Hinkley Point C takes one step closer to reality
Hinkley Point C, the proposed nuclear power station in Somerset, may at last be on the final straight in the journey towards a definitive investment decision. Hinkley will consist of two large EPR reactors, with a capacity of 1.6GW respectively, which would be capable of generating roughly 7% of Britain’s electricity requirements.
Chancellor of the Exchequer George Osborne, who is in China for a five-day visit to attend the seventh UK-China Economic and Financial Dialogue in Beijing, announced towards the end of September that the UK will guarantee up to £2billion in investment for the nuclear plant.
The planned nuclear plant at Hinkley has been beset by delays, with reports even as recent as the beginning of last month telling of delays and deadline push-backs. Unite, Britain’s biggest trade union, called on Energy Secretary Amber Rudd to push for an investment decision, with its national officer Kevin Coyne warning that ‘business and domestic consumers face the very real prospect of power cuts and the lights going out in the years to come, if the final investment decision on Hinkley Point is not made very soon.’ This urgency is born of the necessity of closing the UK’s remaining coal-fired power plants before 2023 under EU air quality rules.
Mr Osborne said that the guarantee would make it possible for a final investment decision to be taken on the delayed project by French energy company EDF, which announced in February that it had pushed back decisions surrounding investment in the plant. The guarantee also ‘paves the way for Chinese investment in UK nuclear’, according to Osborne, which refers to China’s state power companies, China General Nuclear and China National Nuclear Corporation, taking a large minority stake in Hinkley as well as a follow-up project at Sizewell, Suffolk. They will also gain rights from EDF to develop a reactor at Bradwell, Essex, making the French company a ‘minority partner’. This plant would be the first in the West to use an exclusively Chinese design, and details of the deal are expected to be revealed during a Chinese state visit to the UK this month.
The government investment guarantee will be provided by Infrastructure UK, a branch of HM Treasury, under the provisions granted by the Infrastructure (Financial Assistance) Act 2012, which allows the government to issue guarantees to projects meeting a broad definition of infrastructure, spanning energy, transport, health, education, courts, prison and housing concerns. The UK Guarantees Scheme is intended to avoid the delays to investment in UK infrastructure projects which may arise from adverse credit conditions, by issuing an unconditional and irrevocable guarantee to lenders that scheduled interest and principal payments will be paid in full, irrespective of project performance, in return for a fee.
This government guarantee makes a final investment decision much more likely, and more likely to be made in a timely fashion, and if the Hinkley Point C installation goes ahead some 25,000 new jobs will come into being. However, with an existing shortfall in relevant skillsets, it remains to be seen whether this will have much of an impact on unemployment levels.
The development is still not out of the proverbial woods, however, and is beset by controversy. This is engendered in part by the enormous up-front costs (the plant is expected to cost around £25bn, making it the most expensive in the world), as well as safety issues which have forced a revision of the original 2019 target for power production until at least 2023. The controversy does not end there however, as the current deal with EDF guarantees them twice the current price of wholesale electricity for power generated by the installation. It is important to note, however, that the Chancellor has stated that any pricing guarantees are “not set in stone” and would be “subject to final negotiation”. He also added that nuclear power would still be “substantially cheaper than other low-carbon technology, such as offshore wind and onshore wind”.
It remains to be seen whether Hinkley will be the beginning of the end of Britain's energy problems, or will in fact prove to be the ‘bottomless pit and white elephant’ it was branded by Lord Turnbull, former Cabinet Secretary, last month.
CBSbutler's Energy Consultant, Matthew Bone, is very excited about the employment opportunities which the new plant may provide, and will be watching developments closely.
If you are interested in a career in Nuclear or Renewable energies, give Matt a call on 01737 821001 or send your CV to email@example.com.