The end of Hinkley Point C?

Hinkley Point C is vulnerable to the effects of Brexit. The Hinkley project is a joint French and Chinese investment, and it is awaiting the final investment decision from the board of EDF which has a 66.5 per cent stake in the project. A decision by the board is expected in September. EDF, which is 85 per cent owned by the French government, has delayed making a financial commitment, amid resistance from trade unions which have a third of the votes on the board. In March, the company’s Chief Financial Officer resigned.

Hinkley is officially costed at £18bn—excluding the costs of capital—which would make it the world’s most expensive power station. The cost reflects the dreadful construction record of the type of reactor planned for Hinkley, the European Pressurised Reactor (EPR). There are reactors of this type in Finland, France and China, where even the Chinese expertise in building nuclear stations could not deliver the project on time. The French reactor, at Flamanville in Normandy, has defects in the pressure vessel (a critical part of the structure) which are being investigated by the French nuclear regulator. As these defects didn’t occur in the Chinese reactor, they probably reflect manufacturing problems rather than a more serious design flaw. But this is hardly reassuring. In addition, the UK has built no nuclear station for 21 years and the industry lacks experience.

All of this, together with EDF’s weakened financial state (heavy debts, borrowing to pay its dividend, a 60 per cent fall in the share price in the last five years), would be enough to justify cancelling or delaying the project. But the hopes of France’s nuclear industry rest on the success of the type of reactor planned for Hinkley, and there remains pressure from the French state to go ahead.

Brexit should not in theory affect the economics of the project. The politics, however, are more problematic. The French government would need to explain to its people that a largely taxpayer-owned company would be taking a large risk to ensure that the British lights stayed on. If one imagines the situation reversed—a British state-owned company risking bankruptcy to invest in France—the difficulty immediately becomes clear.

If the French government were looking for an excuse to cancel or further delay the project, then Brexit is very convenient. The politics might now tilt the balance in favour of delay, perhaps until the French reactor is operating successfully.

The Chinese company CGN, which is EDF’s minority investor partner in Hinkley, might not be too dismayed by the cancellation, so long as its own project for a Chinese reactor at Bradwell in Essex remains on track. That requires the UK regulator to approve the design, a process likely to start later this year and take about five years. The Chinese have a superior record in nuclear construction to any other country and are arguably the world’s leading nuclear nation.

What would the UK do without Hinkley? Whitehall accepts that the UK will miss its fourth carbon budget (2023-27) not least because of Hinkley’s delay. Other nuclear projects are planned to start generating in the 2020s. At least two (Wylfa in Anglesey and Moorside in Cumbria) show every sign of progress, but have yet to agree detailed financial packages from the government.

British energy policy, dominated by the 2008 Climate Change Act (CCA), is largely independent of the EU so in principle leaving would not affect it. Of course a new government might amend or abolish the CCA but that would be embarrassing when the UK has supported climate change policy. Support for new nuclear remains, as far as one can tell, strong across the political spectrum. But there is an indirect threat to Hinkley Point C.