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China to invest £6bn in Hinkley as Government fixes fuel price at £92.50/MWh

EDF and its Chinese partner China General Nuclear Corporation have signed a strategic investment agreement that brings closer the start of the UK’s first nuclear plant for a generation.

The deal was signed on Wednesday during the China State Visit. EDF has confirmed it will take a 66.5 per cent stake in Hinkley with CGN taking 33.5 per cent, demonstrating a clear commitment from both parties. EDF is currently pricing Hinkley C at £18bn.

The Government and EDF have also finalised the detail of the Contract for Difference which offers increased price certainty for the electricity produced from Hinkley Point C. Initial strike price will be £92.50/MWh or if  a  new reactor is built at Sizewell, it will be reduced to £89.50/MWh (both 2012 prices).

"The government must take an even stronger position on why this project is vital and represents good value for money for the public over the long term. Serious questions are already being asked about the agreed strike price, which could foster uncertainty among investors as well as construction firms, and undermine the whole project" - Nelson Ogunshakin, ACE

The Funded Decommissioning Programme has also been approved intended to make sure that the tax payer doesn’t pick up the cost of decommissioning the plant in the future.

Hinkley Point C will provide low carbon electricity to six million homesfor around 60 years creating 25,000 jobs, up to 1,000 apprentices and offeringUK businesses billions of pounds worth of supply chain contracts, the Government said.

 “I’m pleased to announce that today we are signing an historic deal to build the Hinkley nuclear power station, providing reliable, affordable energy for nearly six million homes and creating more than 25,000 jobs, all while working together to build a low-carbon future,” said Prime Minister David Cameron.

Energy secretary Amber Rudd said this was the start for a new fleet of nuclear plants.

“The Government will support new nuclear power stations as we move to a low-carbon future. Hinkley Point C will kick start this and is expected to be followed by more nuclear power stations, including Sizewell in Suffolk and Bradwell in Essex,” she said. “This will provide essential financial and energy security for generations to come.”

EDF Energy CEO Vincent de Rivaz claimed the deal would save customers money on fuel bills. He said: “Hinkley Point C and successive nuclear projects will guarantee the UK the reliable, secure low carbon electricity it needs in the future. Nuclear power will save customers money compared with other energy options and provide a huge boost to British industrial strength, jobs and skills both in Britain and abroad. Today’s announcements are also good news in the fight against climate change.”

Reacting to the Chinese nuclear deal, announced today, ACE chief executive Nelson Ogunshakin said Government had to work hard to sell the deal and the strike price to the public. 

“It is good news that the Chinese have chosen to invest in the Hinkley Point C nuclear power station, however it is important we do not lose sight that this is important infrastructure for UK and there remain fundamental concerns,” he said.

“Firstly, this is a huge opportunity for the UK to lay the foundations for a new generation of skilled workers and become a world leader in new nuclear technology that can be exported around the globe. We have seen the construction sector blaze a trail in projects like the Olympics and Crossrail, and it is crucial we do not waste this golden chance.

“Secondly, the government must take an even stronger position on why this project is vital and represents good value for money for the public over the long term. Serious questions are already being asked about the agreed strike price, which could foster uncertainty among investors as well as construction firms, and undermine the whole project.

“With UK power generation dropping to levels that can only just meet peak demand in the coming years, any further delays would put at risk the country’s reputation and its position in the global economy.”

Head of energy and environment at the Institution of Mechanical Engineers, Dr Jenifer Baxter said: “This development is positive news, which will help put the wheels in motion into developing the new generation of UK nuclear power plants at Hinkley Point C, Bradwell and Sizewell and creating capacity in power generation.

“Nuclear is currently one of the least CO2-intensive ways to generate base-load electricity.  If we are to secure the UK’s energy future, while at the same time meet the country’s challenging emissions target, nuclear must play a part in the electricity mix, in addition to gas-generation and renewables," she said.

“But while it is important to look to secure future energy supplies, the Government also needs to encourage significant investment in the whole nuclear life-cycle. We still need proper research and development into methods for recycling and maximising the energy returns from nuclear waste.

“We haven’t yet found a way of dealing with the large stockpile of nuclear waste at Sellafield, which is set to include an estimated 140 tonnes of plutonium by 2020. It is clear the UK has been too slow to address this issue. Long term deep geological disposal offers a potential solution, however around 20 years of testing is required in the UK for this approach to be used with confidence and we are yet to start this process.”

 

 

 

 

If you would like to contact Jackie Whitelaw about this, or any other story, please email jackie.whitelaw@infrastructure-intelligence.com.

Comments

The viability of the HPC project depends on the establishment of the unit "strike" price of £92,50/MWh, which with inflation of 1.5%/annum may be around £107 in 2026. This is the subject of Plea 3, the main challenge of the 10 pleas in the Austrian government's (and 3 others) nullity actions lodged with the European Court of Justice against the EC Commission's decision for the HPC financing package. It claims this "operational aid" is unlawful. This may take some years to settle, especially if the plaintiffs win and the UK government appeals. EdF has now to find its £12 billion equity by asset sales, while the successful commissioning of just one of the four EPRs under construction is years away. It may be that HPC, like the smile on the Cheshire cat, may simply fade away.