Despite frequent headlines suggesting otherwise, EDF has not yet agreed to buy two nuclear reactors from its sister French state-owned company Areva. The British Government has yet to sign a contract to purchase the electricity the reactors will produce. Without that contract EDF will not make the final investment decision to purchase the reactors. This is a lucky escape for Britain’s electricity consumers.
On April 18th it became public that the French nuclear inspectorate had discovered a ‘very serious’ fault in the pressure vessel of the nuclear reactor currently under construction at Flamanville in Normandy. The reactor is already five years late and costing three times as much as forecast. It is the same type of reactor as EDF want to build at Hinkley Point in Somerset.
The French regulators have discovered a serious problem with the quality of the steel used to make some safety critical components of the pressure vessel. These are forged by Areva at Le Creusot. They have already been installed in the Flamanville reactor. This makes it very expensive, if not impossible, to correct. It will also add to the delay in finishing construction of the reactor.
The French regulators will now carry out further tests. They will report the results in October. So far, so bad.
It gets worse. EDF have not yet finally agreed to purchase the Hinkley reactors as they are waiting for the British government to agree to buy the electricity. But, in another example of the extraordinary arrogance that got its former chief executive fired, it has already forged the same components for the Hinkley reactors.
If, as seems quite likely, they have to be re-forged who will pay for them? The Hinkley project has suffered a succession of delays. It was originally scheduled to be producing electricity by Christmas 2017. These delays have saved the British electricity consumer a massive bill. If, as EDF and the Government wanted, we had already signed the contract to purchase Hinkley’s electricity the cost of this hubris would add to the £24.5 billion cost of Hinkley.
As it is this failure on Areva’s part gives the incoming British Government a chance to think again. It would be reckless for it to sign a contract with EDF until the French regulators have reported and there has been a chance to assess the implications of their findings. But this was always a bad deal based on flawed analysis and a ruinous policy by DECC. It would commit Britain to buying electricity for 35 years at twice its current wholesale price – index linked.
Areva’s efforts to build reactors of the design intended for Hinkley are in trouble everywhere. None of the five projects, one in Finland, one in France, two in China and Hinkley, are on time or budget. It is time for the British government to admit that it made a mistake backing this French design.
As we know from our experience with the banks, changing a management culture as hubristic as that on display from Areva is no quick task. We have no reason to believe that they will perform as promised. We have much better things to do to secure affordable, secure, low carbon electricity for the British people. We should get on with them.
April 19th 2015