Hinkley nuclear plant approved but no detail on strike price

Posted on 19 Mar 2013 by Tim Brown

Planning consent was given today to build the first new nuclear power station in the UK since 1995, but the government would not provide the specifics of the planned 'strike price' agreement with French energy firm EDF who will build the new power plants.

The planned £14bn nuclear project at Hinkley Point in Somerset – to be operated by NNB Generation – will generate enough low carbon electricity to power the equivalent of five million households, making it one of the largest power stations in the UK.

Two new reactors will be built at Hinkley C, using technology supplied by French group Areva, and the station will support between 20,000 and 25,000 jobs during construction and 900 permanent jobs during operation.

“I am confident that the planning decision I have made is robust, evidence-based, compatible with the Energy National Policy Statements and is in the best interests of the country,” said the energy secretary Ed Davey.

“It’s vital to get investment in new infrastructure to get the economy moving. Low carbon energy projects will bring major investment, supporting jobs and driving growth.”

Mr Davey said that construction could begin as early as this year with EDF estimating that the power station could start generating electricity at the end of this decade or early next decade.

However, despite repeated requests from members of parliament, Mr Davey refused to disclose any detail of the proposed ‘strike price’ which will dictate the minimum cost paid for energy generated by the new nuclear plants.

“In terms of details of the negotiations, ‘claw backs’ and the actual price, I’m not going to be drawn on those. We are determined to get a price that is value for money, is fair and affordable and bears scrutiny,” he told the Commons.

Providing context to today’s decision, Liberal Democrat MP Martin Horwood opined in parliament that the “planning decision does not actually represent a decision to go ahead with Hinkley C” and that it “pales in significance beside the strike price negotiation”.

Mr Horwood estimated that the strike price would be £97 per megawatt hour. He said that over a 35-year period, the estimated lifespan for a nuclear power plant, the price would “guarantee an uncompetitive French nationalised energy company nearly £90bn overtime from British bill payers”.

Concerns were also raised in parliament as to whether or not the negotiations with EDF would contravene the European Community Founding Treaty which generally forbids state aid.

Asked why other countries such as Spain and Germany were reducing their reliance on nuclear while the UK was planning on increasing its use, Mr Davey said that to tackle climate change, “we need every form of low carbon generation possible“.

“The risk is so great and the challenge is so great I think it is wrong for people who are worried about climate change to turn their back on this issue,” he said.

The energy secretary conceded that nuclear build projects in recent years, such as that in Finland, have proven to be “over budget and out of their original time schedule”. “This is why we, in our approach to these negotiations and our whole approach to the new nuclear programme, are being extremely careful, learning the lessons from the past and learning lessons from other countries so we do not repeat those mistakes.”

Commentators agreed in general that the strike price was crucial but that formal Westminster approval was still a significant step. “After two years of turbulence, nuclear new build is finally back on track, this is tremendous news both for EDF Energy and the wider UK Energy Plc,” said Martin McKervey, partner at law firm Nabarro who works in the energy sector.

“The expectation of a nuclear renaissance is now realistic but the concerns remain, can the industry deliver on budget and on schedule? This represents the first new nuclear plant in a generation and the UK manufacturing, engineering and energy related supply chains must seize the opportunity this will present.”

Roger Salomone, head of business environment policy at EEF, said the move was a key step in a more balanced energy mix for Britain. “Nuclear power has a key role to play in ensuring that industrial consumers have access to secure and affordable low carbon energy,” he said. “The government must now work with industry to ensure that UK manufacturers are well-positioned to take advantage of the major business opportunities this project will generate. “