UK nuclear power enters new age with Hinkley deal - with householders footing the bill

Government to defend agreement to pay investors double the market price of electricity

Economics Editor

The French and Chinese investors in Britain’s first new nuclear power station in two decades will receive a guaranteed price of £90-£95 per megawatt hour of energy produced, the Department of Energy is expected to announce today.

The agreed “strike price”,  which will ultimately be footed by households, promises to be controversial because it is double the current market price for electricity and it comes as energy suppliers are imposing inflation-busting hikes in domestic bills.

The guaranteed price could also rise if the consortium does not take up the option of building another nuclear power station in the UK.

But Government sources insisted last night that the agreed price represents good value for households and that the construction of a new generation of nuclear power stations will,  ultimately, result in lower domestic energy bills.

The commercial agreement due to be signed today will see the French energy multinational EDF Energy and two Chinese firms – China National Nuclear Corporation and China General Nuclear Power Corporation –invest £16bn over the next decade to fund the construction of a new generation reactor at Hinkley Point in Somerset.

Government sources were keen to stress last night that the agreement will have no impact on domestic bills until the new plant comes on-stream in the early 2020s. And the Department of Energy estimates bills will be £77 a year lower in the 2030s than in the absence of any new nuclear power stations.

Today’s agreement will not be legally binding because the terms of the deal, which involves state aid, still have to be approved by the European Commission. A final investment contract is expected to be signed in the summer of 2014. The deal represents the culmination of two years of intense negotiations between the Government and private energy companies over nuclear investment. UK-listed energy firms, including British Gas-owner Centrica, have refused to invest in British nuclear power stations because they wanted a higher guaranteed price from the state.

“They demanded higher returns [than the Chinese and the French]” said a Government source last night. “[But] it’s a fair return and a lot of people in the City will be looking at this again and thinking ‘maybe we should have invested here’.” The Government hopes today’s nuclear deal will result in a “nuclear renaissance” in Britain.

Government sources said today’s agreement would ensure the guaranteed price came down if construction costs were lower than estimated and would not rise if they were higher. “We’ve gone through this with a fine toothcomb, learning from all the  mistakes of the past” said a source. However The Independent understands that unless EDF goes ahead with its plans to build another separate new  nuclear reactor in Sizewell in Suffolk, its guaranteed price for Hinkley  power will rise.

Last week British Gas raised its prices by 9.2 per cent, following SSE’s 8.2 per cent hike. Npower is expected to unveil its own increase this week. The big six energy companies say they are responding to increases in the wholesale price of energy and state-mandated environmental policies, but campaigners accuse the sector of profiteering.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue