Britain’s nuclear rebirth signed off - with Chinese investment

Building of major new nuclear plant announced

PUBLISHED : Monday, 21 October, 2013, 12:01pm
UPDATED : Monday, 21 October, 2013, 12:02pm

Britain will on Monday embark on building the first nuclear power station for two decades as the coalition government hands a multibillion subsidy to France’s EDF with help from a state-owned Chinese firm.

The two planned pressurised water reactors at Hinkley Point C, Somerset, south-west England, are the first to start construction in Europe since Japan’s Fukushima disaster and the first in the UK since the Sizewell B power station came online in 1995.

The new reactors, which will cost GBP14bn, are due to start operating in 2023 if constructed on time and will run for 35 years. They will be capable of producing 7% of the UK’s electricity - equivalent to 7m homes.

After months of delay, the news came as the coalition has come under intense pressure over rising electricity bills. Gas suppliers British Gas and SSE have both announced price rises for customers of close to 10% and Labour party leader Ed Miliband’s promise to freeze energy bills has struck a chord with voters.

Over the weekend, the archbishop of Canterbury waded into the row over energy prices, warning that the latest wave of hikes looks inexplicable. Justin Welby, a former oil executive, insisted the big six companies had an obligation to behave morally rather than just maximising profit. “They have control because they sell something everyone has to buy. We have no choice about buying it,” he told the London-based Mail on Sunday. “With that amount of power comes huge responsibility to serve society.”

The guaranteed subsidies promised by the government for Hinkley Point C will lead to accusations that ministers are loading a further cost on spiralling energy prices by again requiring British taxpayers to subsidise nuclear power.

The coalition counters that similar subsidies are going to other carbon-free industries such as renewables and that the country needs the energy security and steady base load that nuclear provides. Gas prices, although relatively low, are predicted to rise.

Britain is taking a sharply different route to Germany, which has decided to phase out nuclear power, and Italy, which has scrapped a planned nuclear programme. France, traditionally the nuclear enthusiast, has pledged to cut atomic power to 50% of its electricity mix from 75%today.

The strike price will be announced today, following two years of complex negotiations. Industry sources have put the price at around GBP89-GBP93 per megawatt, nearly twice the market price of energy. EDF was thought to have started negotiations demanding a figure of GBP100, with the Treasury’s gambit being GBP80.

The precise cost will depend on whether EDF presses ahead with a second plant at Sizewell, Suffolk, east England, something that would reduce the price further.

Ministers will come under twin attack from green groups, both for endangering safety and providing subsidy, as well as from enthusiasts for shale gas for failing to put their faith in cheap gas, currently nearly half the cost of nuclear.

The UK’s energy secretary, Ed Davey, is preparing to counter green groups by arguing that onshore or offshore wind could not fill the energy gap created by the decommissioning of the first wave of power stations. By some estimates, Hinkley Point C will generate the equivalent output of 6,000 onshore wind turbines. EDF’s longtime partner, China General Nuclear Power Group (CGN), possibly in combination with China National Nuclear Corporation (CNNC), is expected to have a 30% to 40% stake in the consortium, with Areva taking another 10%, according to French weekend newspaper reports. The deal is thought to provide a 10% return on EDF’s investment.

The coalition policy is ironically being led by the Liberal Democrats - the party that had, in principle, opposed nuclear power right up until its party conference in September. The deal is a huge gamble for both the government and EDF, since projecting the state of the electricity market and wholesale prices 35 years ahead is fraught with risk.

The deal comes amid an increasingly bitter row over electricity prices in Britain, with two of the main six utilities announcing more than 8% rises for this winter. There are expected to be further rises announced by the big six this week.

Michael Fallon, the Conservative energy minister, signalled another review of the green subsidies imposed on energy firms, but Davey said: “It only takes a GCSE [an exam taken between the ages of 14-16 in England and Wales] in maths to recognise that green subsidies are not pushing up prices. It is a fact that 47 % of energy prices come from wholesale prices and they have risen 50 % on five years.”