As if the proposed new nuclear plant at Hinkley Point in Somerset hasn’t got enough problems, today it emerged that the CFO of EDF, the French energy giant that is supposed to be building it, has quit, apparently over fears that the project could bankrupt the company.
The move comes ahead of yet another effort to push through the ‘final investment decision’ on Hinkley, first due way back in 2012 but still yet to be made by EDF and it’s Chinese backers. A lot has changed in those four years – not least a substantial decline in both the price of electricity generally and EDF’s share price in particular - and the projected cost of £18bn is now perilously close to the market cap of the whole company.
M Piquemal has not commented on the reasons for his departure. But given the likely delays and cost overruns involved – no EPR (the type of reactor planned) has yet been completed on time and on budget – it would not be surprising if he had been considering his fiduciary duties. It is not hard to see how the risks of sanctioning such a huge project could be considered unreasonable.
Even the effective promise of a massive subsidy from the UK taxpayer to EDF – in the form of a guaranteed price for electricity some three times the going rate – has not been enough to get a firm commitment from the constructors and their Chinese backers to go ahead. So should HMG now be taking a leaf out of Piquemal’s book and pulling the plug?
For one, Hinkley is just too costly – it would be the most expensive power station in the world. No wonder EDF is struggling to raise the money to build it.
Should they succeed it might be hardly less expensive to run - we’d be committed to pay around £100 per MWh for its electricity for 35 years. That’s an awfully big gamble on rising energy prices, given how fast they have gone in the opposite direction over the past 18 months.
For another, it will be far too late to help ‘keep the lights on’. As first conceived, Hinkley’s 3.2 gigawatts could have played a vital role in bridging the gap between the closure of old coal and gas fired plant and the arrival of new greener generating capacity. But that ‘generation gap’ squeeze is now upon us and Hinkley is still at least a decade away. Something else will have to be done to keep the blackouts and brownouts at bay.
None of this is to say that nuclear power is the wrong choice – on the contrary it has a key role to play, providing stable baseload capacity to complement the more variable nature of the wind, sun and perhaps tides.
But the French-designed EPR reactors proposed for Hinkley are increasingly looking like the wrong sort of nuclear technology – the design is old, dating back decades, and hard to build. The two under construction in Europe have been beset by delays and the Chinese are reportedly having trouble with the ones they are building too.
Ranged against all this is the fact that pulling out would leave the UK’s ‘energy policy’, already widely derided, in tatters, and the Government’s reputation for infrastructure-related ineptitude much enhanced. Never mind mere money, some big Westminster careers would be at stake.
But the truth of the matter is that, in nuclear tech just like very other kind these days, small is beautiful. The next generation of modular reactors promise better safety, ready financing, short lead times and economies of scale.They are smartphones to the EPR's dumb brick.
£18bn is just too much to spend on one project, which never mind ‘too big too fail’ is increasingly looking too big – and far too costly - to succeed.