Press speculation has mounted within the last few days as to whether agreement has been reached on a strike price for nuclear power from the proposed Hinkley Point C station. The Telegraph had suggested that agreement had been reached for a price of between £90-93 MW/hour for a 35 year period. Then The Times on 10 October, without attribution, has suggested that under the deal which has been “hammered out” between the Government and EDF is £93 over 40 years. The Government has then denied that any deal has been reached and that talks are continuing, and that no deal will be agreed to unless it is “value for money, fair and affordable” – words almost as widely used as “hard-working families”. EDF has declined to comment. However, a £93 per MW/hour deal would not be unexpected: previously the Government has been offering £80 and EDF asking for £100. A figure significantly below £100 would be construed as implying that the Government had agreed to take a greater share of the risk.
The package agreed as a whole will need to clear the hurdle of EU state aid rules. In a bit of a setback for the Government on this aspect, it has also been reported recently that specific reference to nuclear energy has been removed from an early Commission draft of state aid guidelines, apparently at the behest of Germany and some other EU non-nuclear states, and after a spat with the EU’s Climate Service, who have argued that nuclear is a mature enough technology not to need state support. This means that Hinkley C will have to blaze its own trail on its merits, by reference to EU case law.
Interestingly, The Times at the same time has suggested that China General Nuclear Power Group (formerly Guangdong Nuclear) will take a 49% stake in the project, and is indeed in talks with EDF to acquire interests in further possible sites. The prospect of Chinese controlled nuclear projects in the UK is of course political dynamite, but the timing of a deal coincident with agreement on pricing with the Government would be no accident.
In any event, time isn’t on the Government’s side. Warnings as to the capacity margin before a severe winter brings electricity shortages become ever starker, and every month that passes before the button is pressed on constructing Hinkley C increases that risk. As Tim Yeo MP, Chair of the Commons Energy and Climate Change Committee, has said (in a masterpiece of understatement) there will be a lot of support for finally getting the project under way.
The prospects for large scale carbon capture and storage remain somewhat becalmed within Europe, and it cannot be relied upon as obviating the need for new nuclear capacity. Further, although there have been claims that the cost of renewable is falling, The Times reported on the same page as the item about Hinkley that projects to build offshore windfarms as part of the so called “Round 3” may be in difficulty – the Offshore Wind Developers Forum has written to DECC to say that the subsidies currently on offer are too low and too short in duration, and that SSE is considering pulling out of its Round 3 projects. The piece illustrates the huge capital cost of such offshore projects, estimated at £50 billion in total, which to put it in context is more than the latest official estimates for HS2. The key problem may lie in the fact that prices for the electricity are guaranteed only until 2020, so that developers and funders fear that the tap may be turned off after that date, perhaps in favour of other technologies (nuclear?) Failure of these projects to proceed would be a blow in a number of respects, nit least in the failure to create substantial numbers of jobs through construction and the supply chain. There is therefore still a great deal to play for.
