How President Macron could scupper Boris Johnson’s legacy.
‘Time to pull our finger out’ on nuclear, said departing PM – but is France getting cold feet?
BySimon Foy10 September 2022 • 6:00am
Macron’s government has indicated that it will not implement the Sizewell agreement as agreed CREDIT: SARAH MEYSSONNIER /AFP
Boris Johnson and Emmanuel Macron did not see eye-to-eye on many issues, but they at least shared one common goal: reviving their countries’ nuclear ambitions.
At the centre of the French President’s re-election campaign earlier this year was a plan to build a minimum of six new nuclear reactors in the decades to come as well as a fleet of smaller plants.
“What our country needs, and the conditions are there, is the rebirth of France’s nuclear industry,” Macron declared in February.
“Certain countries have made the extreme choice of turning their back on nuclear energy. France has not made that choice.”
This sentiment chimed with one of the last acts of Johnson’s premiership earlier this month, when he pledged £700m of government support for a new nuclear power plant on the Suffolk coast, known as Sizewell C.
“We need to pull our national finger out and get on with Sizewell C,” the outgoing prime minister said.
“Let’s think about the future, let’s think about our kids and our grandchildren, about the next generation. And so I say to you, with the prophetic candour and clarity of one who is about to hand over the torch of office, I say go nuclear and go large and go with Sizewell C.”
Despite the Government’s commitment, which will cover only about 20pc of the financing needed for the project, France could yet scupper Johnson’s nuclear legacy.
This week, French media reported that Paris is pushing back against the timeline set out for building Sizewell C, as France battles its own energy crisis and Macron takes over struggling energy giant EDF.
EDF’s board of directors have reportedly voted against the government investment decision, negotiated with the French energy giant, to build a pair of nuclear reactors at Sizewell.
Meanwhile, Macron’s government has indicated that it will not implement the Sizewell agreement as agreed, within the planned timetable, according to the reports, due to wrangling over audits for the project. EDF was contacted for comment.
“EDF is central to the Sizewell deal,” Matthew Lockwood, an energy lecturer at the University of Essex, says. “If they were to pull out, the deal would collapse, at least until the Government finds another partner for the project.”
EDF is facing problems of its own. In July, the French government announced it would fully nationalise the debt-laden nuclear power giant in a bid to shore up energy supplies in the wake of Russia’s invasion of Ukraine. Paris will pay up to €10bn (£8.5bn) for the 16pc stake it does not already own.
The company has struggled with a string of power station shutdowns and a debt pile now worth around €43bn. It has been forced to shut down about half of its nuclear fleet to fix corroded equipment in its power plants, cutting its forecasts for power output several times this year due to the problems.
Lockwood’s says: “Before the current energy crisis [EDF] had a number of issues of its own. The company is in a bit of a crisis, including questions over its wider corporate strategy.”
Given this context, there are concerns that the company might not want to embark on a capital intensive project in another jurisdiction.
The problem for the Government is the extent of EDF’s involvement in Sizewell C. The French state-owned energy giant is Sizewell’s promoter and was set to take a 20pc stake in the venture alongside the Government’s 20pc stake.
Jack Sharples, a research fellow at the Oxford Institute for Energy Studies, says: “If you lose a major investor, that is providing a lot of the capital and tech for the project, then that would be a clear concern.”
The UK is already in the midst of pushing out one investor from the project. EDF and British ministers have drawn up plans to create a new company to replace the current joint venture that has been working on Sizewell.
Under these plans, Chinese state-backed nuclear company CGN would be forced out due to government concerns over Beijing’s involvement in the project. CGN owns 20pc of the current joint venture, with EDF holding the remaining 80pc.
The plant is expected to cost at least £20bn, which was set to be funded by EDF, UK taxpayers and private investors.
If it goes ahead, Sizewell C will be the second new nuclear plant built in the UK for a generation after Hinkley Point C, which EDF is building in Somerset. It will also produce around 7pc of the UK’s electricity requirement or enough for around six million homes. At present, nuclear output makes up roughly 15pc of Britain’s energy mix.
Ministers have been looking to overhaul the funding model for nuclear energy projects due to a lack of commitment from private investors under the previous system. Kwasi Kwarteng, the former Business Secretary who became Chancellor this week, has sought to attract private investment to the sector and reduce the UK’s reliance on foreign capital.
The sector failed to attract adequate investment under its old model, which required developers to finance the entire construction up front, meaning they would only start to receive revenue when the station started generating electricity.
This led to the collapse of potential projects, including Hitachi’s project at Wylfa Newydd in Wales and Toshiba’s at Moorside in Cumbria.
The Government hopes that its new scheme, a so-called regulated asset-based (RAB) funding model which it is consulting on at present, will attract a wider pool of investors to fund nuclear power projects.
Under the new model, companies building new plants will be paid during the construction phase, cutting down their development risk and allowing them to secure cheaper financing for the projects.
Ministers have also hired Barclays to lead a hunt for private investors to fund the remaining 60pc of Sizewell C. But many institutional investors are still not convinced.
One chief executive of a City insurer says he has been in regular talks with the Government about backing nuclear projects, adding that while he is open to the idea, the investment case remains difficult to justify.
Lockwood says RAB is a “clever idea” as it will help bring down the cost of capital, but only by about 10pc. “I don’t think it will be the silver bullet the Government is looking for,” he adds.
Regardless of whether Sizewell C ultimately gets the green light or not, it will not be a solution to the looming energy crisis this winter.
Sharples says: “You can put it in the long term strategic basket rather than the short-term winter basket.”
Yet the Government is determined to make nuclear power central to its longer term energy security plan, with Liz Truss, citing it in her first appearance in Parliament as prime minister.
In February, Macron said: “The time of nuclear renaissance has come.”
That might be the case in France, but if EDF is getting cold feet over Sizewell C then the UK’s nuclear resurgence will struggle to get off the ground.
