Finance agreed for new nuclear plant

21st October 2013


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IEMA

French energy giant EDF and backers from the Chinese nuclear sector are to spend £16 billlion building the UK's first nuclear power station since 1995

After extensive negotiations, the government has finally agreed financial terms with EDF to build a new nuclear power plant, Hinkley Point C, in Somerset.

The plant is due to come into operation in 2023, some 28 years after the UK’s last nuclear reactor, Sizewell B, came online. It will generate enough power to meet around 7% of the UK’s electricity needs, while cutting carbon emissions by 9 million tonnes a year, according to Decc.

EDF and its minority investors, CGN and CNNC, have agreed to spend £16 billion on building the new plant, and the government has confirmed it will pay £92.50 for every MWh of electricity the plant generates.

The “strike price” for nuclear electricity under the contract, which will apply for 35 years after the plant becomes operational in 2023, is similar to those proposed for onshore wind and hydroelectric plants from next year.

Under the government’s proposed delivery plan for electricity market reform (EMR), hydro plants generating up to 5MW of electricity will receive a strike price of £95/MWh from 2014/15, while similar sized onshore wind farms will receive £100/MWh between 2014/15 and 2016/17, falling to £95/MWh up to 2018/19.

Energy secretary Ed Davey, who granted planning permission for a new nuclear plant at Hinkley in March, said that the agreement was “an excellent deal for Britain and British consumers”.

“This deal is competitive with other large-scale clean energy and with gas,” he said. “And, while consumers won’t pay anything up front, they’ll share directly in any gains made from the project coming in under budget and from refinancing.

“The new plant will increase energy security and resilience from a safe, reliable, home-grown source of electricity.”

CBI director-general John Cridland welcomed the announcement, arguing that nuclear power will be key in meeting the challenges of decarbonising energy and maintaining security of supply.

“New nuclear plants must be a fundamental feature of our future energy landscape, and Hinkley Point C is the starter gun to securing the investment we need,” he said.

“It’s important to remember this investment will help mitigate the impact of increasing costs. The fact is whatever we do, energy prices are going to have to go up to replace ageing infrastructure and meet climate change targets – unless we build new nuclear as part of a diverse energy mix.”

However, the agreement between the government and EDF was labelled “misguided” by the Scottish energy minister, Fergus Ewing. He warned that the 35-year contract for difference was more than twice that being made available to renewable technologies under current EMR plans.

“The cost of this single station alone is comparable to the £43 billion the UK government’s budget is assigned for all energy technologies between 2013/14 and 2020/21,” said Ewing.

“The guarantee of support and subsidy under this contract until after the middle of this century sits in sharp contrast with the lack of a UK government commitment to support our offshore renewables sector and its potential beyond 2020.”

The news also came as research from the Energy Savings Trust confirmed that the public are concerned about shortages of energy in the next five years.

More than one-quarter of the 2,000 adults surveyed, believe that it will be difficult to supply enough energy to meet the UK’s needs by 2018, and 52% say they would be willing to cut their own energy use to prevent shortages.

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