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Hinkley Point C

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EDF Energy CEO remarks on new nuclear

New EDF Energy CEO Simone Rossi comments on Hinkley Point C progress and the opportunity to progress Sizewell C
In his first speech since taking up his position, EDF Energy’s new CEO, Simone Rossi, today outlined his vision for the UK’s energy sector, and the development of new nuclear in the South West and East of England.

Alongside an update on the good progress being made at Hinkley Point C, he set out the opportunity for the UK to press ahead with the development of Sizewell C in Suffolk.

Key points from the speech:

  • The Hinkley Point C project is now fully underway, with 3000 people on site. It is on track for its next big milestones. Significant benefits are now flowing to the local economy.
  • Britain will need to replace retiring generation capacity over the next 15 years with a mix of renewables, gas and new nuclear.
  • At Sizewell C, a capital cost reduction of 20% is possible thanks to the unique opportunity to replicate Hinkley Point C.
  • We want to work with Government to identify a new financial framework to lower the cost of financing and make the project as attractive as possible to third party investors.

Please contact the External Communications team if you would like any further detail on today’s announcement.

Simone’s full speech is below.

New nuclear – responsibilities and opportunities

It’s a great pleasure to be with you here in Somerset.

Thanks to Gemma for telling us your story and your inspiring example.

I am pleased to be able to introduce myself to you.

I have been with EDF for about 12 years and Chief Executive of EDF Energy for less than three months. I spent three years working in Britain until 2014 and I am delighted to be back here with my family and delighted to have the responsibility of this job.

The UK matters to EDF and EDF matters to the UK.

As a company we operate in many different areas. We have millions of customers at home and in business.  We are installing tens of thousands of smart meters for them every month, developing new energy services which we recently acquired and a number of innovative products.

In one of the most competitive markets in the world, the needs of our customers will always be paramount.

We operate renewables, gas, coal, batteries and nuclear power stations. We are investing to decarbonise electricity and to develop the skills and expertise of people across Britain.

There are a lot of things on my plate but today I will be focusing on one thing.

Britain has put its trust in EDF to deliver Hinkley Point C and it’s my job to honour that trust. That is my top priority.

Today I am going to talk to you about three things.

First – how is the Hinkley Point C project going?

Second – what is the right solution to power Britain in the coming decades?

And third – why do we believe that Sizewell C is a great opportunity for Britain?

So let me take the first question on Hinkley Point C.

It’s going well.

Today there are almost 3,000 people on the site and there will soon be more than 5,000 working there, on a project that is on track for its next big milestones.   We’ve moved more than four million cubic metres of earth – that’s like digging a hole two and a half times as big as the Millennium stadium in Cardiff.  We are already installing the huge sea water cooling pipes.  Soon the boring machines will arrive for the 11kms of tunnels which will be dug under the Bristol Channel.

One of the main focuses at site is what we call J-zero – June 2019 – when we start building the power station’s structures above ground.

That can only happen once the foundations are in place for the first unit. All our 2018 goals will help us to achieve this major milestone on schedule by June 2019.

Beyond J-zero, our goal is to put the first unit into service by the end of 2025. Are we confident that we can deliver by 2025? Yes we are confident.

We are confident we can deliver this timeline as our project at Hinkley Point C benefits from innovative tools and the lessons from other EPR projects.

For example, the detailed 3-D digital model of the plant is a critical new tool which helps teams get more jobs done right first time.  It shows the design down to the last light switch. Every engineer can see exactly where each of the 4,000 kms of cable and 400kms of pipe goes and in what order they are laid.  Every team has the same plan with them in their hands – not away in an office. It’s already making a big difference and significantly improving delivery of the programme.

Working with suppliers long before 2016 when contracts were signed means that they have already found solutions before they start work and they have an accurate idea of what they need to do and how much it will cost. Testing equipment offsite means the quality of parts arriving on site is assured before they are put in place.

At HPC we are building the fifth and reactors of their type. It’s one of the largest infrastructure projects in Europe and it will deliver safely for over 60 years.

That said, like any major infrastructure project, we know we will face challenges and it is our job to deal with them. We will never compromise on safety and quality.
What also matters is our impact on the local economy. Here in Somerset, all the activity on site is making a real difference to the economy and people.

Four thousand businesses in the South West are registered to work on Hinkley Point C and by 2020, there will be £200m of spending each year in the local economy.

Money spent with companies like heavy engineering specialists Blackhill Engineering from Exeter or Somerset Larder which is already providing 65,000 meals a month.

In November, the Social Mobility Commission highlighted the challenges facing West Somerset in providing opportunities for young and disadvantaged people. I know a lot is being done to tackle that and I am pleased that Hinkley Point C is playing its part.

We are giving young people like Gemma reasons to stay and build their careers here with good, well paid jobs. We are playing our part.

The Construction Skills Centre – just a short walk round the corner is training a new workforce for us and other big UK projects. Trainees are learning skills in areas like steel-fixing where there is a national shortage.  Next month the National Nuclear College is due to open here in Cannington. Without qualified people it wouldn’t be possible to deliver the project. I want to take the opportunity to thanks the local businesses, councils and education establishments. Without their support this would not be possible.

Success at Hinkley Point C will also be possible because of the entrepreneurial spirit and dedication of the businesses, councils, chambers of Commerce and colleges of Somerset. Many of you are here today – thank you.

Question two.
What is the right solution to power Britain in the coming decades?

Britain still needs to commission two-thirds of the low carbon energy needed to meet demand and replace older power stations due to close in the next 15 to 20 years. Coal stations can’t operate beyond 2025 and the country has to replace this capacity.

Energy efficiency will have an impact on demand, but electricity will also play a bigger part in our digital and decarbonised lives – especially in areas like heating and transport.
So what’s the solution?

We need low. It is good to see that Britain is continuing to be a low carbon country and reducing emissions.

We are one of the windiest places in the world. IN fact it’s very windy today. Britain has world class wind…

That’s why it makes sense to have as many renewables as we practically can, in places where the wind is strongest like Scotland and offshore where Britain is a world leader.

The UK’s first offshore wind projects were given contracts of around £150 for each megawatt hour – now with established supply chains that price is falling. Now this industry is delivering projects at £70 a megawatt hour. That is good news. It shows that the Government’s electricity market reforms are working.

I am proud that EDF’s new Blyth offshore project in the north-east is a test bed for innovation, using new construction techniques from the North Sea oil industry. We also have an ambitious pipeline of projects under development in Scotland.

At the same time, wind has it limits. With growing numbers of wind turbines in the system, it matters when the wind doesn’t blow or even when it blows too hard and more power is generated than is needed.

What about solar?

We support the development of this technology; however we must be conscious of its limits.

As an Italian, I know that Britain is not one of sunniest places in the world – especially in January. It also has peak electricity usage in January.  I am told we get as much sun as one of the US’s largest states.

Unfortunately it’s Alaska and not California. And our demand comes in winter, when solar is most limited. That’s why solar power cannot easily match demand in Britain.

Some say that for when the wind isn’t blowing and the sun isn’t shining, the issue of intermittency can be dealt with by using batteries.  I believe that batteries have an important role to play in our energy future.  EDF Energy’s new 49MW battery project in Nottinghamshire stabilises the grid in split seconds to keep the grid frequency constant. It’s a big plant at 49MW and it’s a big issue as more of the country’s large steam turbines are replaced by wind power.  But the batteries would empty in less than half an hour if discharged continuously.

Batteries are good at storing energy for short periods but using batteries to store electricity for more than a few hours becomes very expensive.

If a wind farm faced a few days of still conditions, the cost of filling the gap with battery power could be well over one thousand pounds for every megawatt hour.

Even if battery costs are slashed by half or more, this extra cost for consumers will still not be justified. Back-up power means more cost for consumers.

Gas is a good choice for flexible back-up power and that’s why we need gas power in our future energy mix. However generating our electricity with too much gas in the mix means we will fail to meet our binding climate change targets. Gas is not a low carbon fuel. We can’t use too much or we will increase our emissions.

And as UK production dwindles, it also makes us increasingly reliant on the movements of LNG tankers as they chase the best prices around the globe.  Any additional gas would have to be imported which starts to question our security of supply.

Nuclear power in Britain provides large volumes of low carbon electricity when it is needed 24/7 – even on a dark, cold and still winter’s night. It is electricity that goes directly to customers without the need for back-up, interconnectors or storage. It’s what our existing nuclear stations provide now, putting in record performances in output and safety even as they come towards the end of their operating lives.

And on top of that it provides jobs and boosts industrial capacity here in Britain on a scale that other technologies cannot.

That’s why I believe that the Government has been so steadfast in supporting nuclear power as part of the solution.  There is a clear logic to the case for having reliable low carbon nuclear in our future energy mix at a competitive price.

Which leads to my final question.
Why do we believe that Sizewell C represents a great opportunity to meet that energy need?

We understand the message from the Government on cost reduction and the need to be competitive for the next nuclear projects.

It is our job to meet the challenge and I think we can. The cost to consumers is made up of construction and financing. There is potential to significantly reduce both for Sizewell C.

Let me take construction costs first. The key to reducing the construction cost is replication.   Doing something again with the same design makes it easier and cheaper.

Let me give you an example.

Hinkley Point C has eight emergency generators.   They had to be designed and certified to meet the standards required for nuclear safety.  That means the first two will cost £38m, but the next six will be half the price – £19m each. At Sizewell, none of that development or certification work needs to be done again. All its emergency generators will be at the lower price.

Repeating that experience countless times for a power station at Sizewell that is largely identical to Hinkley Point C makes a capital cost reduction of 20% possible.

This repetition extracts more value from everything that is happening at Hinkley Point C to restart the nuclear industry after the long gap since Sizewell B opened in 1994.

Like the successful adaptation of the EPR design to meet British regulatory requirements.  Achieving this for Hinkley Point C means tens of thousands of hours of engineering work does not need to be repeated for Sizewell C.

There’s another reason Sizewell C can be cheaper.

Years ago, the site at Sizewell was built with a grid connection capable of handling a bigger power station – and it is relatively close to where demand is. Sizewell C can benefit from that big advantage with substantial savings in grid connection costs.

Let me now turn from construction costs to financing.  Reducing the cost of capital can make a significant difference to the price for consumers.

At Hinkley Point C the shareholders bear all the risk of building the power station. The National Audit Office says that other models of financing should be considered for the future.  It believes this could significantly reduce overall cost of the project to consumers.

With Government, we should explore alternative financing models that can create the conditions where institutional investors like pension funds can participate when they were not able to before. Sizewell C will be a proven technology, representing the 7th and 8th EPR Unit, and the first 4 units will soon be operational in China, France and Finland.

I am not saying financing will be easy – with the right framework in place, it will be possible.

Taken together, all of these cost reductions give Sizewell C a unique opportunity to be significantly cheaper than Hinkley Point C and competitive with equivalent alternatives.  That is the case we are working to prove.

So let me conclude.

I said at the start that my top priority is to honour the trust that Britain has invested in EDF to deliver Hinkley Point C. We will deliver Hinkley Point C. But the job doesn’t stop there. You can see for yourself the hard work done at HPC which provides the bonus of building a cheaper power station at Sizewell and to give the east of England some of the economic benefits delivered here in Somerset.

What we will achieve together at Hinkley Point C will also enable us to deliver a competitive Sizewell C for the benefit of Britain and the East of England.
Because that opportunity is clear, it would be irresponsible if we didn’t work hard with Government and our partners to see if we can make it happen.

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