UK nuclear – the next question

The news that Areva and the Chinese company Guangdong Nuclear Power Group have pulled out of the bidding for the Horizon franchise to build some of the UK’s next generation of nuclear power stations was unsurprising. Areva is not an operator of nuclear stations and the government is reported to have made clear to the companies that while Chinese investment was welcome, a Chinese operator was not.

The remaining bidders for Horizon – Westinghouse and Hitachi – meet the government’s criteria of a “western operator” – western for these purposes can be taken to include Japan. But their bids are at a very early stage and the technology they want to bring will have to go through an elaborate approval process which would take years.

Areva’s interest is serious and it may not have completely given up on the process, which could last for some months. But as noted in previous blogs to succeed they will have to find an operator acceptable to the UK government.

The next question is what will happen to the EDF link to the same Chinese company that was intended to fund part (perhaps a significant part) of their bid for the first two stations. If the Chinese have pulled out completely EDF will have to find the funds for the whole project. EDF is not cash rich and a report in the European press earlier this week suggested that they face a very heavy bill to bring their existing stations in France up to the new European standards.

Meanwhile there is no agreement (or even detailed negotiation) on the pricing formula for the new stations. On the basis of EDF’s experience with its new station at Flamanville in France there is a risk that costs will be materially higher than was thought likely when the Hinkley Point project was first put forward.

No wonder that the UK’s Energy Department, which is beginning to worry about future supply, has given approval to a set of new gas powered stations, which are cheaper and can be built quickly – even if they do produce more emissions and will complicate the government’s objective of meeting its long-term targets on emissions.