One of Britain’s most controversial energy projects for decades – the £24.5bn nuclear power development at Hinkley Point in Somerset – is poised to get the green light.
After years of wrangling, the Government and EDF – the energy giant that will operate Hinkley Point C and own around half of it – have agreed a deal that would guarantee EDF a price of £92.50 per megawatt hour of the electricity it generates, rising with inflation, up to 2061. That’s nearly three times the current price, suggesting households may have to hand over a substantial subsidy to the French state-controlled generator in the form of higher bills.
Advocates of the arrangement argue that the new reactors, due to start generating in 2026 and to account for 7 per cent of UK consumption, will provide a secure, low-carbon and predictable supply of electricity – something that can’t be said of renewable power sources such as wind and solar.
They also say it will generate billions of pounds of investment and thousands of jobs and that, although it may sound expensive, the so-called strike price compares favourably with other forms of clean energy, which are essential if the UK is to meet its targets to cut greenhouse gas emissions.
The Department of Energy and Climate Change (DECC) has gone so far as to say households will be £74 a year better off in today’s money by 2026-30 than they would be without Hinkley Point C.
But the detractors are not in the least bit convinced, with analysts, politicians and even some rival power companies dismissing the project as a colossal waste of money. Shortly before his sudden departure from RWE Npower this week, the chief executive of the big six provider, Paul Massara, said future generations would look back on Hinkley Point C as an “expensive mistake”.
Despite the strength of opposition to the project, David Cameron is expected to sign a final deal in October during Chinese President Xi Jinping’s visit to the UK; the Chinese are big backers of the project.
A DECC spokesman insisted that “the deal must represent value for money and is subject to approval by ministers”. But with so many questions hanging over such an extraordinarily expensive and complex project, will it actually get built?
We look at some of the main challenges to completion.
The political justification
An in-depth report into Hinkley Point C by HSBC bank saw “ample reason for the UK Government to delay or cancel the project”. It argued that the justification for the plant was “receding” because the UK’s energy consumption is falling just as a threefold rise in the number of giant interconnectors, hooking the country up with mainland Europe, means we could import energy much more cheaply than generating it at Hinkley Point.
Furthermore, while UK electricity generation is set to fall, capacity looks set to hold up surprisingly well, in part because of rising wind and solar power. As a result, the strike price is very difficult to justify, HSBC argued.
But while these might be reasons for the Government to pull out of the project, it won’t be able to once the deal has been signed. And if the problem is that the strike price is too high, it’s unlikely that EDF or the other funders will want to pull out either.
The new reactors at Hinkley Point will use the EPR – European Pressurised Reactor – model, a highly sophisticated new design that is supposed to be safer and more efficient than older reactors, but which has been fraught with problems and is not yet up and running at any site in the world.
The three other sites planning to use the new model have all suffered huge delays – in Finland, France and China – and Hinkley Point would be the fourth. Concerns about EPRs have mounted this year after a potentially catastrophic mistake was identified in the construction of an identical EPR power plant in Flamanville, Normandy. At the heart of the problem was the 50ft-high safety casing, or “pressure vessel”, enclosing the reactor, which appeared to have been made inaccurately. This meant the enormous cylinder, whose function is to prevent radiation leaks, could be liable to crack, the ASN nuclear watchdog warned.
A second problem has also emerged with the reactor cooling system at Flamanville.
But EDF is confident the problem will be overcome because it is a manufacturing rather than a design issue. Furthermore, it is subjecting the EPR reactor head previously destined for Hinkley Point to additional rigorous tests to help iron out the problems encountered at Flamanville. A new casing will be produced for the Hinkley Point EPR.
Analysts are concerned about the cost and time delays associated with the EPR setbacks. However, they say these kind of problems are built into the strike price and deadline for the project, suggesting the hurdle will be overcome. As one analyst put it: A project like this should take six years and budget for £4bn a reactor; EDF has given itself 10 years and £8bn a reactor.
Problems at Areva
Areva, the French state-owned reactor designer behind the EPR model, has fallen deep into the red. It has not sold a new reactor since 2008 as problems with its reactors have pushed plants in France and Finland billions of euros over budget.
But EDF and the French government have moved to address Areva’s financial weakness, meaning it is unlikely to cause problems for the Hinkley Point project by going bust. EDF has agreed to take control of Areva’s main reactor division in a deal orchestrated – and with the implicit financial support of – the French government.
Austria has launched a legal challenge to the European Commission’s ruling that the guaranteed price for the new Hinkley Point reactors amounts to legal state aid.
The case is expected to drag on for two to three years but neither the Government or EDF seem hugely concerned by it – seeming keen to work on the basis that Austria will lose, and plough on with development. Their optimism is backed up by experts, who believe the commission’s judgement is legally solid and unlikely to be overturned – while the HSBC report said the Austrian case “represents only a minor irritant”.
If environmental concerns haven’t stopped the project by now, they are unlikely to in the future. The site has all the permits it needs – a task made considerably quicker and easier after the last Labour government changed the law, restricting public inquiries into these kind of infrastructure developments to very local issues such as noise and lorry movements. The issue of whether such a project was “needed” – a debate that took years with developments such as Sizewell B – was taken out and handed to government. This enabled Hinkley Point to clear environmental hurdles in less than a year.Reuse content