French auditors have delivered a stinging blow to the French nuclear industry with a withering report on the “failure” of EDF’s under construction Flamanville plant.
Montel News: Chris Eales 12 October 2020 www.montelnews.com
They could have called it “How not to build a nuclear power plant”. Instead, magistrates at France’s Cours des Comptes, the country’s supreme public spending watchdog, went for the anodyne title “The EPR sector: thematic public report”. Yet the 148-page probe from the state auditors, focusing on EDF’s under construction European pressurised reactor (EPR) at Flamanville, pulls no punches. The newbuild plant is a “failure” with “huge” financial consequences and implications for the French nuclear industry and beyond, it says.
Released in July, the report charts the steps that have led EDF and former reactor builder Areva (now Framatome), into a costly mire: from a far too hasty launch, through mismanagement and a striking lack of oversight to a string of costly setbacks.
“It is not only an exceptional documentation of the failures and mishaps of project management, engineering and huge financial consequences, it is foremost an unprecedented illustration of the total absence of state oversight,” writes nuclear industry critic and independent consultant Mycle Schneider in the World Nuclear Industry Status Report 2020, published in September.
Flamanville was supposed to be a flagship plant for a nuclear renaissance. Now, 13 years after its launch, the build is billions of euros over budget and a decade behind schedule. EDF’s latest start-update, by 2023, is in doubt given the potential for further coronavirus related delays. And, according to the auditors, the firm’s current EUR12.4bn estimate of the construction cost is unreliable. A further EUR6.7bn may be needed before the 1,600 MW reactor is commissioned, with financing costs in particular – due to delays – contributing around EUR 4.2bn extra.
What’s more, the interminable delays have driven up the estimated cost of power output from the plant to EUR 110-120/MWh, well above the price of renewable wind and solar output, the auditors have calculated, adding EDF itself has failed to publish any cost estimates regarding Flamanville’s generation for over 10 years.
There are two other European EPR builds, Olkiluoto in Finland and Hinkley Point in England. All come in for criticism from the auditors, whopoint to more delays at Olkiluoto – being built by Finland’s TVO – and “risks” at Hinkley Point, which are “weighing heavily on EDF’s finances”. The two completed EPRs sited in Taishan, China, meanwhile, are showing insufficient profitability”, the auditors say.
So how did it all go wrong? EDF and Areva, were at loggerheads from the start. Both state- owned, each wanted to be first in the world to build a series of EPRs. The rivalry led to a “bidding war” and a vast underestimate of costs, along with an “unrealistic” timetable, to build new units in France and Finland, says the report.
Construction at Flamanville went ahead when only 10-40% of the necessary assessments had been completed, says the report. EDF estimated it could build the reactor in 54 months when the average lead time to complete reactors at the time elsewhere in the world was 121 months. It said it needed 5m hours of engineering when “in fact it would take 22m”.
EDF knew it had to “convince public authorities and public opinion” that EPRs could be built and commissioned by 2020 to replace the firm’s ageing, existing fleet of reactors when they reached 40 years old. But in reality, it was woefully disorganised, say the auditors. Its oversight at Flamanville as self-styled “architect builder” led to “confusion” and until 2015 there was no specific entity “responsible for ensuring that the objectives of the technical and financial framework of the project were respected”. It was only in 2012, four years after construction started, that EDF began to “track expenditure” and not until 2015 thatit “estimated completion costs”. The firm’s board rarely discussed the build even when it was alerted to problems, the report says.
Further up the ladder, there is more evidence of a tendency to look away or not to look at all. State representatives sitting on EDF’s board –the company is owed 84.7% by the state – failed to carry out their own analysis of the impact of “successive problems” or to alert ministers of the consequences. “The shareholder appears as a spectator of events which it only seems to know of via the press”, the auditors write. Among other things, the lack of oversight meant the government cleared a EUR7.5bn bailout of Areva and EDF “without having been alerted of the situation in time”.
The report is also critical of EDF’s handling of two of the most notable setbacks to have hit Flamanville’s construction. The risks following the discovery of excessive carbon in the lid of the reactor vessel, equipment that is vital for safety, were “poorly assessed and consequences poorly qualified”. And the auditors reiterate that EDF was only allowed to keep the vessel in place due to a government decree in July 2015 which created exemptions “for the application of compliance rules to nuclear pressure equipment”. The firm will have to replace the lid in 2024.
Secondly, it is currently grappling with sub-standard welding, which has already added EUR 1.5bn to the cost of the reactor. Yet, according to the report, EDF knew about this issue in 2013 but did not inform France’s ASN nuclear safety authority until 2017.
The welding saga illustrates how the nuclear industry has suffered from a “loss of human capital” on the one hand – it’s 30 years since France built a reactor – and more stringent post-Fukushima safety demands on the other, says Aurelien Saussay, an economist at the London School of Economics Grantham Research Institute.“
Those welds would have passed inspection when the EPR was designed,” he says. Now, in a tougher safety environment, “the people with the practical experience of building the French reactor fleet in the 1980s have all retired. This loss of human capital takes years to rebuild”.
Some industry insiders say EDF has learnt lessons from the mistakes made at Flamanville and elsewhere. The firm launched a EUR100m action plan to improve the manufacture of reactor equipment and construction last December following a critical government commissioned audit of the new EPR last year.
The utility is now touting a revised version of the EPR and drawing up plans to build six of them in France over the next 15 years, which it estimates will cost EUR 46bn. Known as EPR2s, these reactors, it says, will be simpler and cheaper to build.
Yet the auditors at the Cours des Comptes take a different view. “We cannot establish with a reasonable degree of certainty that the construction savings of the future EPR2s compared to the cost of construction of Flamanville-type EPRs will be realised.”
EDF alone cannot finance the building of new reactors without some sort of public guarantee, the auditors say. But the estimated costs of power generated by new units would have to be competitive to justify asking consumers and taxpayers to cough up, it adds.
And given that nuclear costs are rising while those of renewablesare falling, “it doesn’t make sense at all for EDF to go ahead with more EPRs in France compared with pulling their weight towards renewables”, says Saussay. This didn’t mean there was no future for the EPR, however. Far from it.“
The only way that the EPR plans will be shelved is if EDF goes through a dramatic bankruptcy procedure just as Areva did… EDF is a company with tremendous pride and a great history. They don’t want anyone else teaching them what to do, especially not pesky auditors from the Cours des Comptes who have no power of sanction,” he adds.
Watch this space.