By: Harry Price
In its attempt to move away from fossil fuel dependence, the UK must reckon with the fact that most renewable energy sources are inherently somewhat unreliable in their output. The wind or the sun cannot be counted upon in the same way the supply of coal or gas can be. Therefore, there must be an alternative source of power for the times when other renewable energy sources are not available. Unless the UK intends to keep fossil fuel powered plants online for emergencies indefinitely it will most likely have to rely upon the output of nuclear power plants to cover shortfalls elsewhere.
The problem with this is that the current generation of nuclear power plants are due to be retired by the end of the decade and while there are plants being constructed, there are more reactors due to be decommissioned than there are being built. There are currently 9 reactors in operation, generating 5,883 MWe, but only two under construction which are projected to produce 3,620 Mwe. This means that when the current generation of reactors are turned off, the maximum power output at any one time of the industry will have decreased substantially. The government plans to call for up to 24 GW of new nuclear power capacity by 2050, but so far this hasn’t materialised into any new construction projects breaking ground.
The two reactors currently under construction are being built in Somerset at Hinkley Point C by EDF Energy (the British subsidiary of French state-owned Électricité de France) and China General Nuclear (CGN), but the project is facing major issues. The plant began construction in 2016 and originally was meant to be finished by September 2028, at a cost of £18 billion. The estimated cost of the plant was revised first to between £25-26 billion, then revised upwards again to £32.7 billion in February 2023. Now the most recent estimate suggests that the entire project will cost £35 billion, however the eventual cost will be far higher because the £35bn figure was calculated by EDF using 2015 prices. The project’s estimated finish date has now been pushed back to 2031.
The project’s managing director, Stuart Crooks, stated that “like other major infrastructure projects, we have found civil construction slower than we hoped and faced inflation, labour and material shortages, on top of Covid and Brexit disruption.” This explains some of the reasons for both the delays and the ballooning costs of construction.
Additionally, EDF Energy have also taken an £11 billion impairment fee on the Hinkley project which has caused more problems than just a hit to the cash flow of the company. EDF have been left to foot the entire bill after CGN, who own 32% of the power plant, stopped backing overruns at Hinkley. This move came after the UK government took over CGN’s stake in Hinkley’s proposed sister site, Sizewell C. As a result, CGN were stripped of their role in the project, with the government stating it was due to security concerns.
This has also caused friction between the British and French governments. Since the full nationalisation of EDF last year, the French government is now the only shareholder in the company. Crooks claims “it is important to say that British consumers or taxpayers won’t pay a penny, with the increased costs met entirely by shareholders.” This means that the French government is paying for the impairment charge on a power station being built in England. French officials have been lobbying the UK government to provide state guarantees on loans related to the Hinkley project, with the French finance minister, Bruno Le Maire, saying that it would be “fair” for the UK to accept some of the burden of the extra costs. However, so far, the British government has refused these demands.
The delays to Hinkley Point C will also have an impact on the energy bills of British households. The head of energy at KPMG stated that “If we fail to build the necessary capacity, any gap is most likely to be filled by gas, thereby making it harder to get to a net zero power system in the planned timescales.” The problem with this, beyond simply continuing our reliance on fossil fuels, is that gas-fired power plants tend to provide expensive back up electricity, consequently raising energy bills. Rob Gross, the director of the UK Energy Research Centre said “If we are more reliant on gas and if gas continues to be expensive then electricity prices will tend to be higher.” It is estimated that the delay could push wholesale prices up by 6% between 2029 and 2032.
EDF have suggested that they could mitigate this lack of capacity and help avoid a spike in energy prices by increasing the lifespan of the nuclear reactors they currently operate. However, there is no guarantee this is feasible. EDF’s former decommissioning director told a parliamentary committee in 2022 that “no investment will take them any further,”. Since then, EDF have stated that inspections of their reactors had revealed their state to be “better than, or in line with, their expectations.” However, even if it is possible for some of their reactors to be kept online for longer than expected, it does not address the gap between the UK’s current nuclear energy output, its nuclear energy output in the near future, and its goal of 24 GW of capacity by 2050. It will take a lot more than Hinkley Point C and Sizewell C, as well as some aging reactors, to reach that target. If the government is serious about its goal to decarbonise the economy, it is going to need to support the development of the nuclear power industry far more.
However, it is important to note that the British government clearly recognises the importance of the industry. In November 2020, the government laid out The Ten Point Plan for a Green Industrial Revolution, and the delivery of new and advanced nuclear power capacity was Point Number 3. Only support for the offshore wind industry and the advancement of low-carbon hydrogen were ranked higher. The government has also set up Great British Nuclear, an organisation with the aim of enabling more development in the sector. A Future Nuclear Enabling Fund of £120 million has been established to “support development of nuclear projects, stimulate competition in the industry and unlock investment.” The support for nuclear energy exists in both major parties too. In June 2021 the All-Party Parliamentary Group on Nuclear Energy called for the government to take urgent decisions regarding the future of the industry and its ability to maintain at least 10 GWe of nuclear capacity. The government has also committed to reaching an investment decision on “at least one” large scale nuclear power plant before the end of this parliament – which ends in December 2024.
This shows that while there is appetite for supporting the industry in government — which will be integral in its continued development over the coming years — there is still much to be done. Energy security and energy affordability are increasingly entwined and are becoming more important to the electorate, especially following Russia’s invasion of Ukraine, which has heightened the public’s awareness of both. Investment in greater nuclear power capacity will provide the country with greater security by becoming less dependent on the supply of fossil fuels, greater energy affordability because it will have a lower reliance on gas-fired power plants, and the ability to achieve a reliable decarbonised economy.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.
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