Death by 1,000 cuts

News of fresh delays and cost overruns at France’s next generation reactor at Flamanville may not be a killer blow for the country’s nuclear industry but the sector could face death by a thousand cuts. 

This week´s pod discusses more woes for French and European reactors.

Host:

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guests:

• Paolo Coghe, Director, Acousmatics, 
• Chris Eales, Editor France, Montel. 

Transcript

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:04

Hello listeners and welcome to the Montel Weekly podcast. Bring New Engine Matters in an informal setting. My name's Richard Sverrisson, and I'm joined today by Paolo Coghe, from Acousmatics, and my colleague Chris Eales. Who's not wearing them today? My day of. Yes. So I, I thought gentlemen we're in Paris. There's quite there's been quite a lot of news this week coming, especially in relation to the nuclear plants and, and the, the European pressurized reactors. There's been some news on this parallel. If I can start by asking you, what, what's your assessment of the delays and the cost overruns? Now, the latest ones are, I mean, does, did this take you by surprise?

Paolo Coghe, Director, Acousmatics: 0:42

To be honest, no, no, they didn't take me by surprise because these are very large engineering projects and so you have to put that into account. That is why they go with usually very low bids to win the project, and then they sort of adapt the budget a little bit as it comes. But even knowing the nature of the biso to speak effectively, what is happening with the, you know, the EPR reactors in Europe? And it could be hinley, could be, it could be qua. Mm-hmm. They are just, you know, uh, first in class when it comes to, uh, you know, having, you know, new, new budgets, higher budgets each time, you know, anywhere you want to look at it, more cost is eating into the profit of. The whoever invested in, uh, you know, subscribed to this investment. You know, whether it's the French state, whether it's the, you know, indirectly the other EDF shareholders and so on and so forth, uh, these delays will eat into profit.

Chris Eales, Editor France, Montel: 1:35

There's no doubt about that.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:36

What was the news that came out this week? The news? News?

Chris Eales, Editor France, Montel: 1:39

Yeah. The news was that they decided that to, to carry out repairs on the welds, these eight defective welds, it would cost them another 1.4 billion euros. And I think that was the correct figure. And they also said that fuel loading begin at the end of 2022. Now

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:00

what they said previously,

Chris Eales, Editor France, Montel: 2:01

I mean, well, I mean, the last thing they said in July, they said that this, this reactor would not start up. Before the end of 2022. There's a bit of, uh, a gray area about when you talk about a startup and when you talk about fuel loading. So just to be clear about this, this reactor at the moment isn't actually going to start up until probably mid 2023, the date they've given us for fuel loading. End of 20. Uh, 22. So it's a new date in a way. In a way. It is. And it's more costly than they thought. Yes. So that's the news.

Paolo Coghe, Director, Acousmatics: 2:36

That is the news. And, and you know, they usually come in pairs. It takes longer and it costs more, right? Mm-hmm. It's like a double whamy. And as I said, yeah, I mean, if we look at Hinkley, I think before this last time, because

Chris Eales, Editor France, Montel: 2:47

Hinkley, there was, there's also a new budget, a new estimate.

Paolo Coghe, Director, Acousmatics: 2:50

Of course, of course. Right? And then when it's not the welding, it's some other, uh, some, some other problem. But yeah, I, I. Ijo some numbers. Hinkley went from just in the last couple summers, really from summer 17 onwards from 18.1 billion, they added a billion and a half. I like it when I can talk about billion then now pocket money for you. And then, and then interestingly, they, they give. A range of what it might cost in the future, right? It's between something and 22.5. Now, if experience is, is telling us anything is that there is an inherent bias in these things, I personally believe it unlikely that they're going to do something sooner and that their estimate additional costs actually gonna be inferior, right? If something happens is going in the wrong side, right? So maybe even the 22.5 billion is a bit conservative. Although I'm sure that they've done all their calculations and, and so far the number is the right one for, I've said that there's a, a timeline, a slightly different timeline, but do you think this will actually lead to a further delay? Because the other news was that EDS said, we have a plan B if a S NM does not accept using the robots. Yeah, but that's

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:00

an important element, isn't it?'cause it. If they accept the robots, it's six months. Yeah. And if they, if they don't, if they don't, it could be an extra year. Correct. And,

Paolo Coghe, Director, Acousmatics: 4:07

but it's not their decision. And this, I think, exemplifies how difficult it is to pull these projects off in time and on budget. Right. If not, impossible. You know, this is like textbook EDF must assess the problem. Right. That takes time. Mm-hmm. After assessing the problem, they must think of a solution test it. And the resident propose it to the a SN, right? So in this case, they've got a three pronged approach. If one doesn't work, you know, there's another one. And the ESN will will decide. And so they're giving the impression that they're not resting on their laurels, so to speak, you know, it's being, uh, unintentionally ironic. But, um, but, but, you know, they're working hard and yet the nature of the process is such that they have to wait for the a SN, you know, robots will be employed, you know, many times. This is the first. Time, such a problem has to be solved. That's what also makes it so difficult. So I would, if, if I had to, if it was a yes or no type of answer, do you think they will ultimately be delayed a bit more? I would say yes.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:09

Yeah. Yeah. And. How long would that delay be? Six months a year. I mean, it's

Paolo Coghe, Director, Acousmatics: 5:14

honestly, I do not have a precise estimate. But then if everything else that we said stands, it wouldn't be a two week delay, right? No, no, it would be, it would be several months

Chris Eales, Editor France, Montel: 5:23

on that point. There is another deadline, which I think is 2020. Four, if I'm right for the lid of the pressure vessel, because they've talked about the lid being only in, can only be in service for a number of years. Is that, uh, do you know whether that's a deadline from the mm-hmm. Uh, is it, I mean, does it mean that we can use, we, that lid could be in place, uh, for four years after the EPR started up? Or does it, is it. Actually 2024. And then we have to change the, they have to change the lid, to be honest with you.

Paolo Coghe, Director, Acousmatics: 5:52

I don't, I don't have a precise estimate of that. I'm not looking to that,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:56

but, but when you're saying Hinkley, the numbers there and that's, I mean, they've just basically done the groundwork there. Yeah. Flammer build, they've, they've come obviously a lot, lot further. Yeah. But with Hinkley, it's, it's 18 billion pounds, was it? Or was that 10 Euros? It was

Paolo Coghe, Director, Acousmatics: 6:10

supposed to be now, and now it's two point, I think it's Euros.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:13

Okay. No,

Paolo Coghe, Director, Acousmatics: 6:14

maybe it's pounds. Sorry,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:16

but that's, so that's already. 30%, 40% over budget, about 20, 25, 30%. Yeah. My math is not always that great. No, it's okay. But it's yeah, so 25%, 30% over budget. And it hasn't, they haven't really got going as such yet. No, exactly. Exactly.

Paolo Coghe, Director, Acousmatics: 6:32

And so again see, they, with, with these new designs, the APRs, they're going for economies of scale. So they're doing larger size. These are 1600 roughly in. Not 900, right? They, they will pay less in maintenance once they get going. You know, they will have, you know, advantages from having chosen this design once they get going. But until then, it becomes a little bit of a nightmare because every problem already difficult problem because of what we we're dealing with. Mm. It's a difficult and slightly larger than before problem. Mm. Right. And so this is not helping them now with these, you know, matters of budget and, and. Timing. Mm. But in the long term, you know, if they're successful in their projects, you know, this will be sort of a bad memory if they don't overdo it, I guess. Mm. But

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:21

who, I mean, who would look at, uh, these projects, there's this three key EPR question and say that's, that's the energy solution for my country, you know? Yeah. Several billion over budget. Yeah. Delays of massive amounts of years. I mean. You know, where are the potential customers and clients for such such

Paolo Coghe, Director, Acousmatics: 7:39

huge products? Well, one, one. Thought is, again, I think that France and the French like to think big and have big ideas and, and long-term views. So they've had the vision to go nuclear. You know, they've made a decision at the country level is not by chance that today 75% of their electricity generated by nuclear sources. And that is very useful today. But first of all, it's been. A quite a reliable source of cheap power once you've sunk a lot of money in the ground. Um, it, it comes useful today because it doesn't produce CO2 right at a time when, as we've seen in other countries some decisions are clearly being, being, uh, deemed the wrong ones. Um, I would like to mention what is happening with Poland and of course I was gonna ask you

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:23

about that, Paula, 'cause you were the author of a. Of a report that was, that was published this week, um, about Poland and, and the state utility there and the Ignite Mine

Paolo Coghe, Director, Acousmatics: 8:31

and yeah, I mean, they're, they're facing these decisions and, and not just in Poland, you know, you could see that as the breath, you know, air pollution. Um. New standards came in a few years back forcing utilities to basically come up to speed in terms of the equipment they use or stop generating. Right. Some dec some utilities have clearly made a decision to go green, to invest more in, in, in renewables. Mm-hmm. Which in periods of high prices are have, are generating more revenues. Right, because they don't have the CO2 cost. Right. And other companies or industries have not, and Poland is such a case. I don't think that staying with nuclear today is a bad decision for France. As, as such, we also know that, you know, when land was around, he had promised a certain decrease in the, you know, in how much the country was dependent on nuclear and a certain timeline. We know that. Uh, Macron has come in and said, yes, of course we remain committed to decreasing our dependency, but not so fast, right? Mm-hmm. And so, and, and yet, you know, there will be, there will be closures, but I don't think the country will change and switch on its, you know, sort of vocation to, to nuclear. What is for sure what, what for sure needs to happen, and we've seen this in other, everywhere in Europe, whether it's again, countries or single companies, it's, they need to switch to renewables and to. Invest more in renewables. And you know, if you look at what, what kind of news and what kind of analysis is done on EDF, there is talk of, you know, plans being drawn to split EDF or to have a sort of a EDF, uh, blue or, you know, renewable EDF, you know, Allah, you know, sort of Juniper, RWE type, type of, type of one uni. But it should also be mentioned that, you know, if you look at the last financial result from EDF, the, the. First semester of 2019, they have maintained their EBITDA guidance, right? And this is in a year where they've gone, it has been lower hydro year on year, so. You know, they are getting performance from their nuclear units. Mm. Um, you know, there is whole, but you don't want to, you know, you don't want to have this buffer become too, too thin.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:44

Exactly. And, and, and you know, as we've mentioned previously on this podcast, that you know, the reactors aren't getting any younger and there's probably more and more and, and the scrutiny on them post Fukushima is probably going to. Become ever greater. Correct. Um, wouldn't you say Pablo? Correct.

Paolo Coghe, Director, Acousmatics: 10:58

There, there is a very interesting point here, and once again, it testifies to, you know, how the French think and act and the decisions they've made for these industries. So the nu, the lifetime of a nuclear reactor is. Let's say 40 years. You know, the 40 years don't start from the beginning. There is a start of a plant and then there's a 10 year review, uh, is on. Then there's a which where you get a stamp that approves it for another 10 years, then the stamp that improves it for another 10 years and so forth until you have the fourth visit. The al Hmm. And that is the one which is the most important. Right. Per bar. The first perhaps. Hmm. Where you're actually saying. Based on the results of this visit, we agree to release another 10 year continual stamp. But this is the one that's gonna go beyond the 40 years. Mm-hmm. Right. So they're going to be extremely careful. Uh, when, when they, when they do these visits, when they release the approval. So getting these approval is crucial. I reckon about half of edfs fleet will have to have this fourth visit, uh, between now and 2025. Mm

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:06

so a crucial time coming up. EDF was in the news this week about the potential. Split, wasn't it? Could you just update us on that?

Chris Eales, Editor France, Montel: 12:12

That's right. Uh, I think Edfs, um, CEO, John Ard Levi wrote a letter to staff in which he said that, uh, their proposal to, uh, reorganize, restructure EDF, uh, would not be submitted to the government as planned by the end of this year. Instead, it would happen possibly in the spring. The context of that news is. A recent protest from the unions, the energy unions in France, who four of the biggest are calling strikes and called one, uh, in mid-September, which was well supported, relatively speaking. Uh, they claim they had nine gigawatts of cuts and that I think. It's possibly, possibly having an impact on government thinking. That's some observers believe that has some kind of sway. The unions are very upset about this plan, which would effectively, they say split ED, f up and, uh, something. They're very much against the reason given, uh, for this delay. In submitting the proposal was that the French uh, government is currently in negotiations with the European Commission over the Aaron regulated rate at which EDF sells its nuclear supply, and that these discussions are still taking place. But, uh, so that, that was, that's the context of, of, of the news. So, uh, about EDF split, but it would be interesting to know,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:37

but also I'm, I'm quite interested, sorry to, to, to, to, but in here, but I think. Where does this leave EDF, if it's gonna have to spend 1.4 or 1.5 even, uh, fixing these wells, it doesn't leave it with a lot of resources to, to expand renewables, which the country needs to do, or, or, you know, which are part of the, the aims of 2030 targets in a sense. Yes, and

Paolo Coghe, Director, Acousmatics: 14:00

I think, I think this is where, uh, without wanting to offend anyone where they. Golden share of over 80% of government ownership can come into, into helping EDF. You know, I don't think know. I recently looked at the case of PGE in Poland. PGE E is 54 or 57% owned by the government. When you go to their credit rating, what the rating agencies say is. We don't have a problem. It's backed by the Polish government, it's fine. Mm-hmm. Right. And then they have a problem with the business model, right? Mm-hmm. And so with EDF, I think it would've to be the same. Now, they certainly, between the ground carnage, the problems they've had delays, you know, the, the year to year fluctuations or more or less hydro, and therefore having to run their, their existing plant a bit more and so on and so forth. Can you just explain

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:49

what the grand carnage is as well? The grandage is?

Paolo Coghe, Director, Acousmatics: 14:51

Yeah. It's, it's a. It's a humongous program of extraordinary maintenance, which is connected to, you know, the, all the revisions and all the work that's needed so that aging nuclear plants get approved to continue running. And they, and you know, EDF has embarked in this, uh, wider role. I think it's meant to finish by 2025. A another point we haven't discussed Hmm. Which is related to this is not only. On from the financial point of view, this is taxing, but for everything that has to do with nuclear finding problems, devising solution, testing them, fixing the problems you need. Knowhow in terms of the engineers that are going to find the problems of device solutions and so on and so forth. There's only so many, you know, that a generation of engineers has retired. I am not inside EDF to know, I'm sure they're doing all they can to, to, you know, to replenish this. So that's one point which is not directly financial, the lack of, of knowhow in terms of, of the people. And also again. A, uh, some sort of supply industry that would help them with these things, right? Because maybe they find out that the solution is to put a gigantic screw somewhere, but some, but nobody sells gigantic screws. So to speak, right? So they have to commission one. It will take three months. Oops. It's gonna take five months already, and so on and so forth. This is how, why the, the delays accumulate. So all of these things also cut a little bit, you know, of, of, of, of the flesh.

Chris Eales, Editor France, Montel: 16:20

To go back a bit, I'm talking of screws being screwed, a DF. What are the implications of, um, this delay?'cause we haven't really talked about when you say that nuclear is required for the future, when you have all these delays and problems, what does that mean for them?

Paolo Coghe, Director, Acousmatics: 16:39

Well, it can be good. I mean, they, what, what do they do? They is, they produce power and sell power, okay? Mm-hmm. They produce very cheaply after having made huge investments, and so now they want, they need to sell as much as possible. Very simple from that point of view. I think the crisis of the past few years has shown that there is, that they have resilience. Okay. But as you move forward, they need to start delivering on these projects. You know, markets have also shown. On one end, they're very, very sensitive to what happens in this country because it is an a power exporting country, right? Mm-hmm. So if they catch a cold, you know, and they sneeze that the rest of the world, uh, or the rest of the European power market feels it, but I don't think that they're at the stage like they were a couple years back where they were very thin on the ground. They still have time. They're doing a, a good job in trying to fix the problems, but. They can't afford bigger, longer delays going forward. I think especially because, and once again we tie back to the, the financial stuff. Every delay, uh, is, is less money. Mm-hmm. In their pockets. So this isn't,

Chris Eales, Editor France, Montel: 17:44

so for you, this isn't a big blow. This isn't the knockout blow for the new nuclear industry. Well, you

Paolo Coghe, Director, Acousmatics: 17:48

know, you can also die from a thousand cuts, right? Mm-hmm. And so in this case, I don't. If I had to pick a big blow, that would've been the one from a couple years back, right? In 2016. In 2016, where they had to go back and figure out from handwritten records who forged what, you know, and so on and so forth. Going back a couple decades, that was a bigger blow because you could see that the, the a SN immediately moved in and rightly so, manage the whole, the whole process. This is, is. You know, of the same kind, you know, um, it's not going to be gentle to, to the company given the delays estimated and the amounts, you know, again, counting in millions, but I don't think it's as big a blow. However, it also comes from the previous blow, right? So again, there is a cumulative effect here.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:38

Mm-hmm. There's only so much, so many blows. That's that body you want. Yeah, I, there's limits. Mean

Paolo Coghe, Director, Acousmatics: 18:43

again. Would you want to be to see the glass, glass half full? Then we go to China? Where Where Yes. It's on the ground, it can be done. Right. The Isha. So that's what we know. Yeah. Isha one. Right. So we know it can be done. That's great or better. Yeah. We know it can be done in China. Mm. Okay. So, so here we look back to unions, for example. I don't think they have strong unions in China. I

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:06

doubt it, maybe, but, but, but, but, but sticking with 2016 and what happened there, we've seen also recent, in recent weeks. Some problems emerged with steam generators at six reactors. Yeah. Um, yeah, so the, the, isn't that right, Chris? That's right.

Chris Eales, Editor France, Montel: 19:21

Yeah. The problems with the six reactors, we are in the middle. We are very close or EDF, sorry. A SN is very close to making a decision or to announcing their decision on what will happen to these six reactors that EDF have. Identified as having substandard welding on parts of their steam generators. You know, is it, how serious is it? Does it require repairs? Does it require reactors to come offline? Maybe we'll get some answers to these questions. Uh, the safety authority, I mean, we asked actually. Uh, we asked the safety authority to take part in this discussion today. They, they, they were unable to put anyone forward, but they answer some of these questions we should hear quite soon, by the end of the month, which we, the, is the last I think it was the last scheduled, date for us to hear how, how serious are these issues when you compare them to what we were talking about earlier, the 2016 steam generator? What do you think about? I mean, it's, the

Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:12

markets are very sensitive to this information as well.

Paolo Coghe, Director, Acousmatics: 20:15

Yeah. Understand. Yeah. I mean, markets are sensitive because I, I, I mean, I, I have to repeat myself, but there, there isn't as small or a simple problem, right? Mm-hmm. So. Uh, if you go look at the previous one, the content of, of car carbon concentration, even big part of the boiler, how do you even start measuring that or finding, okay, and in these guys. It seems to be a simpler problem from the outside. Right. Welding, you know, how how difficult could that be? Well, you want to be sure you've done a good job. Right? It

Chris Eales, Editor France, Montel: 20:46

wasn't easy in, in the EPR.

Paolo Coghe, Director, Acousmatics: 20:48

Yeah. The

Chris Eales, Editor France, Montel: 20:49

welding is the issue there. Yeah, exactly. That's true. Very expensive and cost and timely.

Paolo Coghe, Director, Acousmatics: 20:53

Right. So, so back to my point, there isn't a small or simple problem here, so I guess therefore maybe I have to, to, to change my advice a little bit. It's potentially another big blow potentially. Let's see what the, as n says on the mm. You know, now that it's third turn to, to speak, so to say.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:11

Absolutely. I'm sure we'll, we'll follow up again on this Paolo, um, and then I'm sure we'll, we'll invite you back to discuss this in, in, so when we have more. Clarity on, on the French situation. Yes. But in the meantime, thank you very much for joining the Monte podcast Paolo. You're very welcome. And you too, Chris. Thank you very much Bridget. And thank you listeners. And remember, you can keep up to date on all the news on monte news.com and you can follow us on, on social media, LinkedIn and remember to subscribe on Apple Podcasts and Spotify. Thank you very much. Goodbye.