Finland's symbol of resurrection becomes showcase for hassles, delays and cost-overruns

Thursday, November 6, 2008

Finland's Olkiluoto power station was meant to symbolise the resurrection of nuclear power after the 1986 Chernobyl disaster and to act as a showcase for Areva of France's new EPR reactor technology.

The first nuclear power station to be built in western Europe since Chernobyl, Olkiluoto 3 would demonstrate that nuclear energy was the obvious solution to growing concerns about CO2 emissions, high fossil fuel prices and dependence on imported energy sources.

It would also advertise that Areva had an efficient technology that could be rolled out to all the countries now considering building nuclear plants. To meet safety fears, Olkiluoto's outer shell is designed to withstand the impact of an airliner and nuclear waste will be stored underground on site.

Instead, Olkiluoto has become a showcase for the hassles, delays and cost-overruns that critics say always bedevil nuclear projects. Finland's fifth nuclear plant is now only expected to start operation in 2012 - three years late - and to cost €4.5bn, 50 per cent more than originally planned.

If it remains any kind of showcase for Areva, it will be an expensive one. Since Areva and Siemens of Germany (which supplies the turbine unit) agreed to deliver the plant as a turnkey project, they will have to cover the bulk of the cost overruns, although they are likely to try to dispute the final amount.

The Finnish side is adamant that Areva and Siemens will have to foot the bill.

"They have to take all the responsibility," insists Jorma Aurela, senior engineer of the Finnish ministry of employment and the economy.

Finland took the plunge to build a nuclear power station because it wants to reduce its acute dependence on expensive imported energy sources, particularly gas from neighbouring Russia. It also needs nuclear energy to help fulfil its commitments to reduce CO2 emissions by 16 per cent before 2020. Renewable energy, primarily biomass and hydro-electric power, already represents around one-third of total generation and ramping it up further while consumption continues to grow will be difficult.

Nuclear power - already a quarter of the country's generating capacity - seemed the obvious answer and parliament voted in 2002 to re-start the nuclear programme, halted in 1993 in the wake of contamination by the Chernobyl fallout.

TVO, a consortium of big energy users, held a tender and chose Areva in October 2003 to build an extra 1,600MW unit at the Olkiluoto power station on an island in western Finland.

Areva needed a showcase for its EPR third-generation reactor and agreed highly aggressive terms to win the project. It agreed a price tag of €3bn and pledged to have the plant up and running in the first half of 2009 - just five years after it applied for a construction licence.

This was unrealistic because a conventional nuclear reactor normally takes six years to build and the EPR is far more complex. It was also Areva's first turnkey contract and they had no experience of running such a large project, the largest single unit ever built.

More fundamentally, the almost two-decade moratorium on nuclear plants in western Europe has caused reactor-building expertise to atrophy. There have been delays in receiving vital components and quality problems. The construction companies at the site underestimated how many workers they needed and how rigorous the safety procedures would be.

There has also been a culture clash between the French and Finnish approaches to building regulation. The French side has grumbled that the Finnish nuclear regulator has demanded huge amounts of documentation in advance and has been sluggish in processing it.

For their part, the Finns are unapologetic and blame the French for being unprepared. "They should have known what is the Finnish system," says Mr Aurela. "We have very strict authorities. We have not seen any important delays there."

Whether Olkiluoto's problems deter others from building nuclear plants or commissioning Areva's EPR will depend on whether the French company can stick to its latest targets and whether it becomes embroiled in a squabble over cost overruns with TVO.

Areva will try to write Olkiluoto off as a loss-leading prototype and hope that its experience there will enable it to win new contracts that it can complete under budget.

Areva is also building a second EPR at Flamanville in northern France - which is currently only slightly delayed and over budget - and is competing in a vital tender in South Africa. EdF, the French utility, is also planning to build four EPR reactors in the UK following its recent acquisition of British Energy.

For their part the Finns are not disheartened by their pathbreaking nuclear project. The government has already received proposals from TVO for a fourth unit at Olkiluoto and two separate proposals for new plants are expected to be submitted next year.

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