Today the government was widely expected to sign contracts with French utility giant EDF to build two nuclear reactors at Hinkley Point. The board of EDF had (reportedly narrowly) voted to approve the project but Greg Clark, the new Secretary of State for Business, Energy and Industrial Strategy announced a review.
The reactors would cost EDF £8 billion each and have a capacity of 3,200 MW – a cost of £5 million per MW. For this cost, CCGT gas-fired power stations with a capacity of 27,000 MW could be built – eight times greater than that of Hinkley C.
Although EDF will pay the construction costs, UK energy policy makes it implausible for a utility company to build a new power station without the economics of the project being underwritten by consumers and/or taxpayers. This is done by the government fixing the income of new generating capacity by guaranteeing prices.
EDF would receive a guaranteed £92.50 per MWh (2012 prices). In today’s money that is £97, more than two and a half times the current wholesale electricity price.
At an average output of 90 per cent of capacity, Hinkley C would earn EDF £81 billion over five years.
The deal could make nuclear power in the UK the most costly in the world, 20 per cent more expensive than in France and 33 per cent more expensive than in the United States.
Despite the huge potential returns, seven of the seventeen members of EDF’s board voted against the project and one resigned before the vote. EDF’s Finance Director quit in March over concerns with the Hinkley Point project.
The European Pressurised Reactor (EPR), the type planned for Hinkley Point, has had a deeply troubled existence. A power plant in Finland, Olkiluoto 3, which will use the EPR is currently ten years behind schedule and three times over budget. Another project in Normandy is faring no better.
In summary, it’s encouraging that the government is rethinking this terrible deal that would see consumers paying exorbitant bills for decades. The technology is completely unproven and the costs and time needed to build the reactors has already doubled since the initial proposal. The new department needs to completely rethink the energy policies and arbitrary targets which are driving up bills and destroying jobs. Even if the government decides more nuclear is capacity is needed, there are far more affordable options available.
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