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Cambridge Judge Business School
Tragedy or comedy?
The story of UK
nuclear energy
Simon Taylor
Director, Master of Finance...
Act One: out of the shadow of the Bomb
The UK leads civil nuclear power
Source: National Archives http://www.nationalarchives.gov.uk/wp-
content/uploads/2014/03/...
Gas-cooled was only option for UK in 1950s
4
Facilities for
enriching
uranium?
Facilities for
making
heavy water?
Gas-cool...
Steam Generating Heavy
Water Reactor
High Temperature Gas
Reactor
Magnox
Advanced Gas-cooled
Reactor
Light Water
Reactor
F...
Steam Generating Heavy
Water Reactor
High Temperature Gas
Reactor
Magnox
Advanced Gas-cooled
Reactor
Light Water
Reactor
The symbol of failure: Dungeness B
1965 Construction
contract awarded
1970 Target
completion
1985 Full operation but
not f...
1989
9
The last reactor built in the UK
Commissioned
1995
Sizewell A (Magnox, closed) and B (PWR, golf ball), Suffolk
Act Two
British Energy’s share price 1996-2003 (£)
12
2003 Energy White Paper
“..we do not rule out the possibility
that at some point in the future new
nuclear build might be ...
14
Source: Directory of UK Energy Statistics 2015
Act Three
2003-2006
2005-07
17
2008: new nuclear is decriminalised
2006-08
• How to cut GHGs by 80%?
Source: Committee on Climate Change Nov 2008 https://www.theccc.org.uk/publication/building-a-
l...
It’s going to be difficult to do it without more nuclear
20
British nuclear stations in 2016: most close to closure
Outlook for UK nuclear output (GW capacity)
22
“as a response to
circumstances
and without great
enthusiasm”
April 1969
1973-74
UK nuclear share: 17%
25
French nuclear share: 71%
Hinkley Point C: to produce 7% of UK power by 2026
Source: EDF
The troubled history of Hinkley Point C
1990 Planning permission given for PWR at Hinkley Point
2006 Hinkley Point C proje...
Hinkley Point C project cashflows (estimated)
29
(2,000)
(1,000)
0
1,000
2,000
3,000
4,000
2016
2019
2022
2025
2028
2031
2...
EDF is not the financial giant it used to be
30
Market cap
c.€20 billion
Market cap
c.€160 billion
French lessons
£ billion
The French Dungeness B: the troubled EPR
Olkiluoto 3 – Finland
Original scheduled operation – 2009
Latest estimate – 2018
...
EDF turns to its Chinese friends
33Source: EDF http://shareholders-and-investors.edf.com/fichiers/fckeditor/Commun/Finance...
Why is China keen on nuclear?
Who did China learn nuclear power from?
35
French-built station at Daya Bay, near Shenzhen (and Hong Kong)
UK is only advanced economy planning major
nuclear expansion
Country % nuclear
power (2015)
Policy
France 77 Stable – one ...
Proposed new reactors in UK
37
Station Sponsor Reactor
type
Gross
GW
capacity
Projected
commissioning
(first unit)
Hinkley...
Outlook for UK nuclear output
38
The Guardian’s view of UK nuclear policy
Source: The Guardian, Bill Bragg http://www.theguardian.com/commentisfree/2015/oc...
40
“hard hitting and authoritative”
- Sir Geoffrey Owen, Financial Times
“..Taylor’s cool and dispassionate financial and ...
s.taylor@jbs.cam.ac.uk
41
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The story of UK nuclear energy

A history of nuclear power in the UK based on my book "The Fall and Rise of Nuclear Power in Britain - A History"

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The story of UK nuclear energy

  1. 1. Cambridge Judge Business School Tragedy or comedy? The story of UK nuclear energy Simon Taylor Director, Master of Finance May 2016
  2. 2. Act One: out of the shadow of the Bomb
  3. 3. The UK leads civil nuclear power Source: National Archives http://www.nationalarchives.gov.uk/wp- content/uploads/2014/03/t228-6981.jpg Intelligence Report by the US State Department on the UK’s Nuclear Power Program, 1st July 1955 “cost estimates appear rather optimistic and may well be reached only by the device of heavily subsidising the by-product plutonium to be used in different type plants at a later stage in the program” “The dividends in terms of international leadership and valuable export markets may be substantial” In addition, the government’s emphasis on nuclear rather than oil fuels for power plants is influenced by considerations of security.
  4. 4. Gas-cooled was only option for UK in 1950s 4 Facilities for enriching uranium? Facilities for making heavy water? Gas-cooled, graphite moderated, reactor Heavy water pressurised reactor Light water pressurised reactor UK, France Canada USA No No Yes Yes Obsolete by late 1960s Industry standard now France (from 1969) Nuclear reactor decision tree
  5. 5. Steam Generating Heavy Water Reactor High Temperature Gas Reactor Magnox Advanced Gas-cooled Reactor Light Water Reactor Fast Breeder Reactor
  6. 6. Steam Generating Heavy Water Reactor High Temperature Gas Reactor Magnox Advanced Gas-cooled Reactor Light Water Reactor
  7. 7. The symbol of failure: Dungeness B 1965 Construction contract awarded 1970 Target completion 1985 Full operation but not full capacity 1995 Full capacity
  8. 8. 1989
  9. 9. 9
  10. 10. The last reactor built in the UK Commissioned 1995 Sizewell A (Magnox, closed) and B (PWR, golf ball), Suffolk
  11. 11. Act Two
  12. 12. British Energy’s share price 1996-2003 (£) 12
  13. 13. 2003 Energy White Paper “..we do not rule out the possibility that at some point in the future new nuclear build might be necessary if we are to meet our carbon targets. Before any decision to proceed with the building of new nuclear power stations, there will need to be the fullest public consultation.. .”
  14. 14. 14 Source: Directory of UK Energy Statistics 2015 Act Three
  15. 15. 2003-2006
  16. 16. 2005-07
  17. 17. 17 2008: new nuclear is decriminalised
  18. 18. 2006-08
  19. 19. • How to cut GHGs by 80%? Source: Committee on Climate Change Nov 2008 https://www.theccc.org.uk/publication/building-a- low-carbon-economy-the-uks-contribution-to-tackling-climate-change-2/ How on earth are we going to do this?
  20. 20. It’s going to be difficult to do it without more nuclear 20
  21. 21. British nuclear stations in 2016: most close to closure
  22. 22. Outlook for UK nuclear output (GW capacity) 22
  23. 23. “as a response to circumstances and without great enthusiasm” April 1969
  24. 24. 1973-74
  25. 25. UK nuclear share: 17% 25
  26. 26. French nuclear share: 71%
  27. 27. Hinkley Point C: to produce 7% of UK power by 2026 Source: EDF
  28. 28. The troubled history of Hinkley Point C 1990 Planning permission given for PWR at Hinkley Point 2006 Hinkley Point C project revived with an EPR 2007 EDF Energy CEO says British families will be cooking their Christmas turkey with nuclear energy from HPC in 2017 Oct 2008 EDF starts public consultations on Hinkley Point Oct 2010 Protest against EDF’s plan to move badger colony Feb 2011 EDF now says HPC will be finished by 2018 Mar 2011 Fukushima disaster Dec 2011 HPC to produce power by 2019 Aug 2012 Rumours of Chinese investment Oct 2013 Project (including Chinese investment) gets full government approval; completion seen in 2023 Oct 2014 European Commission gives state aid approval Oct 2015 Chinese President Xi Jinping state visit to UK; completion seen in 2025 Feb 2016 French trade union urges delay or cancellation Mar 2016 EDF Chief Financial Officer resigns over HPC threat to EDF’s financial stability Sep 2016 Possible final board decision
  29. 29. Hinkley Point C project cashflows (estimated) 29 (2,000) (1,000) 0 1,000 2,000 3,000 4,000 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058 2061 2064 2067 2070 2073 2076 2079 2082 Figure xx Indicative cashflows for Hinkley Point C (£ million) Financial input Assumption Annual inflation 2% Average operating cost (£/MWh) 15.3 Construction cost (£m) 16,000 Availability 91% No of years to build 9 Corporate tax rate 20% Price fall in year 36 50% Table xx Assumptions on Hinkley Point C financial model
  30. 30. EDF is not the financial giant it used to be 30 Market cap c.€20 billion Market cap c.€160 billion
  31. 31. French lessons £ billion
  32. 32. The French Dungeness B: the troubled EPR Olkiluoto 3 – Finland Original scheduled operation – 2009 Latest estimate – 2018 Original cost – €3.2 bn Latest estimate - €8.5 bn Flamanville 3 - France Original scheduled operation – 2012 Original cost - €3.6bn Latest estimate €10.5 bn Expected operation 2018 Q4 Taishan 1 & 2 – China Unit 1 original scheduled operation – 2014 Construction finished December 2015 Testing in 2016 32Source: EDF
  33. 33. EDF turns to its Chinese friends 33Source: EDF http://shareholders-and-investors.edf.com/fichiers/fckeditor/Commun/Finance/Publications/Annee/2013/EDF_NNB_EquityPresentation_2_va.pdf New structure (November 2015): EDF two thirds, CGN one third 2013 investment plan
  34. 34. Why is China keen on nuclear?
  35. 35. Who did China learn nuclear power from? 35 French-built station at Daya Bay, near Shenzhen (and Hong Kong)
  36. 36. UK is only advanced economy planning major nuclear expansion Country % nuclear power (2015) Policy France 77 Stable – one EPR under construction Belgium 47 Stable – no new stations planned Sweden 41 Stable – no new stations planned Switzerland 38 Stable – no new stations planned Finland 35 Stable – one ERP close to finish; Russian reactor on order Spain 20 Stable – no new stations planned US 19 Intense competition from gas UK 17 Major expansion/replacement planned Germany 16 Planned phase out Canada 17 Stable – no new stations planned Japan 0 Planned restart but controversial Italy 0 Shut down after Chernobyl disaster, 1986 36Source: World Nuclear Association http://www.world-nuclear.org/info/Facts-and-Figures/Nuclear-generation-by-country/
  37. 37. Proposed new reactors in UK 37 Station Sponsor Reactor type Gross GW capacity Projected commissioning (first unit) Hinkley Point C EDF/CGN EPR 3.3 2024 Moorside NuGen (Hitachi + ENGIE) AP1000 3.8 2026 Oldbury C Horizon (Toshiba) ABWR 3.2 2028 Sizewell C EDF/CGN EPR 3.3 2026 Wylfa Newydd Horizon ABWR 2.8 2024 Bradwell B CGN/EDF Hualong 1 1.4 2028
  38. 38. Outlook for UK nuclear output 38
  39. 39. The Guardian’s view of UK nuclear policy Source: The Guardian, Bill Bragg http://www.theguardian.com/commentisfree/2015/oct/20/george- osborne-renationalisation-britain-nuclear-power-china-france-privatisation
  40. 40. 40 “hard hitting and authoritative” - Sir Geoffrey Owen, Financial Times “..Taylor’s cool and dispassionate financial and economic analysis of nuclear technology in the UK, especially over the past few years, is an excellent and even enthralling read.” - Gordon Mackerron, Nature Energy "A terrific piece of work ... far greater and more devastating detail than anything else so far in the public domain." - Lord Howell, former Secretary of State for Energy "An important and valuable analysis of one of the most important challenges of this century. The role of government and the market needs a fundamental reappraisal.” - Tim Stone, Non-Executive Director of Horizon Nuclear Power; former Expert Chair of the Office For Nuclear Development in DECC "Much can be learned from Britain's adventures in nuclear power. This engaging and authoritative account is essential reading for anyone who wants to reap the lessons of history." - Professor Sir David J C MacKay FRS, Regius Professor of Engineering, University of Cambridge and author of Sustainable Energy – without the hot air. Chief Scientific Advisor to DECC (2009-2014).
  41. 41. s.taylor@jbs.cam.ac.uk 41

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