French next-generation nuclear reactor may weather setbacks
* Enel's move to leave French project had been brewing-source
* EPR reactor was conceived after the Chernobyl disaster
* On time EPR reactors in China could become showcase
PARIS, Dec 6 (Reuters) - The latest in a series of setbacks will not sink France's development of a new generation of ultra-safe, powerful nuclear reactors as precious feedback from pilot projects will finally bear fruit.
France's Prime Minister on Thursday confirmed it would go all the way with its EDF -managed pilot reactor in northern France, after the withdrawal this week of its Italian project partner, utility Enel.
Four new EPR reactors under construction and more potential orders from countries including China and Saudi Arabia will help France's nuclear industry weather embarrassing delays and cost overruns.
"It will be finished since it will be commissioned in 2016," Prime Minister Jean-Marc Ayrault told RTL radio.
"It's expensive, it's true but at the same time do you know the lifespan of the reactor? Sixty years. I think we have to be responsible and prudent."
France has four next-generation reactors under construction, including two in China, one in Finland and another in France. In the near-term, it aims to sell up to four reactors in Britain, another in Finland and two others in China.
The two reactors under construction in China are on time and budget, a big improvement on delays and cost overruns at Finland's Olkiluoto, where Areva is building its first EPR reactor.
"If the EPRs in China stick to deadlines and costs, then they'll be a good showcase for exports," Colette Lewiner, energy adviser to consultancy CapGemini's chairman, said.
Enel's exit was the latest for the project, 20 years in development and which optimists hoped would represent the gold standard for countries serious about expanding nuclear capacity. But Japan's Fukushima disaster last year threw a wrench into such hopes for all power plant makers worldwide.
Enel's withdrawal will cost state controlled EDF some 700 million euros ($914.76 million) and may slow down its sales and those of reactor builder Areva in the short term. The potential for long-term projects remains favourable, though, with China expected to build half of the world's 150 planned reactors by 2025.
"First of all the price of new reactors will necessarily go up with Fukushima and the tightening of rules," said Thibaud Brejon de Lavergnee, a research analyst for economic consultancy Xerfi. "The growth potential of the nuclear market remains huge and the positioning of the French nuclear sector remains good."
EDF on Monday said tweaks to the EPR reactor's boiler design, additional engineering studies and post-Fukushima rules had lifted the pilot project's cost to 8.5 billion euros, the latest in a series of hikes that has almost tripled its price tag since 2005.
Claude Jaouen, Areva's head of reactors and services, told Reuters that the cost of Flamaville's reactor was not representative of EPR reactors sold to the market.
"It's the price of a pilot reactor which has not benefitted from the feedback of the first EPR reactor built in Olkiluoto in Finland," Jaouen said.
An Italian political source said that Enel's decision to withdraw had been long under consideration due to escalating costs and delays, as well as a 2011 referendum in Italy which blocked any nuclear development there.
The situation, he said, came to a head when Socialist Francois Hollande, who pledged to scale back France's dependence on nuclear power, won French presidential elections this spring.
"That was the final straw and the decision was taken because he (Hollande) wanted no new plants to be built and possible closure of some existing ones," the source said. Italy had pinned its hopes on developing 6 plants in France and 4 at home.
Some analysts attribute France's setbacks to Flamanville's status as a pilot for the next generation of reactors and the first built in France in 15 years.
"We have lost the management skills for big nuclear projects as well as the competence of sub-contractors in the sector," Lewiner said. "But (Enel's departure) does not kill France's nuclear sector, far from it."
Critics have faulted the sheer ambition behind the EPR, twice as powerful as current reactors. Conceived by French and German engineers after the 1986 Chernobyl disaster, it is endowed with a double containment building, a compartment isolating the molten core, six back up diesel generators and four back-up cooling systems.
It is not the first time that France, which prides itself in its engineering prowess, has developed sophisticated but hard to sell technologies for export.
"There's a French belief that bigger the project, the cheaper it costs," said Jean-Marie Chevalier, senior associate at energy advisory firm IHS Cera. "Isn't Flamanville (EPR reactor) an example of the limits that we can expect from economies of scale?" he said.
Enel's departure from the French project could put pressure on EDF in Britain, where it is planning to build four nuclear reactors, with the first two at Hinkley Point in Somerset.
EDF's junior partner in Britain, utility Centrica which owns a 20 percent stake, said its position on investing in the Hinkley Point project alongside EDF Energy had not changed following Enel's withdrawal from Flamanville.
"The question remaining is how much can be learnt from (Olkiluoto and Flamanville) and the Chinese EPR and applied to the UK new build programme," said Matt Brown, director at energy consultancy Poyry.