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UK Gov’t Invests £100m In EDF’s £20bn Sizewell C Project

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Dan Yurman 83064
Editor & Publisher NeutronBytes, a blog about nuclear energy

Publisher of NeutronBytes, a blog about nuclear energy online since 2007.  Consultant and project manager for technology innovation processes and new product / program development for commercial...

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  • Jan 28, 2022
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  • UK Gov’t  Invests £100m In EDF’s £20bn Sizewell C Project
  • A Modest Proposal to Fund Sizewell C – A Very Big Deal
  • Rolls-Royce Seeks Sites for SMRs in England and Wales
  • UKAEA Seeks Sites for Fusion Power Plant
  • EU Commissioner Says Few Changes Expected in “Nuclear Green” Proposal

UK / Gov't Invests £100m in EDF’s £20bn Sizewell C Plant

(NucNet) UK government ministers have added further financial support to EDF Energy’s £20 billion Sizewell C nuclear power station project in Suffolk, southeast England. The financing comes in the form of a £100 million investment to help develop the project while the company looks for private investors.

The government’s cash injection is designed to “maximize investor confidence” in the project while French state-owned power company and nuclear operator EDF works towards setting out a funding plan which satisfies investors and ministers.

RAB Method Could Be a Key Success Factor

One of the elements of the plan, if the UK parliament acts, is to implement the RAB Financing Method which is a ‘pay as you go” method by ratepayers tied to construction progress. It eliminates a huge chunk of interests costs that wind up adding significantly to costs without enhancing plant performance.

rab-model-wna

In return for the the £100 million investment, the government will have rights to an equity stake in the development company behind the project and over the land on which EDF plans to build it. If EDF is able to secure enough investor backing to make a final investment decision on Sizewell, it would reimburse the government with an equity stake in the project or in cash. An equity stake is more likely as an outcome.

The announcement comes as the Nuclear Energy (Financing) Bill, which will enable a Regulated Asset Base (RAB) funding model framework for new nuclear projects, passes through Parliament. It is estimated that RAB could lower the cost of each new large-scale nuclear power projects compared to the existing Contracts for Difference model.

The RAB model is also expected to reduce Britain’s reliance on overseas developers for finance by substantially widening the pool of private investors to include British pension funds, insurers and other institutional investors from like-minded countries.

Private Sector Investors Sought for Sizewell C

The Department for Business, Energy and Industrial Strategy (BEIS) said in a statement, “The funding commitment will be used to continue the development of the project which will aim to attract further financing from private investors and, subject to value for money and relevant approvals, the UK government.”

BEIS Secretary Kwasi Kwarteng is quoted in the government’s press statement, “In light of high global gas prices, we need to ensure Britain’s future energy supply is bolstered by reliable, affordable, low carbon power that is generated in this country. New nuclear is not only an important part of our plans to ensure greater energy independence, but to create high-quality jobs and drive economic growth.”

The department said the two EDF 1600 MWe EPR nuclear plants planned for Sizewell C would produce 3.2 GW of electricity powering the equivalent of around six million homes, and providing increased longer-term grid and overall energy resilience.

The BEIS statement said, “Nuclear power has a key role to play as we work to strengthen Britain’s energy security and reduce our exposure to volatile global gas prices.”

By way of background, the UK government resumed talks with EDF over the nuclear project in late 2020, focusing on whether the company could prove it had learned lessons from its Hinkley Point C nuclear project in Somerset, and that a the next plant would offer the public value for money. Key items are keeping the project on schedule and avoiding the horrendous delays and cost overruns that afflicted the EPR projects in Finland and France.

The government has made up to £1.7 billion of new direct government funding available at the Spending Review for developing a large-scale nuclear project to the point of Final Investment Decision this Parliament project – on top of a £120 million enabling fund to support further nuclear projects and inform potential investment decisions during the next Parliament.

A key challenge for EDF will be to replace China’s 20% stake in the project worth about £5 billion. The government is looking to push out CGN because of concerns over security.

Prime minister Boris Johnson said recently that he is against “undue influence by potentially adversarial countries” in national infrastructure such as Sizewell C, but does not want to exclude all Chinese investment from the country. This is a somewhat contradictory statement since previously, Johnson booted a Chinese telecommunications company from being able to bid on a tender to supply 5G wireless service in the UK.

EDF is building Hinkley Point C in Somerset, the only new nuclear plant in the UK. Three projects – Wylfa, Moorside and Oldbury – have either been cancelled or shelved, largely because of financing problems, while Bradwell remains in the early technical stages.

BEIS emphasized that overall no final decision to proceed with Sizewell C has been made.

& & &

A Modest Proposal to Fund Sizewell C – A Very Big Deal

equity

It is no secret that UK PM Boris Johnson has been convinced by his advisers to boot China off of the Sizewell C nuclear power project and then repurpose the 20% equity stake that China was slated cover to be taken up by western investors.

This is a perilous move since it will undoubtedly annoy China which has it firmly in mind on being able to build one of its Hualong One 1000 MWe PWRs at the UK Bradwell size in return for the Sizewell investment.

Actually, there is a way for EDF to get funded for SizewelL C, for which it still does not have a formal deal with the UK, and to soften the blow to China. The proposed move is a major swap of equity for EDF and China. Here is how it would work.

Back in 2008 EDF signed a deal with Chinese state owned nuclear energy firms for a 30% equity stake in the construction of two 1650 MWe EPRs in Taishan, China. The two reactors have since been built and commissioned into revenue service. Suppose for the sake of discussion that EDF swaps its 30% stake in Taishan for China’s 20% stake in Sizewell C?

Advantages of the Swap

  • The advantages of the deal are that China saves face, though not completely, in exiting Sizewell C. It takes some of the bite out of a deal they can’t refuse.
  • The advantage for EDF is that it now has a 20% stake in Sizewell with capital it can’t raise for now in France.
  • The advantages for the UK government and EDF is that now they have to raise only 80% of the capital needed to build the two reactors. Also, it takes the sharp edge off of ending China’s equity stake.

It looks simple on its face, but probably has the potential to get complicated which means that if the UK and EDF think this is a good idea, time is being wasted just thinking about it. Obviously, valuations will have to be compared and due diligence worked out, but as a concept it makes a lot more sense than just running China off with a political pitchfork and having a big unresolved investment headache that will take a lot more effort to resolve.

& & &

Rolls-Royce Seeks Sites for SMRs in England and Wales

laND SURVEY(Irish Times & wire services) Rolls-Royce has launched a search in England and Wales for a site to be the location of the main factory that will build a planned fleet of at least 16 small modular nuclear reactors (SMRs) to be deployed in the UK and perhaps even more thereafter to be built for export to Poland, Saudi Arabia, and elsewhere.

An industry consortium led by Rolls-Royce has written to several of England’s regional development bodies and the Welsh government asking them to pitch the firm for the manufacturing site. It is promising investment of up to £200 million (€239 million) and the creation of up to 200 direct jobs.

The Rolls Royce consortium secured £210 million from the government last year towards the development of a fleet of mini-reactors after raising a similar amount of private sector funding. More recently, the firm received an investment of $85 million from Qatar.

Components from suppliers would be built in factories around the country and then assembled on site thus reducing the risks and huge costs of construction of big nuclear power plants. The main factory will build the heavy reactor pressure vessels (RPVs) that are part of the 477 MWe reactors.

The company said it is looking for proposals that identified “sites based on our selection criteria in your region together with supporting evidence or financial and non- financial support where appropriate.”

According to news media reports, Rolls-Royce is not seeking cash or economic incentives from local councils. It emphasized that it is interested in skills training facilities already exist, how much land is available, and local incentives for the deployment of on-site renewable power generation among other things. The company intends to build other, smaller facilities to build modules for the reactors. In other words, plans to have financial and operational control of key parts of its supply chain.

Rolls-Royce has not yet committed to any sites but Wylfa and Trawsfynydd in north Wales are believed to be under consideration.

Rolls-Royce has a challenging set of milestones to meet to complete the first-of-a-kind (FOAK) unit by 2030 and all 16 of them by the end of that decade. It is expected to submit its reactor design to the UK Office of Nuclear Regulation for the four year long generic design assessment later this year.

& & &

UKAEA Seeks Sites for Fusion Power Plant

The UK Atomic Energy Authority (UKAEA) has asked residents in five areas to provide feedback on potential plans to construct a prototype nuclear fusion power plant by 2040.

The Spherical Tokamak for Energy Production (STEP) program has the objective of developing a commercial fusion power plants that are capable of producing clean energy. A prototype unit is the first milestone that needs to be achieved to reach that goal. If successful, commercial units might follow over the remainder of that decade.

gpawg-fusion-energy-scienceThe government committed £220m for the conceptual design of the power station in 2020 as part of efforts to move the UK towards a zero-carbon energy network.

The STEP site will ultimately be selected by the Department of Business, Energy and Industrial Strategy (BEIS). The shortlisted locations for STEP are: Ardeer, North Ayrshire; Moorside, Cumbria; Goole, East Yorkshire; West Burton, Nottinghamshire and Severn Edge in Gloucestershire.

The final decision on the successful site is expected by the end of 2022. Support from the local community to accept the project is one of the key criteria.

Tristram Denton, head of commercial and program development for STEP, said: “STEP is not just of strategic importance to UKAEA, but to the national and global efforts to harness fusion technology in the fight against climate change.

“While it’s still early days, we anticipate that the host region will become a global hub for a wide range of technological and scientific expertise, leading to massive economic opportunities.

& & &

EU Commissioner Says Few Changes Expected in “Nuclear Green” Proposal

(Reuters) The European Commission will not make any fundamental revisions to proposals that classify nuclear power and gas as sustainable, Financial Markets Commissioner Mairead McGuinness said despite objections from some European Union states.

The Commission included gas and nuclear investments in a draft of its “sustainable finance taxonomy” rules circulated last month.

“We may be able to tweak the proposal in one place or another to address some objections,” McGuinness told the Frankfurter Allgemeine Zeitung. “But we actually have limited room for change.”

McGuinness said nuclear power and gas were necessary as transitional technologies – “and as such they will be clearly labelled” – on the way to a “cleaner, better future.”

The Czech Republic has objected to the limitations built into the proposal policy that would prevent new nuclear power plants from being built after 2045. It said nuclear power should have a big role in curbing global warming because it does not emit greenhouse gases.

Other critics have issued biting criticisms of the EU’s belief that an all renewables power paradigm is possible at some point. They point to the fact that Germany’s efforts have failed and have resulted in increased use of coal.

Germany and other EU members said gas investments were needed to help them quit using more-polluting coal.

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