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Nuclear Power Plant Will Cost UK Consumers £83 Billion

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Emily Gosden, The Sunday Telegraph

A landmark deal to build Britain’s first nuclear plant in a generation is set to be signed tomorrow. A 35-year contract at £92.50/MWh would guarantee revenues for the French Government’s EDF of £83bn in real terms.

Hinkley Point in Somerset, where a twin-reactor power plant is planned for construction
Ministers are expected to announce an agreement with EDF Energy to guarantee the French energy giant tens of billions of pounds of revenue for the proposed £14bn Hinkley Point plant in Somerset. Photo: Simon Dawson/Bloomberg
Ministers are expected to announce an agreement with EDF Energy to guarantee the French energy giant tens of billions of pounds of revenue for the proposed £14bn Hinkley Point plant in Somerset.

Leaders of rival energy firms warned this weekend that the deal will lead to increases in consumer bills to fund subsidies for the plant.

The Sunday Telegraph understands that two Chinese nuclear power giants will both take stakes in the project – China National Nuclear Corporation and China General Nuclear Power Corporation. Their stakes could total 30pc, while Areva, the French company that will supply the reactors for the plant, may also take a 10pc stake.

The Government will hail the subsidy agreement, which follows a long period of intense negotiations, as triggering the revival of Britain’s nuclear industry. Ministers want Hinkley, which could generate 7pc of Britain’s energy needs, to be the first of a series of plants to replace the existing nuclear network.

But ministers will face scrutiny over the subsidy consumers will pay, amid anger over rising energy bills.

Supplier npower is expected to raise energy prices this week, following  increases of more than £100 to typical bills by British Gas and SSE in the past fortnight. The companies have claimed rising green taxes are partly to blame.

SSE and npower today call on ministers to admit that the nuclear deal will further add to bills in the future.

Under the deal, EDF will be guaranteed about £90 to £93 for every megawatt hour of power Hinkley Point generates for 35 years from when it starts operating in the early 2020s.

The market price – currently about half that level – will be “topped up” through levies. […]

Ed Davey, the Energy Secretary, will insist that investing in nuclear will save consumers money compared to the costs of doing nothing and that nuclear is cheaper than offshore wind, which toward the end of this decade will be offered £135/MWh for 15-year contracts.

Official government estimates show that the cost of new subsidy contracts for nuclear plants and wind farms will together add £114 to energy bills by 2030.

Mr Davey is expected to deny that the deal represents a subsidy.

The deal will require EU state aid clearance, a process that could delay EDF’s final investment decision well into next year.

Analysis for The Sunday Telegraph by CF Partners, the advisory and investment firm, suggests that Hinkley Point could directly add £8 a year to average household bills when it starts generating.

Roland Vetter, head of research at the firm, said a 35-year contract at £92.50/MWh implied guaranteed revenues for EDF of £83bn in real terms. Based on his estimate of increases to market power prices by 2020, that would imply total subsidies of £800m a year or £8 for an average household in today’s money, if subsidies were spread evenly among all consumers.

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