Wrestle with PESTLE: Hinkley Point C

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This LCN Says is part of LawCareers.Net’s ‘Wrestle with PESTLE (WWP)’ series, which looks at various business case studies using the PESTLE technique.

Unsure what PESTLE is? Read our first WWP article, which explains the technique.  

PESTLE stands for:

• political;
• economic;
• sociological;
• technological;
• legal; and
• environmental.

This technique uses the above six external factors to analyse the impact on a business and/or industry.

Case study: Hinkley Point C – development of nuclear power in UK

Hinkley Point C is the first nuclear reactor development in the UK since 1995. The site, which is being built in Somerset, forms part of the government’s plans to reach net-zero targets, with the aim to generate enough safe, reliable and low-carbon energy to power six million homes. However, a range of environmental protests, economic challenges and issues with construction have led to increasing delays. It’s been announced that, worst-case scenario, we may have to wait until 2031 for the first of Hinkley Point C’s planned two units to be ready. The development has prompted a great deal of discussion about the future of nuclear energy in the UK. This article provides an analysis of the factors involved in the development of the site and the mounting delays to construction.

Political impacts

French and Chinese investment in Hinkley Point C means that international relations lie at the heart of the project. Electricité de France (EDF) and China General Nuclear Power Corporation (CGNP) both signed a strategic investment agreement, taking on 66.5% and 33.5% stakes, respectively.

For EDF, this decision was political and economical. The deal was signed in 2016, just weeks after the Brexit vote and in spite of all six French trade unions voting against it. The former head of EDF’s internal auditing in Paris, Philippe Huet, explained that: “At the time that it was agreed it was already known that EDF’s estimates understated the cost and schedule of the project. Key decision-makers chose to ignore this because it was too important strategically. As they would say, if a project cannot be profitable it must at least be strategic.”

CGNP’s investment sparked concerns for many. As relationships with China have cooled, the US, Europe, and Britain are aiming to protect their supply chains and reduce reliance on Chinese technology. In 2019, the US put CGNP on an export blacklist and warned the UK against involving China in nuclear projects. In 2022, Britain removed China from its Sizewell C development, which will be built in Sussex, taking a joint stake with EDF instead. Following this announcement, CGNP also stopped providing funding for Hinkley Point C’s overrun costs.

The end of CGNP’s investment has placed more economic pressure on EDF, which is currently searching for an economic compromise with the UK government. A British official said: “In the end, governments always own failure in big national infrastructure.” Adding: “The get-out-of-jail card here is that we transferred the risk to another state, but the question is whether, in extremis, we can enforce that transfer. Ultimately it becomes a potentially very messy government-to-government issue.”

The issue of funding also sparks problems domestically, as some are concerned that a compromise with EDF means that money will come out of British taxpayers’ pockets. The government has assured the British public that this won’t be the case, insisting that “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 in no way will fall on taxpayers”.

Economic impacts

For opponents of nuclear energy, Hinkley Point C is an excellent example of how costly nuclear construction is. According to EDF, completing the project could cost up to £46 billion, a significant increase from the original budget of £18 billion. But do the inflated costs make the project economically inviable or is this the inevitable expenditure needed to revitalise Britain’s nuclear industry?

Well, it’s worth noting that the plant will create a great deal of income once it’s operational. Plus, it’s already boosting the local economy by providing many jobs. But when it comes to completing construction, many want to know who’s going to foot the bill.

French Finance Minister Bruno Le Maire has called for a “fair sharing of costs” between EDF and the British government. In 2020, the government agreed to provide some state aid, in the form of a subsidy of £92.50 for every megawatt hour (MWh) produced for a period of 35 years. However, following the increased delays, EDF is now seeking loan guarantees from the UK, which would allow EDF to issue project-level debt to relieve financial pressure. This was previously discussed in 2014, with a £10 billion loan guarantee on the table. However, the UK withdrew this offer following delays to the construction of Flamanville in France, another EDF project, which uses the same reactor technology as Hinkley. When it comes to loan guarantees, the UK has insisted that, as Hinkley Point C isn’t a government project, it won’t be giving into these demands. But if the British government refuses, how will future investments into nuclear power from EDF be affected?

The delays and uncertainty caused by this project are set to make a lasting impression on the way companies build and invest in nuclear power plants going forward. For example, in January 2024, the government stated that it aims to secure investment decisions for nuclear projects every five years from 2030 to 2044. The aim is to speed up the development of new plants, helping the government meet their goals for decarbonised energy. As the government outlined in its 2021 Net Zero Strategy, more ”electricity coming from […] British nuclear reactors will reduce our vulnerability to sudden price rises caused by fluctuating international fossil fuel markets”, as well as having many other positive economic impacts like “new jobs”, “new industries” and secure green energy. 

To hear from solicitors practicing in the energy sector, check out this commercial question on the future of clean energy.

Sociological impacts

The introduction of new jobs brings with it sociological benefits too. There’s been £8 million invested into three “Centres of Excellence”, which specialise in welding, mechanics and electrics. In 2022, the plant hit its target of providing training for 1,000 apprentices and a dashboard report shows that, in areas that include the site, there’d been a 28% increase in employment between 2015 and 2021. In addition, the number of people achieving post-16 education attainment, particularly in vocational training areas, increased faster than the national average between 2011 and 2021. There’s also been an increase, faster than the national average, in the number of people aged 25 to 39 living in the local area, which the report suggests could be indicative of the employment opportunities the plant has created.

However, the construction hasn’t had a solely positive social effect. In 2019, there was a mental health ‘crisis’ at the plant construction site, according to the Unite union. The main causes of distress were cited as loneliness, relationship breakdown and the struggles that come with being far from family. There were also concerns relating to increased drinking and gambling seen in Bridgwater, a town close to the site. Following these reports, EDF implemented a mental health programme in collaboration with local mental health charity, In Charley’s Memory. Measures included training mental heath first aiders and hosting a range of drop-in sessions. Malcolm Davies, a convenor at the plant’s Unite union, explained: “Construction is a very macho industry. We have the highest amount of mental health issues of any sector.” Gail Cartmail, assistant general secretary at Unite, also cited the “industry’s macho culture” as a reason that workers  might be “unwilling or unable to discuss their feelings”. At the time of these reports, the union said it had eight mental health first aiders in the workplace, with regular meetings taking place with them and EDF to discuss new initiatives in this area. Cartmail added: “EDF at Hinkley also provides a fully staffed medical centre with staff trained in mental health issues.”

The development has also caused protest across the UK. Many are concerned about the environmental and economic implications of the plant’s construction. Analysts have warned that delays could cause uncertainty in the energy market towards 2030, which could drive up energy prices. This is a concerning prospect, given the continued impact of the cost-of-living crisis on the UK. A public opinion survey completed between 17 and 28 January 2024 found that 44% of adults are using less fuel in their home because of the crisis and 41% of bill payers said energy bills were ‘very’ or ‘somewhat’ difficult to afford. Reliable energy supply is incredibly important and any uncertainty in supply caused by delays to Hinkley Point C has the potential to affect people and homes across the country.

Technological impacts

The technology involved in building a nuclear power plant is incredibly complicated and constantly evolving. Plus, given that the UK hasn’t built a plant in more than 20 years, Hinkley Point C has been challenging to develop.

So, how will the plant generate energy? The reactors create steam to power the turbines. The turbines are connected to a generator, which can produce 1.63GW of electrical power. The plant is also building a way to store nuclear waste onsite, which is a first. In addition, the marine and offshore work on the power station’s cooling water system moved to its final stages in April 2023. The construction process has been long and complicated, with a great deal of moving parts.

A large range of contractors have been employed to complete the work, including several technology companies. For example, in 2019, Telent technology services won a six-year contract to provide the plant with communications and IT infrastructure, which includes a dual data centre and both wireless and wired communications to connect to approximately 150 buildings.

From a long list of contractors and lengthy delays, changes to construction plans have arguably been the largest factor slowing the project down. The design for the plant has changed 7,000 times and now needs 35% more steel and 25% more concrete than originally anticipated. The reactor was described by former EDF boss as “almost unbuildable”. However, Sizewell C, a subsequent plant in construction, is also using the same UK EPR design. The developers have highlighted the benefits of replicating designs, explaining that they can use “the efficiencies and expertise learned [from Hinkley Point C]”, along with the plant’s “huge workforce and supply chain”.  Therefore, understanding the technology Hinkley Point C uses could influence not only the success of the plant, but also future UK nuclear developments. For example, with such knowledge, future projects could be constructed more efficiently, as developers are able to make more informed decisions about the technology they choose to use.   

Find out more about AI and energy in this commercial question by TLT LLP.

Legal impacts

There have been many protests about Hinkley Point C, which has often resulted in legal action and changes to construction. For example, waste disposal has been a hot topic. Originally, developers planned to dump mud off Cardiff Bay. However, protesters called for more testing due to concerns that the mud could be contaminated by discharges from the old Hinkley Point A and B. Claims were dismissed by both EDF and the Welsh government. EDF alleged that the claims were "wrong, alarmist and go against all internationally accepted scientific evidence". A spokesperson for the Welsh government claimed that “all tests and assessments concluded the material is within safe limits, poses no radiological risk to human health or the environment and is safe and suitable to be disposed of at sea”.

Following these protests, EDF changed its plans, instead proposing a different disposal site in North Somerset, within the Severn Estuary. This decision also faced backlash given that the estuary is near a site of special scientific interest, Portbury Wharf Salt Marsh. A coalition of environmental groups contested the approval of the decision at a High Court hearing. The protesters argued that the permission granted by England’s Marine Management Organisation (MMO) was unlawful, as a previous licence had been amended instead of a new one being created. They claimed that the “contaminated” mud could risk “human health, threatening protected marine habitats and a treasure of Britain’s natural world”. However, Mr Justice Holgate found that "there was nothing unlawful in the MMO's decision".

Environmental impacts

Many have protested against Hinkley Point C on environmental grounds, which in some cases (as seen above) has led to legal action and amended plans. The delays caused by time in court or time amending and carrying out plans also have an inherent environmental impact.

Hinkley Point C is part of government plans to decarbonise the UK. In fact, in the past, the government has said that it wants 25% of the UK’s electricity to be provided by nuclear energy. As the project is delayed, the government’s decarbonisation plans are also delayed. In response to environmental protest, EDF's head of environment for Hinkley Point C, Chris Fayers, noted that the plant "is one of Britain's biggest projects in the fight to protect the environment from climate change”. This big picture viewpoint is one way to understand Hinkley Point C’s environmental impact. However, in many ways, it ignores the nuance of the situation, and the negative knock-on effect that different elements of the plant might have.

For example, many are concerned that the plant’s cooling infrastructure could threaten marine life. It’s been reported that EDF has considered changing its plans to build an acoustic fish deterrent to protect fish from the cooling system. Instead, EDF said it wants to build an 800-acre saltmarsh as a natural deterrent to “create new habitat for fish and animals, improve local water quality and help prevent flooding”. Highbridge Councillor Barbara Vickers explained that without the acoustic deterrent “something like 182 million fish per year could be sucked [into the cooling system]”.  EDF’s proposal to abandon the acoustic fish deterrent has been questioned in a town council meeting, in which Burnham and Highbridge councillors raised concerns about marine deaths. Burnham and Highbridge’s Mayor Lesley Millard said: “We welcome the 300 hectares of new habitat but we would much more prefer them to find a solution to the fish deterrent.” EDF has defended its choice, stating that the new saltmarsh is “a proven way to increase and protect biodiversity”. It also added: “It will help fish by providing breeding grounds and provide food and shelter for birds and animals. Tidal marsh also filters and cleans water, prevents floods and locks away carbon in one of our most effective weapons in the fight against climate change.”

Despite this reassurance from EDF, environmental campaigners remain concerned about the plant’s impact on marine life.  

The verdict

Much like Hinkley Point C, it’s likely that future nuclear projects will also face many protests and challenges – although they may differ in nature depending on the state of the economy and the political situation. The challenges Hinkley Point C has faced have significantly impacted the way Britain’s nuclear industry will move forward. For example, shifts can already be seen in the way that future projects are being approached, both in terms of funding and construction plans. So, if this is an area of interest for you, keep your finger on the pulse. Although the timeline of Hinkley Point C’s development may remain unclear for a while, it’s likely that it’ll continue to raise issues that fall under each element of PESTLE as the government moves towards net zero.

Ellie Nicholl (she/her) is a content and engagement coordinator at LawCareers.Net.