EDF’s UK Hinkley Nuclear Costs Balloon as Plant Delayed Anew

(Bloomberg) -- Electricite de France SA’s nuclear project at Hinkley Point in the UK will cost as much as £10 billion ($13 billion) extra to build and take several years longer than planned, the latest in a series of setbacks for the budget and timetable of the country’s largest energy project.

EDF now expects the two reactors it’s building in southwest England to cost between £31 billion and £35 billion in 2015 terms, the French energy company said in a statement on Tuesday. That’s up from an estimate of £25 billion to £26 billion in 2022, and is the fifth budget increase in eight years. At today’s prices, the project would cost as much as £46 billion, according to the Bank of England’s inflation calculator.  

“Like other infrastructure projects we have found civil construction slower than we hoped and faced inflation, labor and material shortages, on top of Covid and Brexit disruption,” Stuart Crooks, Managing Director for Hinkley Point C, said in a memo to employees. “Running the project longer will cost more money.”

The UK is struggling to get its huge nuclear program off the ground. The government is aiming for as much as 24 gigawatts of capacity by 2050 and will have to accelerate rapidly to achieve that. Hinkley Point will be the first new atomic station to start generating in Britain since 1995. Construction of complex nuclear plants is notoriously slow, and the cost overruns and delays at Hinkley may damp investor enthusiasm for the sector.

EDF now expects the first reactor at Hinkley to start producing power in 2029 in a best case scenario, a two-year delay. The worst case would be 2031. The second unit will be online about a year after the first, according to the company. EDF said civil engineering and electromechanical works will take longer than expected and the delays will mean more workers on site for longer.

“We will need more people and more time to get the work done than anticipated,” Crooks said.

The setback comes just one day after the UK government pledged to invest an additional £1.3 billion in EDF’s second UK project at Sizewell C. Ministers are hoping the commitment will attract enough private capital to make a final investment decision this year and make progress toward its ambitious 2050 target.

EDF was already struggling with the budget for Hinkley after China General Nuclear Power Corp, its partner in the project, stopped funding, potentially leaving the French company to foot the bill until it is completed. The government-owned French company will also have to spend tens of billions of euros on new atomic plants at home in the coming decades.

Hinkley Point C is not a government project and so any additional costs or schedule overruns are the responsibility of EDF and its partners and will in no way fall on taxpayers, said a spokesperson for the UK Department for Energy Security and Net Zero. 

Britain is increasingly relying on wind and solar to meet demand but needs back-up power when output from those sources drops significantly. EDF’s current fleet of five nuclear plants is scheduled to shrink to just three by the end of 2026. Last year, output slumped to the lowest in more than four decades. 

While rising costs of metals, cement and labor are affecting industries including large offshore wind projects, the revised plan may revive a controversy over how expensive the technology is and whether further delays are inevitable. Still, the UK government said this month that the country will build another large-scale nuclear power plant, beyond current projects led by EDF.

It’s not the first time Hinkley has ballooned beyond its budget. EDF increased its estimates in 2017, 2019, 2021, and 2022 from an initial estimate of £18 billion when the contract was signed with the UK in 2016. 

At the start of the project, the French utility expected the first unit to start by the end of 2025. However, Brexit, the Covid pandemic and the war in Ukraine have disrupted supply chains and boosted the cost of labor and essential materials like steel and cement.    

“Going first to restart the nuclear construction industry in Britain after a 20-year pause has been hard,” Crooks said.

(Updates with cost estimate at today’s prices in second paragraph.)

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