An end to the Horizon nightmare?

Horizon Fantasy

Hitachi says it will be five years before construction can begin on any of the planned Horizon nuclear

power stations at Wylfa and Oldbury. The company has yet to gain approval from the regulator for its

reactor design

– the Advanced Boiling Water Reactor (ABWR). Under the previous owners,

construction of new reactors at Wylfa was expected to get underway towards the end of 2015

– but

now it will be towards the end of 2017 at the earliest. (1)

A lot can happen over five years in the nuclear world. A report by the European Photovoltaics

Industry Association shows that, because of rapidly falling prices, photovoltaics (PV) are likely to

become a competitive source of electricity in the UK by 2019, without subsidies

—not just for

householders paying domestic retail prices but also for wholesale generators and large

commercial and industrial consumers. (2)

According to New Civil Engineer there are four ABWRs currently in operation in Japan, built to time

and budget. (3) But none of these have a capacity factor above 73% and two have capacity factors of

less than 45%.

A capacity factor is the amount a plant generates compared to the amount that would

be generated if it was operating at full power all of the time. Nuclear power plants are costed on the

basis that they will achieve capacity factors of 80-90 per cent. With a capacity factor of 45 per cent

any nuclear power project comes out needing twice the power price to be an economic proposition.

(4)

Started construction Commercial Operation Capacity Factor Ref

Kashiwazaki-

Kariwa-6

3

rd November 1992 7th November 1996 72.8% (5)

Kashiwazaki-

Kariwa-7

1

st July 1993 2nd July 1997 68.2% (6)

Hamaoka-5 12

th July 2000 18th Jan 2005 44.6% (7)

Shika-2 20

th August 2001 15th March 2006 44% (8)

NuClear News No.45 November 2012

5

In Japan, two further ABWRs

– Shimane-3 and Ohma-1 - had started construction when the

Fukushima crisis happened, so construction has been suspended. At least six other proposed ABWRs

in Japan have been suspended. (9) There are two 1350 MWe Advanced Boiling Water Reactors under

construction at Lungmen, near Taipei. Construction began in 1999 with the intention of starting

operation in 2004, but due to various problems neither reactor is open yet. (10) Commercial operation

is not expected until 2014-15, so they will have taken 16 years to build. (11) Plans to build two

Toshiba ABWRs in South Texas were abandoned in 2011. (12)

Hitachi says it will decide whether to invest the estimated £20 billion (£5bn each) required to build

the new reactors in four or five years’ time, once its reactor design has been approved by regulators. It

has enlisted Rolls-Royce and Babcock to provide technical expertise and advice on clearing

regulatory hurdles. SNC Lavalin, the Canadian construction group, is also part of the consortium. The

sale of Horizon results in an unexpected profit of almost £160 million for E.ON and RWE, which had

expected the venture to be sold for closer to £300 million. (13) Senior Lecturer in Energy Policy at

Birmingham University, Dave Toke says Hitachi are nuclear constructors - they contract to build plant

for other people, it seems unlikely they would take on 100 per cent of the equity in the new reactors

never mind 100 per cent of the financing. They did agree to take out a 20 per cent equity investment

in a nuclear power plant in Lithuania (which the Lithuanians have just rejected in a referendum).

Indeed, because the bulk of the Lithuanian proposal was financed by a state-guaranteed loan, Hitachi's

contribution to the projected cost in fact comes out as rather less than 10 per cent. And according to

the UK Government there will be no underwriting of construction costs, so the banks would not lend

any money. Hitachi would have exactly the same problem as is faced by EDF or, for that matter, any

other large company. They would have to finance the lot off their balance sheets .Their shareholders

would face big risks and expect big returns, which pushes the required price to be paid for the nuclear

electricity higher still. (14)

The FT says

drastically reduced business prospects at home have forced Hitachi to take bigger risks to

win business abroad. Masaharu Hanyu, head of Hitachi’s nuclear division, said Hitachi planned

eventually to reduce its ownership to a minority by selling stakes to outside investors. Given the high

price it paid for Horizon, the financial success of Hitac

hi’s acquisition will depend on its ability to

bring in money from new investors by maximising the start-

up’s overall value as a utility. It may take

some time, however, before Hitachi comes to see itself as an investor rather than a builder. (15)

The

Telegraph

says Hitachi would not invest the full £20bn itself so would need to secure financial

backing. (16)

Hitachi says it will "immediately work towards achieving license acceptance under the Generic

Design Assessment process as governed by the Office for Nuclear Regulation and begin working with

our UK partners on the future program". (17)

It has “pencilled in” four years to complete the process

but there is some “positive thinking” that the GDA could be completed in a shorter period of time

because the ABWR is already licensed and operating in other countries and because there are four

ABWRs operating in Japan and two under construction in Taiwan. (18)

(1) Building 30

th October 2012 http://www.building.co.uk/news/sectors/infrastructure/five-years-beforeconstruction-

can-begin-on-horizon-nuclear/5045147.article

(2) Solar Photovoltaics Competing in the Energy Sector, EPIA, September 2011

http://www.epia.org/index.php?eID=tx_nawsecuredl&u=0&file=fileadmin/EPIA_docs/publications/epi

a/Competing_Full_Report.pdf&t=1351772414&hash=3a3e99e5b919aed5060d1f3a9578c827

See also

The Financial Risks of Investing in New Nuclear Power Plants, Energy Fair, October 2012.

http://www.mng.org.uk/gh/private/risks_of_nuclear_investment.pdf

(3) New Civil Engineer 30

th October 2012 http://www.nce.co.uk/news/energy/hitachi-to-build-up-to-ninenew-

nuclear-plants-in-uk/8637882.article

(4)

David Toke’s Green Energy Blog 30th October 2012 http://realfeedintariffs.

blogspot.co.uk/2012/10/hitachi-bid-more-fantasy-nuclear-power.html

NuClear News No.45 November 2012

6

(5)

http://world-nuclear.org/NuclearDatabase/reactordetails.aspx?id=27570&rid=BF928D6F-9277-4E05-

BF0F-2658DC973FEA

(6)

http://world-nuclear.org/NuclearDatabase/reactordetails.aspx?id=27570&rid=15DA1AEF-B63E-

4EBA-827B-7280559C93B1

(7)

http://world-nuclear.org/NuclearDatabase/reactordetails.aspx?id=27570&rid=F98DE7C7-0F7F-467CB98C-

8E633BBD50D5

(8)

http://world-nuclear.org/NuclearDatabase/reactordetails.aspx?id=27570&rid=A14A17FA-9566-494A-

8975-2B6D5F8D41E8

(9) Nuclear Power in Japan, WNA, 22

nd Oct 2012 http://www.world-nuclear.org/info/inf79.html

(10) Nuclear Power in Taiwan, World Nuclear Association, January 2012,

http://www.worldnuclear.

org/info/inf115_taiwan.html

(11) World Nuclear Industry Status Report 2012, page 97

http://www.worldnuclearreport.org/IMG/pdf/2012MSC-WorldNuclearReport-EN-V2-LQ.pdf

(12)

http://en.wikipedia.org/wiki/South_Texas_Nuclear_Generating_Station

(13) Times 31st Oct 2012

http://www.thetimes.co.uk/tto/business/industries/utilities/article3584943.ece

(14)

David Toke’s Green Energy Blog 30th October 2012 http://realfeedintariffs.

blogspot.co.uk/2012/10/hitachi-bid-more-fantasy-nuclear-power.html

(15) FT 30

th October 2012 http://www.ft.com/cms/s/0/174ae282-227e-11e2-b606-00144feabdc0.html

(16) Telegraph 30th Oct 2012

http://www.telegraph.co.uk/finance/newsbysector/energy/9644399/Hitachiunveils-

20bn-plan-to-build-nuclear-reactors-in-the-UK.html

(17) Platts 30th Oct 2012

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/ElectricPower/8864896

(18) i-Nuclear 30th Oct 2012

http://www.i-nuclear.com/2012/10/30/hitachi-in-100-year-commitment-to-uknuclear-

sector-with-700m-purchase-of-horizon/