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Energy policy is hanging by a thread after the only credible company left to build nuclear reactors in Britain increased the price by 40 per cent to £7 billion each, The Times has learnt.

The soaring estimated costs could scupper the French state-backed EDF Energy’s project to build two reactors at Hinkley Point in Somerset. It would also leave Britain’s nuclear programme — and its energy policy — in tatters.

Ministers are relying on EDF Energy to build two reactors by the end of the decade to provide a secure supply of low-carbon power. The German companies E.ON and RWE have scrapped their plans to build as many as six reactors in the UK because they were unable to raise the cash.

EDF Energy will decide by the end of the year whether to proceed with the £14 billion plan, but experts said that the rising costs — and its parent company’s deteriorating financial position — made this less likely.

EDF Energy has briefed its partner Centrica about the internal cost review, which makes it even harder for the owner of British Gas to come on board. Speculation has mounted in recent weeks, fuelled by briefings by Centrica advisers, that the British company will pull out of the joint venture, for which it would have to pay a fifth of the costs. It is understood that the rise in costs for Hinkley Point is based in part on EDF Energy’s experience in building its first “third generation” modern reactor in Flamanville, France. The facility was supposed to be completed this year but is four years behind schedule. EDF Energy said last summer that it would cost €6 billion (£4.9 billion), compared with an original figure of €3.3 billion. It is understood that the cost is likely to increase.

The private sector rarely builds reactors on time or on budget. EDF Energy, which is heavily indebted, underestimated the complexity involved in building the reactor based on the new EPR design from the French company Areva. The Fukushima nuclear disaster last year added to the delay and cost as EDF Energy had to run stress tests on the Flamanville site.

EDF Energy had promised to complete the first Hinkley Point reactor by 2017, but the plan is already behind schedule by at least two years.

The French company and Centrica have spent about £1 billion in preparing the Hinkley Point site. There are also proposals to build another pair of reactors in Suffolk. EDF Energy had hoped that it would be cheaper to build reactors in Britain as more experience was gained in building the EPR design.

But Simon Harrison, of the consultancy Mott MacDonald, said that the UK supply chain had no experience in carrying out the requisite civil works, such as pouring concrete for a reactor base. He said that the £14 billion price for the reactors would put even more pressure on the Government to offer big subsidies for nuclear power to persuade EDF Energy to go ahead.

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