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Weighing up the impact of Brexit

Issues affecting electricity generators and the energy market as a whole.

11th August 2016

We reported last back in March on the new nuclear saga that is Hinkley Point C, but the potential 3.2GW nuclear reactor project was back in the news over the last two weeks following three key developments in short order.

The first was the positive news that EDF’s board has approved go ahead with the £18bn project based on terms already struck with the UK Government that lock us into paying £92.50/MWh for the power coming from HPC once it is finally completed in more than 10 years’ time.

However, on the same day as this good news came through, Theresa May’s new team at the Department of Business, Energy and Industrial Strategy (BEIS)led by Greg Clark, announced a pause in the final decision on this project in order to “consider carefully all the component parts of this project.” A final decision will apparently be made in the autumn.

This news prompted the Nuclear Industry Association chief executive Tom Greatrex to sound the alarm bell, asserting that if this project is not allowed to go ahead it will have wider implications for approval of all large infrastructure projects. The knock-on effect by implication is to send the investment community for these large project scuttling for the exit.

This argument was given not a little credence by reaction from China. Last week, on hearing of the delay the Chinese ambassador to the UK warned the British Government that backing out of the project could jeopardise the wider relationship between the two countries.

Ambassador Liu Xiaoming concluded: “Right now, the China-UK relationship is at a crucial historical juncture. Mutual trust should be treasured even more.”
David Cameron and George Osborne had of course spearheaded a positive rekindling of trade relations with China worth a potential $60bn in inward investment to the UK. China’s state owned nuclear energy companies CNNC and China General Nuclear Power Corporation (CGN) were set to invest nearly $6bn in HPC project and CGN took a 33.5% stake in HPC project last October.

But Theresa May was apparently always a detractor as regards widespread Chinese investment in key infrastructure projects here from a UK security point of view. And her concerns were given some credibility when hot on the heels of the UK returning to China’s ‘naughty step’ came the US charge that CGN illegally obtained US nuclear technology in a conspiracy lasting from 1997 until April this year!

The details sound disturbing: Szuhsiung Ho, a senior advisor to CGN together with the company he owns Energy Technology International, are both facing the same charge. Ho, who uses the first name Allen, is also accused of acting as a foreign agent and appeared before a court in Tennessee last week.
“Allen Ho, at the direction of a Chinese state-owned nuclear power company allegedly approached and enlisted US based nuclear experts to provide integral assistance in developing and producing special nuclear material in China,” said assistant attorney general for national security John Carlin when the charges were announced in April. “Ho did so without registering with the Department of Justice as an agent of a foreign nation or authorization from the Department of Energy.”

The defendants are alleged to have sought out technical assistance regarding small-modular reactors, fuel assemblies and reactor-related computer codes. CGN and Ho are accused of organising payments for US-based experts in exchange for their services.

The Department of Justice said Ho allegedly told potential recruits that: “China has the budget to spend” and needed assistance to independently design and manufacture its own nuclear instrumentation system. In correspondences with experts he made clear he was acting on behalf of CGN and that he was to do so “surreptitiously”.

“The arrest and indictment in this case send an important message to the US nuclear community that foreign entities want the information you possess,” said executive assistant director of the FBI’s national security branch Michael Steinbach. “The federal government has regulations in place to oversee civil nuclear cooperation, and if those authorities are circumvented, this can result in significant damage to our national security. The US will use all of its law enforcement tools to stop those who try to steal US nuclear technology and expertise.”

Sobering stuff indeed and the sort of information which inevitably gives Theresa May and her team in the new BEIS Department pause for thought.
However, is there an even more fundamental concern here about the lack of track record of the European Pressurized Reactor (EPR) technology chosen for HPC? Right now there are no operational EPR plants anywhere in the world. EPR reactors being built in France, Finland and China have all been beset with component manufacturing faults, cost over-runs and delays. The question is inevitable: should we not delay the start of HPC until we know the technology works and have properly absorbed all the learning points of running EPR projects from projects started many years before HPC?

On the other hand, the clock is ticking on assuring the country’s energy security while decarbonising our energy supplies. After all the country’s population and thus demand for power is still growing year on year, while home-grown energy production levels remain over-reliant on ageing coal-fired and nuclear reactors which need to be decommissioned within the next few years. HPC, once up and running could provide a vital 7% of the UK’s total energy supplies and will of course come carbon free.

The decision on HPC could perhaps prove Theresa May’s toughest decision in her first quarter of power, even before she gets into the detail of exiting the EU.

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