Can EDF be great again?

There’s been more bad news than good of late for French nuclear. But don’t count the European champion out just yet.

The current European energy crunch should have been French nuclear’s moment to shine. Nuclear energy enthusiasts know the story well. France somehow built 64 reactors in a 15-year sprint between the late 70s to early 90s. Although it was in reaction to the oil crisis rather than environmental concerns, the French accidentally decarbonized along every significant metric. Not only is their grid running on 70% low-carbon nuclear energy, they’ve also significantly decarbonized their heating with electricity. 55% of the French rail network is electric.

With a fleet of 56 reactors still operating and with France usually a reliable exporter of electricity to the European grid, we might have expected French nuclear to be a lifesaver in Europe’s time of need as it tries to wean itself off Russian gas this year. Instead, the fleet was hit by stress corrosion issues that cratered output just as it is most needed.

On the new-build side, the flagship EPR (European Pressurized Reactor) was also running into one piece of bad luck after another. There were fresh delays for the EPR in China (Taishan 1), Finland (Olkiluoto 3), the UK (Hinkley Point C) in the past couple of years. In the recent bidding to build 6 reactors in Poland, France’s EDF lost out not just to Korea’s KHNP but also America’s Westinghouse. How did the might French nuclear industry fall so far?

Sabotaged from the inside?

According to Mark Nelson of the Radiant Energy Group, EDF’s main problem is that it has been hollowed out systematically for years.

“The French fleet has been bled to support all sorts of parasitic programs,” he said on the Decouple podcast. The most notorious is the ARENH (Accès régulé à l’électricité nucléaire historique) mechanism, designed to “to encourage competition and offset EDF’s monopoly on nuclear power production,” according to Reuters.

Instead, said Nelson, ARENH was simply a sham benefiting middlemen traders. “It’s like having Goldman Sachs brand electricity or Total household power.” Energy companies who ostensibly sold renewable energy are in fact buying big tranches of cheap nuclear energy under the ARENH scheme and selling it on at a profit while providing zero value.

What made ARENH especially insidious is the “heads I win, tails you lose” rules that all but guarantee EDF’s “competitors” a huge profit. EDF is required to offer 100TWh of electricity per year at a fixed rate. However, if prices are lower, the other companies do not have to buy it. In fact, when electricity demand tanked due to COVID in 2020, fossil fuel companies like Total went to court to get out of their contracts, forcing EDF to take back the electricity at a loss.

“The way to get promoted at EDF is to be involved with renewables,” said Nelson, “almost everyone in upper management come from the renewables side.” This is despite the fact that most of the revenue still comes from EDF’s nuclear operations.

It is clear that there are powerful factions within the French government who wished to do French nuclear in, saboteurs and idiots who sometimes come close to treason in their effort to kill the nuclear sector in France.

Voices Of Nuclear @voicesofnuclear

Everyone should be aware that the current state of French #nuclear, currently under fire from critics due to the low availability of its reactor fleet (quickly forgetting more than 40 years of steady service) is the result of 25 years of relentless anti-nuclear effort. 🧵⤵

Fortunately the likes of Dominique Voynet, who lied and went against her mandate from the French state to get nuclear excluded as a clean source of energy in Europe, did not prevail completely. Emmanuel Macron, who earlier in his first term as president gave the green light to shutter Fessenheim, likes to have his gâteau and eat it too when it comes to the issue of nuclear.

“We have to make our electricity in the most decarbonized fashion possible,” he told the Dauphiné Libéré, “We have a historical opportunity. It’s nuclear that can produce the least intermittent and most decarbonized power in the world.”

But then, in a bit of a non-sequitur, he then added “…and our challenge is to reduce nuclear to add to the share of renewables.” 🤦‍♀️

The state of nuclear in France can best be summed up by this meme:

Buff Doge EDF 1970-1994: “I’m going to construct 54 reactors in 24 years” Cheem EDF 2023-2043: “I’m going to build 6 reactors in 20 years”

Down but not out: How the EPR can still be the European Champion

At this point, one might be tempted to think of EDF as a basket case. Or at least a company with a lot of soul-searching to do before it can even think of expansion again. But there are good reasons not to write EDF, and its flagship reactor the EPR, off completely.

The reason? In the wake of the European energy crisis triggered by the war in Ukraine, there is an epiphany spreading from the UK to Poland that energy security is a thing, and the best way to ensure energy security is with a firm source of energy. Combined with a pressing need to decarbonize, nuclear stands as a uniquely appealing option. The problem is, the geopolitical changes that triggered this epiphany simultaneously took the Russian and the Chinese off the table as suppliers. Unfortunately those are the world’s two mature and capable nuclear energy supply chains.

Who is left to build proper gigawatt-scale reactors? GE Hitachi has abandoned their ABWR lineage to pursue the BRWX-300 Small Modular Reactor. Not really sure what’s going on with the Canadians, but there hasn’t been any announcements about any new-build CANDUs, despite plenty of good news on the refurbishment front. This leaves just three contenders: EDF with the ERP, the US’ Westinghouse with the AP1000, and KHNP/KEPCO of Korea with the APR-1400, to meet Europe’s pressing need.

Westinghouse is not really comparable to either EDF or KHNP/KEPCO, which are both state-run utility giants with the ability to execute the project from start to finish. Instead, what Westinghouse does is give a design to their subcontractor, such as Bechtel, who will actually build. There’s been two AP1000 projects so far, the abandoned VC Summers and Georgia’s Vogtle Unit 3 and 4. By the time they are done, those Vogtle 3 and 4 are going to be the most expensive nuclear reactors ever built at USD$30 billion for two units. The Americans are also not planning to build more AP1000s at home, a fact which might give overseas buyers some pause.

In comparison, the Koreans are coming off the success of the Barakah project, which took the UAE from zero to APR-1400 in ten years. Their supply chain is warmed up and ready to go. Sounds like an obvious choice, but the Koreans have three hidden issues, say a French nuclear insider who declined to go on the record.

First of all, in Barakah, the Koreans did no localization, effectively flying in all the labor from Korea. European countries looking into building large nuclear power plants, such as Poland, would insist on localizing at least part of the supply chain, if not a decent amount of technical transfer. Secondly, the APR-1400 design will have to be altered substantially to comply with European standards that are “perhaps unnecessarily strict, but nevertheless must be followed.”  

The real wild card which might stand in the way of Korean exports is a lawsuit that is going on right now in Washington where Westinghouse is suing KHNP/KEPCO for infringing on its IP in the APR-1400 design. “If Westinghouse wins, the Koreans will lose all ability to export reactors. Unless they want to fight US legal reach,” said my source.

In short, the EPR, while troubled, remains viable in a narrow field of imperfect choices. As one European country after another announce new-build plans, we can expect EDF to keep inking some deals alongside Westinghouse (whose reactors come with American friendship points built-in) and KHNP (despite it all it’s hard to argue with a track record of coming in on-time and on-budget.)

At the end of it all, the French really have to thank the Brits for effectively keeping the EPR supply chain purring with the Hinkley Point C build. It looks like they will also continue on to another pair of reactors at Sizewell C at the very least. British energy consultant Kathryn Porter has sounded the alarm repeatedly on the UK putting all its eggs in the EPR basket, but this looked like exactly what is going to keep happening.

As for France itself, it will be building no more EPRs but moving on to the EPR 2. It is a very similar model and the learnings from the EPRs built so far should transfer over. Unfortunately, it IS another model, and so it needs to run through the regulatory process all over again.

THE ELEMENTAL TAKE

Can EDF be great again? It would be difficult.

When it comes to nuclear energy, the French have been their own worst enemies. Although it is good that Macron has restored nuclear to pride-of-place in his rhetorics and firmly signaled that nuclear energy is in France’s future, not just its past, I cannot help but notice he has not reversed ARENH and other parasitic schemes. As a result, you have the unseemly spectacle of EDF, the state-owned utility, suing the French government for those ruinous forced sales.

But let’s say the political support from the top materializes. I ask again, can EDF be great again?

The fundamentals of EDF, despite it all, is still formidable. In the form of the EPR, it has Europe’s own indigenous reactor. Taishan’s fuel assembly issues have been resolved and will not be a problem with EPRs going forward. Olkiluoto 3’s feedwater pump issue is not related to the EPR’s core operations and should also be resolved early next year. Then we can really see if the EPR passes muster. If it does, there are many advantages for European countries to buy a European reactor, especially if they have ambitions to develop their own nuclear supply chain.

Finally, perhaps the question shouldn’t be “can EDF be great again?” But “how can EDF be great again.” Europe’s nuclear push needs the European champion to return to glory.

The dream is possible.

Emmanuel Macron @EmmanuelMacron

Le rêve est possible.