Nuclear deal in doubt after delay
Surprise as Government announces last-minute review of Hinkley after EDF board gives go-ahead
PLANS for Britain’s first new nuclear power plant for a generation suffered a last-minute delay last night after Theresa May’s Government announced a new review.
Executives at French energy giant EDF were left surprised after ministers cast doubt on the plans by saying a decision on the Hinkley Point nuclear power station will not be made until September. Both EDF and government sources had thought that ministers would sign off the subsidy deal for the £18 billion plant today, after the board of EDF approved the project by 10 votes to seven yesterday.
However, within hours of the EDF vote, Greg Clark, the new Business and Energy Secretary, announced that a final decision will now be delayed.
He said: “The UK needs a reliable and secure energy supply and the government believes that nuclear energy is an important part of the mix. The government will now consider carefully all the component parts of this project and make its decision in the early autumn.”
Industry sources expressed surprise at the delay but government sources played down suggestions of a U-turn, insisting it was natural that the new Prime Minister would want to take time to review the project before approving it.
Hinkley has been subject to numerous delays since the project was first envisaged almost a decade ago. A subsidy deal to support the plant was provisionally agreed by the Government in October 2013. The scheme has been backed by successive British governments. Philip Hammond, the Chancellor, is a supporter and said earlier this month that “we must make sure that the project goes ahead”.
However, Mrs May has never given the project her personal backing. She met François Hollande, the French president, last week to discuss it.
Critics of Hinkley say it is poor value for money for consumers. Iain Conn, head of British Gas owner Centrica, which pulled out of the project in 2013, said yesterday that it was “a very expensive way of doing nuclear power”.
The Government has pledged to pay EDF a fixed price of £92.50 per megawatt-hour of electricity for 35 years, meaning consumers will pay up to £30 billion in subsidies.
Some, including Theresa May’s new joint chief of staff, Nick Timothy, have also raised questions over Chinese state nuclear firms investing one third of the cost of the project.
Hinkley has also proved highly divi- sive in France, amid concerns that EDF cannot afford the project. One member of the company’s 18-strong board resigned before yesterday’s vote, describing Hinkley as “very risky” financially.
The two reactors to be built at Hinkley Point are expected to generate enough electricity to meet 7 per cent of the UK’s needs, powering about 5.8 million homes.
The first power is expected to be produced in 2025, although the subsidy contract allows the project to be delayed until as late as 2033.
John Sauven, executive director of Greenpeace, called on Mrs May to “stop this radioactive white elephant in its tracks”. “She should look at the evidence and see that this deal would be a monumental disaster for taxpayers and bill payers,” he said.
The Government has thus far insisted that Hinkley represents a good deal to help replace Britain’s ageing power plants.
Last week Mr Clark said that EDF’s plans to invest showed that Britain was “open for business”.
China General Nuclear Power, EDF’s partners in the project, said: “We respect the new government’s need to familiarise itself with a project as important to the UK’s future energy security as Hinkley Point C and we stand ready to help the government in this respect.”
Every cloud has its silver lining, and for Remainers such as me, one potential upside of Brexit was that it might finally bury that FrancoChinese folie de grandeur-by-sea, Hinkley Point C.
Britain’s most ambitious nuclear power station to date appeared so bound up in the spirit of European communautaire that it was hard to imagine how the French, statecontrolled energy giant Électricité de France (EDF) could proceed if Britain voted to Leave. For both parties – the UK Government and EDF – Brexit seemed to offer a god-given excuse to pull the plug on an investment which all along has been dogged by controversy and setbacks.
No such luck, I was going to say. After years of dithering, the deal was all set to be announced today in a series of press conferences. Yet now, at the last moment, Number 10 has called for a reappraisal. Is this the Government finally getting cold feet? I do hope so.
For the plan otherwise looked set to plough ahead regardless of the solvency risk it poses to EDF, already struggling with the finance for nuclear renewal in France; regardless of the latest EDF resignation; regardless of the everescalating cost, estimated at £18 billion and rising the last time I looked; regardless of the untested technology being adopted; regardless of the fact that it commits Britain to a Chinese solution to other nuclear reactors elsewhere in Britain, together with the accompanying security risk; and most important of all, regardless of spiralling subsidy costs, including a strike price for output, inflation-proofed for 35 years, more than double the current going rate for wholesale electricity.
Even Brexit didn’t seem to stop it. Indeed, the vote appeared to have given it a boost. Keen to demonstrate that Britain is still capable of attracting big league overseas money, and that we are not wholly divorcing ourselves from our Continental neighbours, the new UK Government seemed even more enthusiastic about Hinkley than the last one, kowtowing to the French and Chinese in equal measure.
It is obviously good news that Brexit doesn’t seem to have deterred EDF, or indeed overseas appetite for UK investment in the round. But then the largesse of the dowry was such that even in the face of a 10-year depression, EDF would have struggled to refuse. Far too big a price was being offered for an untried technology which will very likely be obsolete before the plant is even completed.
To get the green light, ministers have had to agree an ever-lengthening and ever more humiliating list of concessions, including, almost unbelievably, virtually penalty-free scope for contract over-runs of up to eight years beyond the planned completion date of 2025. With Hinkley Point scheduled to provide Britain with 7 per cent of its electricity needs, any such delay would leave consumers disastrously exposed to Britain’s looming energy shortfall, as existing nuclear and coal-fired plants come to the end of their natural lives.
In any case, a project of always questionable value to the UK economy has been left looking like a total white elephant by the collapse in the price of fossil fuels. The National Audit Office recently estimated that over the lifetime of the project, the extra cost to consumers of Hinkley’s output had risen from an already punishing £6.1 billion when the strike price was originally agreed three years ago to a jaw-dropping £29.7 billion today. Together with other policies designed to deliver a low carbon future, Hinkley’s costs will add approximately £230 a year to the average household electricity bill. Climate change may well justify these environmental goals, but whether Hinkley is the right way to meet them has always seemed questionable and today looks positively reckless.
To understand how we got ourselves into this mess requires a little history. Like so many other pioneering technologies, Britain practically invented civil nuclear power, but then lost its way in the hopelessly expensive technological cul-de-sac of bespoke gas-cooled reactors. A further stab was made under the Thatcher government, but was derailed by the “dash for gas” and the fallout from Chernobyl. Climate change objectives succeeded in giving nuclear new legs, but private sector solutions have thus far proved elusive.
It is no accident that Hinkley’s two backers, France’s EDF and China’s General Nuclear Power Corporation, are both creatures of the state, for the up-front costs of grands projets like Hinkley are so large and high-risk that the private sector struggles to finance them. France and China will be charging us through the nose for the privilege. Frankly, we would have been better off doing it ourselves.
There are much better solutions to Britain’s looming energy shortfall – gas as a stop-gap, smaller, more affordable nuclear power stations from Japan, and, further out, the development of “small modular nuclear reactors”, a promising technology where Britain could again excel. Let’s trade with France, China and the rest of the world by all means. But for heaven’s sake, let’s not mortgage our future to them in the endeavour. It’s right that this jinxed madness should be reappraised. It’s bad for Britain, and it’s bad for EDF.