The government has moved to shore up flagging support for Britain’s first new nuclear power station in 20 years with a £2 billion support package for Hinkley Point C.
The financing guarantee, backed by taxpayers, was announced as George Osborne arrived in China for final talks about the troubled project to build two giant 1.6-gigawatt nuclear reactors in Somerset — enough to supply electricity to six million British homes.
Despite mounting criticism of the estimated £24.5 billion cost of the new station, to be built by EDF Energy, of France, and bankrolled partly by the Chinese government, the chancellor said that he was determined to press ahead with a project that he claimed would boost UK energy supplies and revive Britain’s standing as a world leader in nuclear energy.
“Nuclear power is cost competitive with other low-carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas,” he said. “I am delighted to announce this guarantee for Hinkley Point today and to be in China to discuss their investments in Britain’s nuclear industry.”
The Hinkley project has suffered repeated delays and mounting criticism as costs have spiralled.
No final investment decision has been taken by EDF and its Chinese partners, although there has been speculation about a final announcement during a visit to London next month by Xi Jinping, the Chinese president.
When first proposed in 2008, the two reactors at Hinkley were expected to cost about £5.6 billion to build and to be in service by the end of 2017.
EDF recently acknowledged that the station would not enter service before 2024, and the European Commission has estimated that its total cost will be £24.5 billion.
Critics have also pointed out that the technology to be used in Hinkley — the French EPR reactor — is still not in use anywhere in the world, raising concerns about its reliability. EPR projects in Finland and Flamanville, France, have suffered huge cost overruns and are still under construction.
In a deal that has been heavily criticised, in 2013 ministers promised the French energy giant that it would be paid a fully indexed £92.50 for every megawatt hour of electricity generated by the proposed Somerset power station for 35 years — more than double the present wholesale price of electricity.
Peter Atherton, an energy analyst with Jefferies, the US investment bank, said that the high guaranteed price, to be paid through a levy on consumer bills, would ensure that the Hinkley station would be a “goldmine” for EDF Energy for decades to come.