EDF’s epic tale: lost in transitions ?

It is finally done. After months of dithering, the nuclear industry’s CEOs and government officials of the UK, France and China solemnly signed off on the nuclear plant project at Hinkley Point C at the end of September. Some maintain that these might be the first signs of a new era for nuclear power after the Fukushima catastrophe, but Hinkley can barely hide the fact that the French nuclear “champion” EDF is at the brink of collapse and urgently needs a strategic turnaround. Andreas Rüdinger explains.

Entry to the Civaux nuclear facility (Photo by E48616, edited, CC BY-SA 3.0)

Entry to the Civaux nuclear facility (Photo by E48616, edited, CC BY-SA 3.0)


Hinkley Point would be the third EPR reactor project in Europe. The first is the nuclear power plant of Olkiluoto in Finland, which proudly displays a 9-year delay, tripling investment costs (from € 3 billion to roughly € 9 billion) and the collapse of its industrial developer, Areva. The second is the EPR in Flamanville, France, totaling € 10.5 billion (€ 3.3 billion initially) and a delay of at least 7 years. Worse, due to numerous construction flaws currently under scrutiny by the French Nuclear Safety Agency (ASN), it might as well never go online.

And now Hinkley Point, with its 22 billion price tag and a guaranteed tariff of € 110/MWh over 35 years (indexed on inflation, of course), is more expensive than most renewable energies are right now. More importantly, it will be far more expensive around 2025 when the plant is supposed to start production. As Andreas Gandolfo puts it in an article for the London School of Economics’ blog, “my colleagues and I at Bloomberg New Energy Finance are still scratching our heads at how such a project was greenlighted.” It certainly wasn’t by EDF’s own unions, which even went to court to avoid the project, considered too risky. Neither was it supported by Thomas Piquemal, EDF’s financial director who resigned in March, nor Gérard Magnin, a board member who left in July.

EDF’s crisis clearly extends beyond Hinkley Point. The company’s stock value has plummeted by almost 90% since 2007, compelling it to leave the major French stock index, CAC 40. It currently faces a debt of € 37 billion and decreasing profits, and no one really sees where the company could find the money to take on any of the major investments which are piling up. EDF is responsible not only for Hinkley Point C and Flamanville, but also for the takeover of the nuclear construction and maintenance branch of Areva; and, most importantly, the lifetime extension of the aging French nuclear power fleet, estimated at up to € 1.7 billion for each of the country’s 58 reactors.

Especially the last issue might become a real challenge for EDF. It currently acts as if the whole fleet was to be extended beyond forty years and already announced an investment plan of € 4 billion per year to make the reactors fit for another ten years. However, in its desire to stick with the status quo, the company blatantly ignores several risks. Firstly, the possibility of extending the reactors’ lifetime mainly depends on the judgment of the Nuclear Safety Agency, which will publish new (and stronger) safety guidelines by 2018. As it turns out, investments undertaken in the meantime could be a losing bet, if the ASN judges that despite the upgrades the old reactors are not fit for the future.

Secondly, EDF’s strategy also seems to neglect the headline objective of the French transition énergétique: reducing the share of nuclear power to 50 % by 2025. To be fair, this is not entirely its fault, since the government constantly defers any credible commitment to this objective. Even though President Hollande seizes every opportunity to quote his electoral promises of reducing the share of nuclear to 50 % and shut down the oldest plant in Fessenheim, it is likely that nothing concrete will happen to implement these decisions before the end of his mandate.

Nonetheless, EDF has to take into account that, assuming a stable electricity demand over time, no lifetime extensions would actually be necessary, at least not until 2025. Indeed, if old reactors were closed when reaching their 4th ten-year safety inspection (visite décennale), the resulting production (including the EPR Flamanville) would be sufficient to achieve the 50% target by 2025. This strategy might also make sense from an economic perspective. France is currently the biggest net exporter in the European power market with 65 TWh (2014). This means that on a yearly average, 11 reactors of 900 MW are currently producing for exports only. Including the investment costs for the lifetime extension, the generation costs of the 40+ reactors might be somewhere between € 62 to € 80/MWh, according to the French Court of Auditors. For the time being, it seems unlikely that average prices on the wholesale market will come anywhere near that level for the next years.

What’s more, shutting down parts of the nuclear fleet might actually push up power prices and improve the economic conditions for the rest of the reactors, as has been illustrated recently. With more than 20 reactors offline due to maintenance and safety checks, the monthly nuclear production in September 2016 has been the lowest since August 1998. But simultaneously, average gross market prices in France have recovered from their record low € 26/MWh in the first half of 2016, to a level of € 50 to € 80/MWh (day-by-day data can be found here).

It clearly appears that EDF needs to embrace the energy transition if it wants to avoid becoming a “dinosaur” in the European landscape. Through its sheer size, EDF could become one of the major players of the future. But this would imply a clear strategic turnaround to market sectors that still show potential. The nuclear dismantling business will become massive over the next decades and EDF (after absorbing Areva) is well placed to succeed. The same goes for the energy efficiency and service market, and of course renewables.

 

Andreas Rüdinger is an independant consultant in the field of energy and climate policies and an associate research fellow at the Institute for Sustainable Development and International Relations (Iddri) in Paris. His research work is focused on national energy policies in Europe and the governance of the energy transition.

 

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16 Comments

  1. James Wimberley says

    One hopes that EDF is prospecting sites in NW France for the massive expansion of wind power that will become necessary some day to replace shuttered reactors. Actually putting up the wind farms can be decided later, as they are quick to build. The complementary expansion of pumped storage hydro will take much longer – the sites are in scenic mountains, and conflicts over conservation are more than likely.

  2. Mike Parr says

    Some Hinkley prices (with 1.5% inflation)
    Now: £100/MWh.
    £114/MWh in 2025 at the start of Hinkley C
    £147/MWh in 2042 halfway the guarantee period
    £192/MWh in 2060 at the end of 35yrs guarantee period
    Denmark: Kreiger Flak – 600MW off-shore wind farm: Vattenfall – winning bid: £40/MWh
    Oh dear sounds like UK serfs are going to get a proper stuffing if Hinkley ever gets built.
    The reason for Hinkley is to keep Rolls-Royces nuclear team in business – they do the reactors for the UK’s sub-sea white elephants (this is reflected in the Sussex report).

  3. heinbloed says

    @ Mike Parr:

    ” The reason for Hinkley is to keep Rolls-Royces nuclear team in business – they do the reactors for the UK’s sub-sea white elephants (this is reflected in the Sussex report).”

    Correct, the Rolls Royce Mafia also delivers the Diesel farms and gas generators to the UK grid.
    Recent rumors have it that the max. price for back-up power will be raised from now £3000.-/kW to £ 10,000/kW already in 2017.
    The Mafia is happy: build back-up generators and connect them and then let them be idle for 365 days per year minus 1 or two hours running time.
    By this method of low carbon grid stabilization hundreds of Diesel farms have to be build and equipped by RR without the generators ever reaching their normal usage life time. Quality isn’t asked for anymore, expensive machines not being used made to the lowest standard – and sold for the highest price.
    Imagine £ 10,000/kW: a simple petrol generator delivering 2.5 kW from the DIY market would cost there £ 50.-.
    And this silly machine is then sold to the public for £ 25,000.- including grid connection.
    Every atom generator needs a back up generator,better two.

    ‘Only the drug trade is more profitable’ the old saying goes. Now we have a new one.

  4. heinbloed says

    At least 20% of the French reactor fleet without permit:

    http://bfmbusiness.bfmtv.com/entreprise/edf-des-risques-sur-l-approvisionnement-pour-les-fetes-1059306.html

    machine translation:

    https://translate.google.com/translate?hl=en&sl=fr&tl=en&u=http%3A%2F%2Fbfmbusiness.bfmtv.com%2Fentreprise%2Fedf-des-risques-sur-l-approvisionnement-pour-les-fetes-1059306.html

    Repeated requests from the by the French atom authority for proper documentation were met by EdF without success.

    For the 30.12.2016 thirteen reactors are scheduled by EdF for being non-operational:

    https://www.edf.fr/groupe-edf/premier-electricien-mondial/activites/optimisation-et-trading/listes-des-indisponibilites-et-des-messages/liste-des-indisponibilites

    With forecasts made 6 week ahead we know that these number easily double as they did so in the last half year.

  5. heinbloed says

    EdF sees atom chaos as an ongoing problem for next winter as well, retirements of fossil fuel power generators are being postponed:

    http://www.leparisien.fr/porcheville-78440/porcheville-edf-relance-une-partie-de-la-centrale-electrique-vouee-a-la-fermeture-15-11-2016-6331905.php

    Machine translation:

    https://translate.google.ie/translate?sl=fr&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.leparisien.fr%2Fporcheville-78440%2Fporcheville-edf-relance-une-partie-de-la-centrale-electrique-vouee-a-la-fermeture-15-11-2016-6331905.php&edit-text=

    The base January power future price for 2017 hit a new record high today with € 137.-/MWh before closing time:

    http://www.eex.com/en/market-data/power/futures/french-financial-futures#!/2016/11/15

    Also the base for the 1st quarter 2017 and the base for the entire year 2017 ….

  6. heinbloed says
  7. heinbloed says

    Belgium grid operator Elia has ordered the activation of the emergency (cold) power reserves, first test runs are exercised to see if they still work:

    (in French)
    http://www.dhnet.be/regions/liege/edf-luminus-a-seraing-la-reserve-strategique-activee-582c5cddcd70d913edcd5686

    Previously it was discovered that the atom power plant Tihange 1 will be out of order (the turbine building was heavily damaged by a contractor) for another month and from France no extra capacities can be expected:

    (in German)
    http://deredactie.be/cm/vrtnieuws.deutsch/nachrichten/1.2819179

    French Total (a state owned oil company petrol station operator) has decided to go PV to reduce the carbon foot print and to save money:

    (in French)
    http://www.environnement-magazine.fr/article/48500-total-couvre-ses-stations-service-de-panneaux-solaires/

    (in English)
    http://uk.reuters.com/article/uk-total-solar-idUKKBN13A0N7

    A French state company doesn’t accept anymore the lies of cheap and CO2-free atom power. Remarkable.

  8. heinbloed says
  9. heinbloed says

    New raid at EdF headquarters: power price is kept artificially low

    http://www.reuters.com/article/edf-antitrust-idUSL8N1DQ2P6

    If the competition authorities are successful this would be the end of French atom power. All European exporters offer lower prices for delivering to France than the real French power price.
    And it would mean the end of the British atom power as well, 10 power companies are still in a legal battle about Hinkley Point subsidies.

  10. Toxteth O'Grady says

    If you ran a grid, which power source would be most useful to you – one that ran at capacity 10-40% of the time (solar/offshore wind) or one that runs at capacity >92% of the time (nuclear) to a controlled schedule because you can refuel it in the summer when demand is lowest – so availability is effectively 100%

  11. Toxteth O'Grady says

    Two questions.
    1). Once the entire system cost is considered, what is cheapest to the consumer:- an electricity source costing £100/MWh that works at capacity 10-40% of the time (solar/offshore wind) or a fully dispachable one that costs £120/MWh?

    2). If the carbon footprint of nuclear [12grams CO₂eq per kWh] is the same as offshore wind, what is the net carbon footprint of a 100% nuclear system compared to a 100% renewables system, complete with HVDC grids, storage and reserves not required by nuclear?
    http://report.mitigation2014.org/report/ipcc_wg3_ar5_annex-iii.pdf

    n.b. Solar PV – utility scale 48grams CO₂eq/kWh and the 10.7GW of new (lignite) coal installed by Germany since 2012 is 1000grams CO₂eq per kWh plus unknown fugitive emissions of methane from new strip mines.

  12. heinbloed says

    France fires up all fossil generators available:

    http://www.reuters.com/article/us-france-power-idUSKBN13N1C4

    The RTE report to which Reuters refers to:

    http://www.rte-france.com/sites/default/files/apercu_energie_elec_2016_10_an.pdf

    The price increase across Europe has caused a first victim, the UK’s cheapest energy provider can’t afford the daily price fluctuations anymore:

    https://www.theguardian.com/business/2016/nov/27/gb-energys-collapse-to-hit-160000-households-with-higher-bills#comment-88394596

    Today the interconnector between France and the UK gave in raising the prices in both countries even further:

    http://www.platts.com/latest-news/electric-power/london/uk-power-prompt-prices-rise-as-supply-tightens-26606847

    The Irish-UK interconnector is down as well:

    http://www.independent.ie/irish-news/broken-power-line-between-ireland-and-britain-to-spark-electricity-bills-rise-35094500.html

    The French CO2-emmissions/kWh can’t increase much further anymore due to the fact that electricity imported doesn’t count in the national balance sheet:

    http://www.rte-france.com/fr/eco2mix/eco2mix-co2

    EdF tops up with two more retired heavy fuel oil power generators, Porcheville 2 in January 2017 and Porcheville 1 in April 2017 – if the rusty stinker equipped with the highest chimney in Europe still can make it ….:

    https://www.edf.fr/edf/05470-edf-t-00010234

    https://www.edf.fr/edf/05470-edf-t-00010233

    Interested in the depth of this atom hole ?

    https://www.edf.fr/en/the-edf-group/world-s-largest-power-company/activities/optimisation-and-trading/list-of-outages-and-messages/list-of-outages

    EdF has trouble maintaining this site, the outages come faster than the IT operators can handle them. Try the French version:

    https://www.edf.fr/groupe-edf/premier-electricien-mondial/activites/optimisation-et-trading/listes-des-indisponibilites-et-des-messages/liste-des-indisponibilites

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