December 17, 2015
The stock market did not hear the call. The claim of four climate mousquetaires at a side event of the Paris climate talks that “nuclear has tremendous potential to be part of the solution to climate change” was lost in space. One day after that enthusiastic statement by former NASA scientist James Hansen, a member of the illustrious quartet, the share value of the largest nuclear operator in the world, the French state-controlled Électricité de France (EDF), dropped to its historic low, a 42-percent plunge since the beginning of the year and an 84-percent meltdown in eight years. On Monday, December 7, Euronext ejected EDF, “pillar of the Paris Stock Exchange", from France’s key stock market index, known as CAC40. On Tuesday, December 8, EDF shares lost another four percent of their value. Two days later, the trade union representatives at the Central Enterprise Committee of EDF—unanimously and for the first time—launched an official “economic alert procedure” considering the “seriousness of the situation.”
These latest developments come as no surprise to analysts familiar with the international nuclear industry. Credit-rating agencies have warned for years that the launch of nuclear new-build projects are considered “credit-negative.” In October 2015, investment bank Investec advised clients to sell EDF shares amid fears that its connection with the nuclear plant project at Hinkley Point in the UK could put payouts to shareholders under threat. One month later, the French and British governments announced the signature of a framework agreement on a financing package including Chinese partners for the construction two French-built European Pressurized water Reactors (EPR) at Hinkley Point. The federation of EDF employee-shareholders EAS said in a statement that the interests of their company would be “gravely threatened” by the Hinkley Point project, calling it "a financial catastrophe foretold.” EAS asked the management of EDF “to stop this risky project, whose financial risks are too big for our company and which could put EDF's very survival at risk.” Is EDF facing its Waterloo 200 years after Napoleon’s defeat?
Launched as a response to the Chernobyl disaster almost 30 years ago, not a single so-called Generation-III+ EPR reactor is generating power anywhere in the world.
In the meantime, the self-proclaimed “global leader in nuclear energy,” the French state-controlled AREVA, went bankrupt. After a cumulate loss of €8 billion ($8.7 billion) over the past four years, equivalent to its annual turnover, and a debt load of €6 billion ($6.5 billion), the company will not survive the year in its current form. AREVA is already deep in “junk” territory when it comes to its credit-rating, and its share value has eroded by 92 percent since 2008, hitting a new low on December 17. The government’s rescue strategy—forcing EDF to absorb AREVA’s reactor business—is in-turn increasing the risk for EDF. A significant barrier for the conclusion of the rescue deal remains the multibillion-euro liability of the Hinkley Point predecessor projects in Olkiluoto, Finland, and Flamanville, France. The EPR construction in Finland started 10 years ago. The plant was to begin generating carbon-free electricity by 2009 and was part of the country’s greenhouse gas abatement strategy. Now, the plant is scheduled to produce power in “late 2018.” The sister plant in France is not doing any better—on the contrary. Construction started in 2007 with completion planned for 2012. Officially, the current target date is the same as for the Finnish project. The investment-cost estimate exploded by more than a factor of three to €10.5 billion ($11.4 billion), and this is likely not the last word. In addition, EDF struggles with a €37.5 billion ($40.7 billion) debt burden, rapidly increasing production costs in its aging nuclear fleet, significant post-Fukushima and other investment needs, and a shrinking client base, with declining consumption levels over the past four years in a row.
The international outlook is not any rosier. There have been 40 reactors connected to the world’s power grids in 10 years—representing a negligible share of the overall added electricity generating capacity—after an average construction time of close to 10 years. Some 60 units now under construction have been in the building stage for an average of 7.5 years; at least three-quarters are delayed, four have been listed as “under construction” for over 30 years. The Organisation for Economic Co-operation and Development’s International Energy Agency projects in its “New Policy Scenario” a net addition of 222 GW over the coming 25 years. This compares with the net nuclear addition of 22 GW over the past 25 years—which illustrates the level of wishful thinking in current international projections.
You can spend a euro or a dollar only once. The investment in new nuclear reactors leads to an increase in greenhouse gas emissions as other options—notably intelligent energy services (like daylighting) that don’t depend on active systems, end-use and production efficiency, and now renewables—are not only considerably cheaper, they are much faster to implement.
Nuclear utilities and the nuclear industry in general badly need a reality check. The traditional utilities, nuclear or not, need to learn to sell something other than kilowatt-hours or they will not survive the ongoing energy revolution. And the reactor-building industry might want to turn to a safe haven: reactor decommissioning. Building these machines has turned out to be too expensive and too slow. The deconstructing business will only expand. Guaranteed.
independent energy and nuclear policy consultant
founding board member, International Energy Advisory Council, and member, International Panel on Fissile Materials