 6% of its GDP.
Meanwhile liability estimates for Fukushima vary between many tens of billions of euros and many hundreds of billions of euros - then even this new proposed level of pan-EU cover wouldn't, by a very large margin, pay for a major nuclear accident in Europe.
Nuclear waste - the million year question
There are features of nuclear energy that distinguish it from any other electricity generating technology or from any other technology. Costs linked to the treatment and management of spent fuel and nuclear waste are difficult to estimate since they take place a long time in the future and there is still little real practical experience.
The most recent estimates are that, once packaged, the UK has around 1,420 cubic metres of high-level radioactive waste, 364,000 cubic metres of intermediate-level radioactive waste, and 3,470,000 cubic metres of low-level radioactive waste.
The time-frame in question when dealing with radioactive waste ranges from 10,000 to 1,000,000 years. Government officials estimate that the cost of managing this waste and decommissioning is currently around £80-100 billion (and rising).
A recent report by the House of Commons Committee of Public Accounts and Nuclear Decommissioning Authority points out that DECCs nuclear legacy budget currently costs the UK over £2.5 billion a year (42% of DECC's total budget), with the remaining financial burden discounted for very many years.
Hinkley C's 'super-charged nuclear waste'
Hinkley C would significantly add to the UK nuclear waste burden. This is because EDF propose to deploy 'High Burn-up Fuel' at the two EPR's there.
This means using significantly more enriched uranium as reactor fuel to increase burn-up rate for longer periods and at higher temperatures. the result is considerably hotter and more radioactive spent fuel - a 'super-charged' fuel producing 'super-charged' waste.
UK radioactive waste policy is predicated in the disposal of very long-lived nuclear waste via a geological disposal facility (GDF). However, at present, there are no secure estimates for costing a UK GDF, and no GDF has been constructed or operated successfully anywhere in the world.
Plans for siting a GDF in Cumbria have met with substantial opposition from the Cumbrian elected local authority.
So what?
So it seems that proposed UK government State Aid for new nuclear is:
incompatible with EC Legislation,
does not represent a genuine 'Service of General Economic Interest',
will distort the European energy market, is neither transparent nor proportionate,
will not make a timely contribution to UK security of supply or decarbonisation,
and will not contribute to affordability, price stability and least-cost for the UK energy consumer.
Along with this, nuclear carries substantial 'tail-end risks'.
The development of sustainable and affordable low carbon energy remains a growing economic sector with huge potential for job creation - this should be a message of hope.
To limit this diversity through State Aid for nuclear at the expense of other, more flexible, safe, productive, cost-effective and affordable technologies seems, at the very least, unwise.
Dr Paul Dorfman is a Senior Researcher at the Energy Institute UCL, Joseph Rowntree Charitable Trust Nuclear Policy Research Fellow; Founder of the Nuclear Consulting Group, Member, European Nuclear Energy Forum Transparency and Risk Working Groups, served as Secretary to the UK government scientific advisory Committee Examining Radiation Risks from Internal Emitters.