Is EDF about to score a coup in Czechia?

The wounded giant has been dismissed as a basket case, but can EDF still come out on top?

For the Czech government’s tender to build a nuclear reactor on the Dukovany site, I think a lot of us assumed that contracts for F-35s by the dozen and a deal for an American reactor would go together like peanut butter and jelly, giving Westinghouse’s AP1000 the edge. But in a surprise announcement, the Czech government announced on Feb 1st that Westinghouse is OUT while Korea’s KHNP and France’s EDF were invited to submit revised bids by April 15. But wait, there’s more!

Cheaper by the four-pack

The bid will not be just for the one reactor on the Dukovany site, but a total of four. This is in order to push down on the cost by 25% per reactor, said the Czech government.

"Based on (the bids), we will then select a supplier and decide whether we will have more reactors built or not," said Prime Minister Petr Fiala.

The reason why Westinghouse has not been invited to bid has been summed up succinctly by Jay Brister of Blue Sky Nuclear: “Company cannot compete against countries.”

The US-Canadian consortium Westinghouse “did not meet the conditions of the tender” because it “did not submit a binding bid.” This means the bid for the AP1000 cannot be meaningfully compared to KHNP’s bid for the APR-1000 or EDF’s bid for the EPR 1200, said Minister of Industry and Trade Josef Sikela.

The Czech tender demanded that the companies take some responsibility for cost overruns and project delay. A private company like Westinghouse, only recently back from the edge of bankruptcy and under new Maple-flavored management, is simply not in the position to do this on the scale of its state-backed competitors.

“Westinghouse has nothing but project of AP1000, basically ton of papers,” said Jan Hruskovic, a nuclear engineer from the Czech Republic, “They don't own any plant, they don't build any plant, they don't have an experience with operation and maintenance.”

While the outcome of the tender will not be known until the Czech government makes its final decision between the French and Korean bids, EDF is very much in the running, perhaps even with an edge.

Despite being able to offer a price that is “rumored to be more than attractive,” the Koreans haven’t done the political legwork, said Hruskovic, who works in Korea.

“So far, it looks like KHNP is in the tender alone, without any political support on inter-governmental level,” observed Hruskovic on his LinkedIn.

How is that possible that after witnessing epic cost overruns and project delays at Olkiluoto, Flamanville and Hinkley Point C, EDF can still come out on top?

How EDF can still win

Recently I’ve heard a most provocative argument that EDF is setting itself up to win not just in the Czech Republic, but elsewhere in Europe, nuclear’s hottest battleground. I’m not sure that I believe it, but let me make the case.

We’ve already addressed how Westinghouse will have a disadvantage competing as a private company. But what of EDF’s other competitor, KHNP? The Koreans appear to be riding high off the success of the Barakah build in the UAE. But conditions in Europe will not be the same.

In the UAE, the Koreans were starting from a blank canvas and could do things their way. In Europe, especially in nuclear incumbent countries like the Czech Republic, the local supply chain will demand to be involved, and they might have preferences for working with more culturally familiar partner that has recently been building in Europe.

“Koreans might be very surprised, thinking that they come to the Czech Republic and they will dictate to us, how to do things. We are totally different culture and this difference can bring many obstacles, not just now but especially in case they get the project,” said Hruskovic.

Too big to fail?

While Hinkley Point C remains an open wound, Olkiluoto 3 is complete and Flamanville is set to split atoms this year. At a huge cost, EDF has show that yes, they can still build reactors. EDF has all the disadvantages of being a giant: bureaucratic, slow, ossified. But we should not underestimate the advantages of being one: the ability to bleed a lot and keep going.

In fact, if your time horizon is long enough, it’s possible to make your money back with nuclear power plants eventually, notes Dutch energy advocate Joris van Dorp: “There are no losses being made at HPC, even if the worst case cost overrun scenario happens. There would only be a lower ROI: 4% versus the originally targeted 9%.”

EDF’s nuclear ambitions have enjoyed a reversal of fortunes domestically with France recently deciding to increase their reactor new build program from 6 to 14 EPR 2s. EPR stands for “European Pressurized Reactor” — originally a joint French and German reactor. This sowed the seeds for a lot of problems as German and French design elements were merged inelegantly into one reactor. Germany, of course, eventually left the project. This leaves EDF free to shed costly Teutonic features such as the double containment wall for the EPR 2. The EPR 1200 on offer to the Czech Republic will be a scaled-down version of the EPR2.

On the plus side, it’s obvious the EPR2 is simpler and should be cheaper to build than the ridiculously overcomplicated EPR. One the down side, are we going to looking at another first of a kind?

The Elemental Take

I find it really interesting to contrast nuclear newcomer Poland’s choices with the recent breaking news from nuclear incumbent Czech Republic. Poland wanted 6 reactors, but chose to split the order. Czechia quadrupled its order in order to price down. Westinghouse came out on top in Poland, with Korea possibly the runner up. In Czechia, Westinghouse has been excluded, and the French have a good shot on goal to make their first sale (although of course the Koreans are still in.)

Every country is going to have their own consideration when choosing between the three reactor vendors, including cultural, diplomatic, geopolitical and economic considerations.

They say that in the kingdom of the blind the one-eye man is king. In the limited competition to sell reactors to Europe, I would say that the US’ Westinghouse has the best “eyes”. Their excellent AP1000 is up and running in China and domestically for solid reference plants and could well be the best design. The Koreans meanwhile have the “legs” proven by its ability to run fast in the UAE, but might not have the dexterity to operate under European conditions. It could still be that the EDF has the best “hands”: recent on the ground experience building in Europe and a vertically-integrated supply chain and the most complete “ecosystem” of the three.

Which one is the right choice? Right now it is honestly very difficult to say. But I have a feeling with so many European countries shopping for reactors, each competitor will probably end up with some deals eventually.