Normally, I like to vary my columns from month to month, but I find myself, for the second month in a row, impelled to remain with the topic of nuclear energy. The reason is the current difficulties being experienced by the predominantly (about 84.5%) French State-owned group EDF regarding its new nuclear power project in the UK, Hinkley Point C. This situation may very well have lessons for South Africa, but only if what is going on is actually understood, and it is already clear that there are commentators in South Africa, attacking local plans to build new nuclear power plants (NPPs), who seek to use Hinkley Point to support their arguments but who fail completely to grasp what is going on in the UK.

We have to start from the basics. The electricity sector in the UK bears no resemblance to that in South Africa. Britain privatised its electricity generation decades ago; all power stations and power transmission systems are owned and operated by companies, none of which are owned by the British State or by any of the UK’s regional administrations (London, Northern Ireland, Scotland and Wales). Perhaps, ironically, some of the companies that operate power stations in the UK are owned by foreign States – EDF is the obvious example.

This situation applies to Britain’s civil NPPs as well. Today, NPPs provide some 18% of the UK’s electricity supply. They comprise 15 operating reactors (Dungeness B 1 and 2, Hartlepool 1 and 2, Heysham I 1 and 2 and Heysham II 1 and 2, Hinkley Point B 1 and 2, Hunterston B 1 and 2, Torness 1 and 2 and Sizewell B). Their total capacity is 9.5 GWe. Eight of these reactors are currently expected to be shut down in about the next decade. All are currently owned and operated by EDF Energy, the UK subsidiary of EDF.

The British government would like these older generation plants to be replaced with new NPPs of the latest generation and desires an increase of the country’s total nuclear generating capacity to about 16 GWe (although this is not a firm target). There is, by the way, no restriction on foreign shareholdings in these new-build NPPs.

Consequently, a number of new NPP projects are now under way, although none have yet reached the construction phase. On sites at Oldbury and Wylfa, Horizon Nuclear Power (now a wholly owned subsidiary of Japan’s Hitachi) plans to build four (two at each site) General Electric-Hitachi advanced boiling water reactors (ABWRs). (The group’s first ABWR started operation in Japan in 1996 and was a Generation III design; the ABWRs to be built in Britain will be to an updated, Generation III+ design.) NuGeneration, which is 60%-owned by Toshiba of Japan and 40% by French group Engie (formerly GDF Suez), intends to construct three Westinghouse AP1000 reactors at a site named Moorside, which is next to the Sellafield nuclear fuel reprocessing complex. (Westinghouse is part of the Toshiba group.) China General Nuclear Corporation (CGN) is considering a project to build two of its Hualong One reactors, adapted for the UK, at Bradwell. This could be a joint venture (JV) with EDF, with CGN holding 66.5% and the French group 33.5%.

But EDF is the most advanced in its plans. It intends to build four European pressurised water reactors (EPRs) in the UK, two each at Hinkley Point and Sizewell. The two EPRs at the former location will form the Hinkley Point C power station. Hinkley Point C is currently the most advanced new NPP project in the UK. Currently, it is set to be a JV between EDF (66.5%) and CGN (33.5%).

The key point is that all this new nuclear build has to be financed by the energy companies concerned. Not a single penny of British taxpayers’ money will be involved. It is true that the British government issued a £2-billion loan guarantee for Hinkley Point C last September, but that comes from a national guarantee scheme to support infrastructure projects in general. And, if all goes well, those guarantees will not need to be implemented.

It is also true that Hinkley Point C will received a guaranteed price for the electricity it will generate, which will be £92.50/MWh. This is indeed twice the wholesale price of electricity in the UK. But a biomass power plant at Drax is already receiving a guaranteed power price of £105/MWh and it is reported that the guaranteed power price for Britain’s planned offshore wind farms in the North Sea will be a staggering £140/MWh!

It is now well known that EDF is in difficulties concerning the financing of Hinkley Point C. The EPR design, from the predominantly (87%) French State-owned group Areva, although being built in France, Finland and China, is not yet in operation anywhere. The first unit, being built at Flamanville, in France, is now four years behind schedule and three times over budget. There are similar problems in Finland. On top of this, last year EDF had to agree to acquire at least a 51% stake in Areva’s reactor business, effectively to help bail out the latter company, which made record losses of €4.83-billion in 2014. So, EDF’s finances are currently rather tight.

So, when British commentators say that Hinkley Point C is incredibly expensive or even unaffordable, they mean incredibly expensive or unaffordable for EDF, not Britain. Their focus is on the company, not the nuclear sector and certainly not the country. If EDF has to abandon Hinkley Point C, it would be embarrassing to the British government, because of its strong support for nuclear energy, but nothing more than that. It would also not mark the end of the new nuclear build programme in the UK. The other companies, with their completely different financial situations and financing plans, would continue to go ahead.

Thus, crude, simplistic extrapolations cannot be drawn from EDF’s situation to South Africa’s. If EDF proves unable to fund Hinkley Point C, that does not mean that South Africa will be unable to fund its planned new NPPs, not least because we still have no idea how Pretoria intends to finance them! Only when we know that will we be able to determine the affordability of the new nuclear build programme.