France Pins Nuclear Hopes on Chinese Success - OZY | A Modern Media Company

France Pins Nuclear Hopes on Chinese Success

France Pins Nuclear Hopes on Chinese Success

By Andrew Ward & David Keohane

An environmental activist walks past a banner during a demonstration called by associations to mark the seventh anniversary of the Fukushima nuclear disaster in Japan, on March 11, 2018, in Paris.


After years of setbacks, the European Pressurized Reactor is ready to debut in China — a key test for France’s nuclear industry.

By Andrew Ward & David Keohane

Every day for the past month, Chinese engineers have carefully fed bundles of fuel rods into the core of a nuclear reactor at Taishan power station on the edge of the South China Sea in Guangdong province. Inside these metallic cylinders are millions of uranium pellets, each capable of producing as much electricity as a ton of coal.

It is an increasingly common exercise across China as the country expands its nuclear sector to meet soaring energy demand. But fuel loading at Taishan — one of the last steps before it starts producing electricity — carries wider significance beyond China.

Taishan, operated by China General Nuclear Power Corp., the state-owned energy company, is on course to become, within months, the first plant in the world to operate a European Pressurized Reactor — the Franco-German technology plagued by delays and cost overruns since it was designed in the 1990s.

It will bring a new image to the EPR.

Xavier Ursat, head of new nuclear projects for French utility EDF

“The Taishan 1 fuel loading is a very important milestone,” says Xavier Ursat, head of new nuclear projects for EDF, the French state-backed utility that owns 30 percent of the project. “It will bring a new image to the EPR.”

Few technologies are in greater need of a makeover. When work started on the first EPR as a joint venture of Areva of France and Siemens of Germany at Olkiluoto, Finland, 13 years ago, it was supposed to herald a new era of growth for atomic power. Instead, as construction timetables slipped and German support melted away, the EPR has become a symbol of the nuclear industry’s struggle to remain competitive.


EDF, the main surviving corporate champion behind the EPR, is hoping that the completion of Taishan will mark a turning point in efforts to convince skeptical investors, policymakers and potential buyers that the reactor can still be a success. At stake is the future of the wider French nuclear sector, which is relying on the EPR for long-term growth, at a time when the country’s dependence on atomic power is being questioned by President Emmanuel Macron’s administration.

Taishan is the farthest advanced of four EPR projects around the world and, at a mere five years late, the least delayed. Olkiluoto is due to come into service next year, a decade late and nearly three times over budget at 8.5 billion euros. It is a similar story at EDF’s flagship Flamanville plant in France, which is seven years late and 7 billion euros over budget. A further project involving two EPRs at Hinkley Point, southwest England, is not due for completion until the end of 2025, eight years after EDF once predicted it would be finished.

These setbacks have plunged France’s nuclear industry into financial turmoil. Areva, battered by its losses at Olkiluoto, was last year folded into EDF in a state-brokered deal that amounted to a bailout of the sector. A 4 billion euro capital raising by EDF last year improved its balance sheet, but the company still had 33 billion euros of net debt at the end of 2017, only a little less than its current market capitalization.


No country has invested more in nuclear power than France, which generates 70 percent of its electricity from the splitting of atoms. The EPR was designed to renew the country’s nuclear fleet as many of its existing 58 reactors approach the end of their operational lives, while also generating valuable export orders. But construction delays have been seized on by those — including some inside the Macron government — who want a decisive shift in French energy policy away from nuclear and toward renewable power.

A policy “road map” is due by the end of the year, setting out how fast France should pursue a government target to cut nuclear’s share of domestic electricity production to 50 percent. Similar debates are underway in many countries where nuclear power is generated, as critics argue that its high costs, safety risks and radioactive waste can no longer be justified when the costs of wind and solar power are falling rapidly.

Some countries, notably China and India, still see a role for nuclear as a source of reliable, low-carbon electricity to fuel their growing economies without the pollution caused by coal. But with several rival reactors vying for orders, ranging from U.S. and Japanese designs to cheaper Chinese and South Korean models, EDF must urgently demonstrate the viability of its technology if the EPR is to have a future.

The problem with nuclear reactors is the risk of low-probability, high-impact accidents.

Paul Dorfman, Energy Institute, University College London

Many of the EPR’s problems stem from the characteristic that was supposed to be its biggest selling point: safety. After the 1986 meltdown at the Chernobyl plant in Ukraine, French and German scientists set out to design a reactor robust enough to overcome public misgivings about nuclear power. Thick concrete cladding around the reactor building is designed to be strong enough to withstand an aircraft or missile strike, an attribute that has taken on added importance since the September 11 terrorist attacks. Further modifications were demanded by regulators after the 2011 meltdown at Japan’s Fukushima plant. But increased safety led to increased costs and complexity.

“The problem with nuclear reactors is the risk of low-probability, high-impact accidents,” says Paul Dorfman, researcher at the Energy Institute of University College London. “After Fukushima, there has been an attempt to design away risk, but this has led to over-engineering.”

While the EPR was designed to be almost bomb- and meltdown-proof, construction flaws have painted a less robust picture. France’s nuclear regulator, the Autorité de Sûreté Nucléaire, ruled last year that anomalies in the steel used at Flamanville meant the reactor’s lid, or vessel head, would need replacing — at significant expense — after just six years of operation. Separate defects have since emerged in the welding of steel pipes at the French plant. EDF is due to reveal within weeks whether it can still meet its latest timetable to be fully operational by November 2019.

While the start-up of Taishan will be a welcome fillip, Flamanville remains the bigger test for EDF because of its 100 percent ownership and because approval from the ASN — seen as a gold standard in nuclear regulation — bestows credibility on the technology internationally.

Ursat denies that any shortcuts have been taken in Taishan compared with Flamanville. “The expectations of the Chinese safety authorities are very high and very close to that of the ASN,” he says. “If at EDF we thought that the level of safety at Taishan 1 was not the same as at Flamanville 3, we would not validate the reactor.”


Like the ASN at Flamanville, Chinese regulators want a new vessel head fitted by 2024 — unless EDF can prove the lid is strong enough to remain in place once the reactor is operational. “The only question is, are we able to demonstrate its safety … in a way that gives comfort to the Chinese or French authorities?” says Ursat. “If we [can] … demonstrate that what is good for seven years is good for 60 years, then we don’t have to replace the reactor vessel.”

Sam Arie, an analyst at UBS, says “further small delays are probably more likely than not” at Flamanville, but he is confident the plant will be finished. Once the first EPRs start generating revenues, investors should become more willing to value the technology as an asset rather than a liability. Arie believes that could add as much as 4 euros to EDF’s 12 euro share price — three-quarters of that in anticipation of future revenues from Hinkley Point. (The stock peaked above 85 euros in 2007.)

Setbacks at Flamanville have cast a shadow over the early stages of construction at Hinkley Point, where two EPRs are being built, with an aim to meet 7 percent of U.K. electricity demand. EDF insists that experience accumulated at Flamanville and Taishan will make Hinkley a smoother process. Avoiding delays in the U.K. will be crucial if EDF is to persuade international buyers — and its own shareholders, not least the French government — that the EPR’s teething problems are over.

The company wants to follow up Hinkley with another U.K. EPR at Sizewell in eastern England, and it struck a tentative deal in March with Nuclear Power Corporation of India, the state-owned energy company, to build six EPRs at Jaitapur, 400 kilometers south of Mumbai.

To secure orders, the EPR must compete not only with rival reactors but also with renewables and gas. Jean-Bernard Lévy, EDF’s chief executive, told French lawmakers last month that future French EPRs built in a series, as opposed to the one-off prototype at Flamanville, could produce electricity at a cost of 60-70 euros per megawatt per hour. That would be at least a third cheaper than the 92.50 pounds/MWh (105.80 euros), which the U.K. government has promised EDF for electricity from Hinkley Point, and comparable with the 57.50 pounds/MWh price in the latest U.K. offshore wind contracts.


Many of the problems at Flamanville stem from the costs of reactivating the French nuclear construction sector, which had been dormant since the last new reactors were built in the 1990s, according to Cyril Crocq-Gaillard, a consultant at Sia Partners. Hinkley Point will keep the French supply chain active, but more orders are needed to avoid it seizing up again.

Yet the prospect of more EPRs in France is uncertain at best. Macron faces opposition to extending the operational lives of existing reactors — most of which were built in the 1970s and 1980s and have already been given 10-year extensions — as well as replacing them. Most analysts believe extensions will happen. But this would only set back the need for new builds, and Nicolas Hulot, the left-leaning environment minister, recently said the goal of reducing nuclear power is “irrevocable.”

In response to these signals, EDF is hedging its bets. The company announced plans last December to invest up to 25 billion euros in French solar capacity and this month agreed to acquire a Scottish offshore wind project for more than 500 million euros, joining the rush of investment in renewable power.

Lévy says renewables and nuclear can be complementary. This puts him at odds with many green power advocates, who claim that always-on electricity of the kind generated by nuclear reactors will become obsolete in a world of renewables backed up by battery storage. EDF is investing in batteries but argues that reliable “baseload” power will still be needed to guarantee energy security during extended periods without wind or sun. “New nuclear must remain an option,” says one person familiar with French-government thinking. “It’s very unclear if we can ever get to 100 percent renewables.”

As a nuclear-armed state, France also has strategic reasons for preserving its long-term expertise.

“It will be a decision of the government by the end of the year to say if they want new nuclear [power] to be launched and in what time frame,” says Ursat. “An optimized version of the EPR can be a solution, but this is a decision that will be taken at a political level.”

Completion of Taishan will make the EPR look like a more viable option. But only once Flamanville and Olkiluoto are operational and Hinkley Point is shown to be on a less troubled path will technical doubts be fully answered. Even then, the commercial case for the EPR will need to be made again in a rapidly changing energy landscape.

By Andrew Ward & David Keohane

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2020.

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