In case you missed it, EDF considered yesterday an opportune time to bury some bad news. It evidently wasn’t wrong, judging by scenes in Westminster yesterday evening, but the French energy giant still had a slightly difficult morning to contend with.
Yesterday morning EDF confirmed that not only was its flagship UK nuclear project, Hinkley Point C, now more likely to be 15 months late, but it could cost as much as £2.9 billion more than previously thought. It represents the latest episode in a continuing drama that the UK just can’t seem to get enough of.
No, not that one. But more on that later.
Hinkley Point C season three kicked off like any other TV drama does. More of the same dialogue, but a bit more severe and starker in tone so as to shock a weary audience. Project delays and cost overruns in that corner of Somerset are now as common an occurrence in the power market as energy retailer collapses, only at least on this front the customers don’t stand to be adversely affected.
The timing of the announcement is doubly poetic considering that, just last week, the UK’s renewables scene was dealt a double dose of good news. Friday saw the eagerly awaited results for the third round of Contracts for Difference auctions and, boy, did they not disappoint. 5.5GW of offshore wind power clearing at prices as low as £39.65/MWh – plus index-linked inflation, of course – means that before Hinkley even comes on stream, there’ll be offshore wind farms generating at almost one-third of its price.
Also last week, Aurora Energy Research collaborated with would-be renewables investor Wyelands Bank and renewables developer Anesco on a report which ultimately concluded that, as early as next year, utility-scale solar-plus-storage farms will be capable of delivering internal rates of return of around 7.6%. Furthermore, when spoken to by Current± about the report, Wyelands Bank described its IRR forecasts as “pretty conservative, actually”.
That conservative figure just so happens to be the new IRR that EDF is forecasting for Hinkley Point C, meaning that the company would have been just as better off if it had ploughed £20 billion+ into solar-plus-storage projects from next year, and those could’ve actually been generating by the year’s end.
It’s the kind of plot twist a struggling TV drama usually reserves for mid-way through its third season, determined to recapture a flagging audience for its end-of-season run. But here’s EDF delivering that news straight off the bat. You wonder what could possibly happen next.
Yesterday’s development was enough to make you wonder why the UK seems so committed to an unquestionably politically-motivated project that promises to be months overdue amidst changing goalposts, and could cost businesses billions of pounds more than was initially promis- ah. Hold on.
Again, at least the British public are at least somewhat protected from further setbacks at Hinkley.
EDF’s dilemma was further compounded by the latest edition of the annual World Nuclear Industry Status Report, out today, which concludes that the world is witnessing an “organic nuclear phaseout”, with the technology simply no longer capable of competing with the kinds of cost reductions seen in other low carbon technologies like solar and wind.
The UK’s relationship with nuclear has also unquestionably cooled in recent years, best evidenced by Hitachi’s withdrawal from Wylfa Newydd last year and a speech Greg Clark made towards the end of his tenure as energy secretary which seemed very much to pave the way towards BEIS letting energy generation technologies compete on an even keel.
Whether or not Hinkley Point C gets a fourth or fifth season is anyone’s guess. There’s significant political will to see the project through to fruition and EDF has already turned a not insignificant part of Somerset into a concrete jungle for it. Rowing back now would too be disastrous, if not catastrophic, for EDF. The impact on the UK’s net zero target would also be significant, and heap yet more importance on carbon capture usage and storage technologies, those that the government has the kind of relationship with the current Prime Minister has with the rest of parliament.
With Hinkley Point C, as with other political dramas, the UK can only wait and see.
