Centrica's exit isn't as big a deal as you think

Centrica withdrew from new UK nuclear projects.

Yesterday Centrica announced it would not take a 20 per cent share in the new nuclear power plant planned for Hinkley Point in Somerset. It was the minority partner with EDF, and leaves the France-based utility holding the entire (potentially £6 bn) can.

Centrica pulled out because of uncertainty on cost and schedule. No doubt its decision is a blow for the project to build a 1650 MW EPR pressurised water reactor—for which, by the way, EDF has not made a final investment decision. But there still are lots of reasons to hope that the project will still go ahead.

First, the current adverse market conditions favour nationalised utilities (or vendors) like EDF for nuclear new-build; whether it is Russia in India, Turkey, Belarus or China, or South Korea in the UAE, state-owned developers have the deepest pockets. They need them: unlike gas or coal, nuclear power plants demand most of their costs up front.

And those vendors that are not state-owned but wish to pursue nuclear new-build have had to act like it. In 2011, GE Hitachi proposed being a major investor in a new reactor for Lithuania (although those plans have probably been shot down by a referendum). Its corporate cousin Hitachi has recently come to the UK and is underwriting its pre-construction safety assessment (for now) as the new owner of nuclear new-build venture Horizon, after Germany-based utilities e.on and RWE sold out. They were beset by problems at home: after Fukushima, the German government quickly arranged a phase-out of all nuclear power plants. Over the next decade, their once-profitable assets will have to be written off.

One nuclear new-build vendor who has so far not pledged to take a share of a new-build project is France’s AREVA (79 per cent owned by the French state). However, its role as the principal contractor (with Siemens) for Finland’s Olkiluoto 3 has become tantamount to the same thing. To land the contract for the first non-France EPR, AREVA agreed with client TVO on a fixed-price contract. Subsequent delays and cost overruns have led to litigation with billions at stake.

Second, EDF’s purchase of British Energy in 2008 really only makes sense in the context of the opportunity for new-build. Seven of the eight nuclear power plants it bought at the time were based on obsolete technology whose potential for long-term operation was iffy (although their lifetimes will be extended by seven years in general). Those assets were not worth the £12.5 bn purchase cost. What was worth paying for, according to this idea, was lots of potential for new-build sites. Backing out now would harm the company’s future prospects.

Third, the UK branch of EDF, EDF Energy, has had a good 12 months. Its performance in 2012 was the best for seven years, which means not only cash in the bank but also a hopeful step away from technical faults that have hurt recent performance. Commercial production of the first units of its new 1300 natural gas plant in West Burton, Nottinghamshire started in 2012 and the rest are due to come online later this year. When Centrica joined EDF in new-build, it also put in a 20 per cent stake in EDF Energy’s operating nuclear power fleet. It has not announced plans to pull out of that investment.

The most important development for EDF’s new nuclear ambitions was that its nuclear reactor design was finally approved by the regulator at the end of 2012. Although it will still have to apply for a nuclear construction permit, obtaining design approval has broken the back of one of the biggest sources of nuclear new-build investment risk: the uncertainty caused by regulatory scrutiny. As of right now, the EPR reactor is the only modern nuclear power plant design that can be built in the UK. The Westinghouse AP1000 reactor is next in line; it is waiting for a customer to  finish the review process.

Will Dalrymple is editor of Nuclear Engineering International

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What can we learn from Liam Fox's book? (Or, at least, from the first chapter)

How Liam Fox helps us face the new era, using orcs, Socrates and his knowledge of general medicine.

It’s a weird and wacky world, people, and we reach for political theory as a way of understanding the myriad linkages – ideological, emotional – between collectives of all sorts and individuals. Reach for political theory, and more importantly political history, for surely it can only be through an understanding of history that we can hope to reach into the shaken-up snow-globe and make sure the itty-bitty little snowman doesn’t get blown to buggery by the winds of change? For profundities such as the above I am indebted, latterly, to Dr Liam Fox, the erstwhile defence minister and currently Theresa May’s International Trade supremo – latterly because I’m primarily indebted to civil servants in his new bailiwick who have revealed to Private Eye that Dr Fox has insisted that they buy his 2013 globalisation excursus, Rising Tides: Facing the Challenges of a New Era, if they want to do just that.

The Eye snarked that Dr Fox’s book had sold just 1,876 copies thus far, but in fact that’s a perfectly respectable sale for a title by a contemporary politician. Ask the residents of Southmoor in Essex how they feel about instantly remaindered political books – half the village disappeared last year into a sinkhole that opened up when thousands of copies of On a Clear Day by David Blunkett, which had been buried in an adjacent landfill, reached a critical point of putrefaction. Some might describe this as ironic, others as justice. Anyway, inspired by Dr Fox’s self-conviction, and wanting to know what we can expect from the man who will be guiding our destiny as a trading nation through the savage cross-currents in the coming years, I hied me to the Amazon cloud reader to read the free sample.

Some might say this was the act of a hack who cares naught for the intellectual property of other writers, and is not prepared to put in the hard work required to understand the full compass of Dr Fox’s thinking, but my view is that the man himself will sympathise with my raw intellectual hunger. So pithily apodeictic (though simultaneously lyrical) is his own writing, that I came away from the free sample richer, wiser, and well equipped to advance his ideas to New Statesman readers – for which I believe both he, and you, will be grateful.

So, I mentioned history earlier, but let the man himself tell you how important it is to him, and us. “I am not one of those who believes that history repeats itself in the most literal sense,” Dr Fox writes, “but I do believe that the types of problems we face are repeated in time and realm.” True, it’s hard to think which “those” he might be thinking of, beyond the character of Phil Connors in Groundhog Day, but otherwise I think this is positively seer-like stuff.

Dr Fox’s use of the slightly archaic “realm” in the above may have given you pause for thought. Masterful prose writer that he is, he is softening his readers up for what comes next: a quotation from that great chronicler of humankind’s history, J R R Tolkien. And this, if I interpret it rightly, suggests that when trying to understand the motivation of jihadists, our best guide is the psychology of, um, orcs. But the history of Middle Earth alone cannot supply wisdom – neither for concerned citizens nor for the elves who lead them. For that, we require additional professional expertise, and Dr Fox is once again our man. Like the great Socrates, upon whose method he has undoubtedly based his own, Dr Fox teases out the technê of statecraft by analogy with his own illustrious medical career, in which: “The first task was to gather all the data possible about the patient and their complaint.”

Yes! How true this is. It makes me think of a hypothetical patient (or politician) whose complaint is that although he once held one of the high offices of state – one that requires of its incumbent great probity and discretion – he nonetheless attended many important meetings accompanied by an adviser who had no security clearance, and who had extensive links to lobbyists for defence contractors. Further, it makes me hypothesise that this patient (or politician), set up a “charity” to fund the activities of this “adviser”, which in turn had to shut down because of a mephitic odour, which – were I to have Dr Fox’s training – I’d probably diagnose as symptomatic of rot. It’s true that Dr Fox cautions his readers to “skip over any detail which seems excessive”, but then again: “I believe history brings some context to the subjects covered, something I think is often missed in contemporary debate.” Yes; and if it were the case that the same hypothetical patient had overclaimed the most expenses of any Tory frontbencher – including the rent on a flat used by the aforementioned special adviser – well, that would seem to provide some context for understanding how he’d function were he, once more, to hold a high office of state.

These, it seems, are the sorts of things being missed by contemporary debate. It’s as if the result of the EU referendum in June hit some sort of hard reset in the British political system: everything was turned off and turned on again, and in the process we have indeed forgotten our history, and so, like Phil Connors, we are doomed to repeat it. Thank the Lord for Dr Fox, whose civil servants will by now have absorbed their new boss’s forensic credo. When he was a general practitioner, having dealt with his own patients’ history and placed their symptoms in the right context: “The third task was to determine the course of treatment in the light of best accepted practice and the most up-to-date information available.”

Hear, hear! Given that the most up-to-date information available is that our hypothetical patient-cum-politician is still mired in the rising tide of his own bullshit, the most advisable course of treatment would appear to be euthanasia. After all, Dr Fox isn’t one of those who believes that history literally repeats itself – so a second resignation is out of the question. 

Will Self is an author and journalist. His books include Umbrella, Shark, The Book of Dave and The Butt. He writes the Madness of Crowds and Real Meals columns for the New Statesman.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump