by Andrew Reimers
The recent referendum in favor of Britain leaving the EU has prompted much discussion about the future of the British nuclear power industry and how international investors will respond to Brexit. All 15 of Britain's existing nuclear reactors came under the ownership of Électricité de France S.A. (EDF), the French electric utility that purchased British Energy in 2009. EDF, along with China General Nuclear Power Corporation (CGN), is involved in developing plans for new nuclear plants in the U.K.
The project that has garnered the most scrutiny is a new reactor planned for Hinkley Point, two-thirds of which is expected to be financed by EDF with CGN as a minority partner. Supporters of the proposed reactor, known as Hinkley Point C, argue that the project is necessary to meet future electricity demand without increasing British reliance on fossil fuels. Opponents of the project, even those who are pro-nuclear power, argue that the cost is too high, referring to the project as "one of the worst deals ever." The high cost can be attributed to several factors - the timeline for construction, unproven technology, and generous guarantees on returns for the project's investors.
A significant percentage of Britain's current coal and nuclear capacity is scheduled to be retired over the course of the next decade. Thus, to avoid supply shortages without exceeding the country's ambitious carbon-emission targets, the British government made plans to revamp the country's nuclear program and push for the first new reactors to come online by 2025. EDF agreed to take on the project despite the abbreviated timeline.
EDF's current reactor offering, the European Pressurized Reactor (EPR), has passive safety features that mitigate the possibility of a Fukushima-like disaster. Similar EPR construction projects in France, Finland, and China have experienced significant delays and cost overruns. And at the same time, EDF is under pressure to update existing French reactors and to purchase AREVA, the French reactor design firm.
Given these difficulties, the British government has offered a sweetheart deal to EDF that includes a guarantee to pay nearly twice the current wholesale rate for electricity generated by the new plant. Such provisions have led industry expert Peter Atherton to argue that Hinkley Point C, with an estimated price tag of more than $37 billion, would be "most expensive conventional power plant in the world."
While EDF has claimed that Brexit will not affect Hinkley Point, overwhelming financial stress could result in them backing out of the project altogether. If that were to happen, CGN could possibly take over the project entirely, perhaps even scrapping EDF's design in favor of Chinese reactor technology. China is building more domestic reactors than any other country, and their involvement in Hinkley Point is part of a broader strategy to establish themselves as an exporter of nuclear technology.
In return for bankrolling nuclear projects such as Hinkley Point, the U.K. has agreed to give CGN the opportunity to take the lead role in building a new reactor at Bradwell Nuclear Power Station in Essex. A contract for CGN to build the reactor in the U.K. would be a signal to the rest of the world that China is able to comply with Western safety standards and compete with other exporters for market share. Such a contract would invariably require a balancing of Britain's demand for clean, affordable electricity, and China's desire for increased international esteem. Thus, even if the U.K. follows through with separating themselves from the EU, they will still have to contend with the priorities of other players on the international stage if they are to keep the lights on in a post-Brexit world.