The cost overruns on France’s signature nuclear reactor pose a dilemma for India, which plans to buy six massive units for Jaitapur
French electricity giant EDF, the engineer, constructor and operator of the Areva-designed EPR nuclear reactor (F3) being built in Flamanville, northern France, has announced a steep hike in the cost of the reactor, from an initial €3.3 billion in 2005 to a dizzying €8.5 billion this year. A revised estimate issued two years ago had put the cost at €6.5 billion.
Work on the reactor is already behind schedule by four years and optimistic estimates say it could go on stream in 2016 at the earliest with costs expected to rise even further by then. These announcements pose a dilemma for India, which plans to buy six of the massive 1650 MW reactors to be built in Jaitapur, Maharashtra. Normally, the first of a series turns out to be the most expensive since it is the first project to be translated from paper to concrete reality and costs tend to decrease as the equipment becomes tried, tested and streamlined.
In the case of EPR, however, that logic appears to have been turned on its head. Flamanville (F3) is not the first but the second of the series to be built, the first being Olkioutou in Finland, which is also running several years behind schedule and is expected to start operating in 2014. Not a single EPR of the four being built is currently operational, although Areva keeps assuring the Indian government that the two under construction in China, Taishan I and II, are “running at cost and on schedule”.
Not that surprising, considering there are 9000 Chinese workers doing 10-hour shifts, seven days a week. But the Chinese appear to be on track also because they fought hard and obtained a total transfer of technology. Not so India, which refused this option. Therefore, the engineer/contractor mix under the overarching umbrella of the NPCIL remains fuzzy. What is worrying in the EPR story is not just the roll-on effect the huge jump in cost will have on the Indian purchase but the massive challenges posed by the complexity of design, construction and maintenance.
The first week of December was a nightmare for EDF. The Italian energy giant Enel announced it was ending its cooperation with EDF on the EPR in Flamanville and on five other projects. “We have decided to exercise our right of withdrawal and are ending the strategic partnership reached by the two groups in 2007,” an Enel communiqué said.
Enel received €613 million plus interest on December 19. EDF will thus recover all its rights in the EPR project at Flamanville including any future commercial gains that might acrue. Enel explained in its communiqué that Flamanville had seen delays and cost increases. This combined with a drop in the demand for electricity and an uncertain future for investments in the nuclear sector in France prompted its decision to withdraw. Another influential factor was the decision by Italy to eschew nuclear power, the communiqué said.
In France this exponential price hike has the ecologist lobby up in arms. “Is it worth building this reactor at all? It appears to be a bottomless financial pit and the cost of construction, which has nearly trebled from the initial €3.3 billion will eventually translate into an unacceptable hike in energy prices. This is sheer folly,” said Cecile Duflot of the French Green Party who is Minister for Housing.
Ecologist EuroMP Daniel Cohn-Bendit called for abandoning the project altogether.
Another influential physicist, Bernard Laponche, who worked on the early French nuclear reactors as an engineer attached to the Atomic Energy Commission, also decried the costs and pleaded for “the integration of the real cost of nuclear energy” in electricity tariffs. “The Flamanville (FA3) site is poorly administered and its construction presents numerous anomalies and weaknesses, inadmissible for such a gigantic project and one which is potentially dangerous,” he told the newspaper Le Monde. Worse, the cost of the reactor is expected to rise even further after 2016, when it is supposed to go into service.
The construction work is being closely monitored by the French Nuclear Safety Authority (ASN), which has made several dozen requests for changes and improvements. Construction has often been found to be shoddy, carried out by untrained or poorly trained workers, imported from those parts of Europe where labour costs are low. There have been two deaths and several injuries on the site. And EDF has yet to begin work on the sensitive core of the reactor. Even with cheap, hard-working labour the project is five years late and 80 per cent over budget. Is there something wrong with the EPR?
The French Institute for Radio Protection and Nuclear Safety (IRSN) which carries out on-site inspections at Flamanville (FA3) said in its report: “During the inspections, deviations to the project’s technical specifications or to the rules of the art were pointed out by IRSN. Those deviations cover various items, such as concrete fabrication, concrete pouring methodology, lack of reinforcement in some structures, unadapted welding procedures of the containment leaktight steel liner and unsatisfactory treatment of concreting joints. The analysis of those problems has revealed flaws in the organisation of the contractor’s teams together with an unsatisfactory control of the contractor’s activities by EDF.”
Concerns over safety
EDF has struggled to cope with building and safety setbacks at the project. Safety authorities raised concerns over welding quality and shut down the site after holes and crevices were found in badly poured cement. “EDF said costs rose partly because the plant is the first of its kind, citing the need to develop a new boiler design, meet regulatory and safety demands and carry out engineering studies,” Businessweek magazine reported.
EDF’s problems at Flamanville are making another French company, Areva, the designers of the reactor, distinctly jumpy. In a press conference on December 13, Areva’s CEO Luc Oursel defended the EPR saying “We have learnt our lessons from the difficulties we have encountered and we do not hide them. Therefore we bring a certain guarantee in relation to delays and construction.” Areva’s aim is to sell at least 10 more EPRs by 2016. Mr. Oursel admitted that the cost of the still pending Finnish EPR OL3 will “be close to that of the EPR at Flamanville” or €8.5 billion. The EPR had just received certification in Britain and Areva is hoping to sell EPRs in Poland, Saudi Arabia, South Africa, The Netherlands and Sweden, he said.
Areva indicated that EDF’s new cost estimate did not reflect the price of an EPR reactor in the series offered in the market today. “The French reactor has not benefited from experience gained on the Finnish construction project for reasons of industrial organisation and schedule,” the Paris-based nuclear generator builder said in a statement. But Areva’s own experience with building the EPR as a turnkey project in Finland is none too bright. The Olkiluoto 3 reactor was originally scheduled to be completed in 2009 at a cost of € 3 billion. It has run into a series of construction delays and cost overruns and Areva has booked more than €3.2 billion of provisions on the project. The plant won’t be ready for regular power production until 2014.
Debate on energy
The warning about Flamanville’s spiralling cost comes less than a week after France began a debate on energy. The government says it will set up a road map for lowering the country’s reliance on atomic power.
The costs have risen so steeply because the nuclear industry has wished to build bigger and more powerful reactors each time. Starting with the early 300 MW reactors, the industry is now aiming for 1650 MW giants. Which means more robust construction, better safeguards and backups. The economies of scale have not played in favour of the nuclear industry. Building bigger and stronger has meant not just marginally more expensive but much more expensive. And maintenance costs too are far higher as a consequence of the power to be generated.
Nuclear experts say that the real costs of building reactors are not properly reflected in energy tariffs, since the design and construction come from state coffers and are an indirect tax paid by the consumer. Similarly the cost of dismantling or phasing out reactors and the disposal and stockage of nuclear waste are not calculated in the tariff but are an indirect tax paid by the consumer.
The delays and cost overruns at FA3 are likely to make private investors wishing to invest in nuclear power nervous and uneasy. The complexity of the EPR pushes up construction risks, which in turn increases the cost of capital. With yet another delay at FA3, nuclear power just got even more expensive.