Areva and EDF defend project costs

Tuesday, January 15, 2013

Areva and EDF, the French nuclear groups, have both defended the cost of new nuclear projects despite the €2bn of extra cost overruns on their flagship next-generation reactor at Flamanville in Normandy.

The news that the reactor, the first built in France for 15 years, is expected to cost €8.5bn rather than the €3.3bn first forecast comes as questions are raised about whether nuclear power remains affordable.

Jeff Immelt, chief executive of General Electric, said in July that nuclear was “becoming hard to justify” because of the availability of cheap gas.

But speaking in Paris last month as he unveiled the latest Flamanville overruns, Hervé Machenaud, EDF’s engineering director, shot back: “Do you know of a medium of production more economic than nuclear on the European scale?”

Mr Machenaud’s point was that, unlike the US, Europe does not have access to abundant shale gas.

Nevertheless, figures from Areva show the European Pressurised Reactor [EPR] it is building at Flamanville will cost between €70 and €80 per megawatt hour, about the same as gas or coal-powered plants but cheaper than onshore wind farms.

Areva insists that the high cost at Flamanville is simply because it is the “first of series” and that future EPR developments will fall to €60 per megawatt hour.

But cost is key as EDF and the UK government negotiate over building two EPR reactors at Hinkley Point in Somerset.

Areva still hopes to win 10 international orders for EPRs by 2016. But it is also exploring a tripartite deal with EDF and China’s CGNPC to develop a smaller reactor, which would generate between 1,000 and 1,100 megawatts rather than the 1,650 megawatts of the larger EPR.

EDF thinks the EPR is too expensive and complicated for many customers and that smaller reactors will account for much of future demand.

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