{"id":33801,"date":"2016-04-07T11:00:00","date_gmt":"2016-04-07T11:00:00","guid":{"rendered":""},"modified":"2020-10-20T10:22:21","modified_gmt":"2020-10-20T10:22:21","slug":"8801-hinkley-point-represents-a-terrible-deal-for-the-uk","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/8801-hinkley-point-represents-a-terrible-deal-for-the-uk\/","title":{"rendered":"Hinkley Point represents a &#8216;terrible deal&#8217; for the UK"},"content":{"rendered":"<p>Doubts are growing about the future of the UK\u2019s biggest nuclear power project, an&nbsp;EPR reactor at Hinkley <a href=\"https:\/\/dialogue.earth\/en\/energy\/9163-doubts-pile-up-about-uk-s-hinkley-nuclear-plant\/\">Point<\/a> in western England,&nbsp;which is partly funded by the Chinese company China General Nuclear (CGN). The \u00a318 billion (145 billion yuan) reactor, to be built by <a href=\"https:\/\/www.edf.fr\/\">Electricite de France<\/a> (EDF), has suffered from repeated delays and escalating costs, and is still not finally approved by the EDF board.<\/p>\n<p>The cost and the uncertainty associated with the design has stoked&nbsp;mounting criticism of the project in the UK, and the EDF\u2019s insistence on continuing recently precipitated the resignation of the company\u2019s finance director, Thomas Piquemal.<\/p>\n<p>Hinkley Point C\u2019s troubles increased further in March&nbsp;when the <em>Financial Times<\/em>&nbsp;<a href=\"https:\/\/www.ft.com\/cms\/s\/0\/2ef61abe-f5b1-11e5-96db-fc683b5e52db.html#axz\">published a document<\/a> in which senior engineers from the company recommended that the plant be redesigned, and the start date postponed by two years to 2027.<\/p>\n<p>This was&nbsp;followed soon after&nbsp;by a letter written by <a href=\"https:\/\/www.theguardian.com\/business\/2016\/mar\/30\/edf-board-member-hinkley-point-c-project-postponed\">Christian Taxil<\/a>, EDF\u2019s employee director and a board member, to the company\u2019s employees, in which he described EDF\u2019s promise to commission the plant within 72 months of beginning construction as \u201cnot credible\u201d.<\/p>\n<p>If the project was submitted to him today, he wrote, &nbsp;\u201cI can only say that the conditions do not exist for me to give a positive opinion.\u201d<\/p>\n<p>EDF has tried to build the EPR design several times, but has not yet completed any of the reactors. The first two, in Olkiluoto in Finland and Flamanville in northern France, have both suffered years of delay and cost overruns.&nbsp;Two further plants in China were due to start operations in 2014 and 2015, but the first will not come online until 2017.<\/p>\n<p>The French state owns 85% of EDF, but the company has found it difficult to put the finance for Hinkley Point C together. In October 2015, CGN agreed to pay a third of the cost in exchange for a 33.5% stake, but the funding for the remaining 66.5% remains unsecured, and EDF is likely to appeal to the French government for support.<\/p>\n<p>The plant was supposed to come online in 2017 to fill a gap in UK power generation caused by the planned closure of the country\u2019s ageing fleet of nuclear plants, many of which are in operation since the&nbsp;1960s. Meeting the shortfall became more urgent when the UK government decided to close all the UK\u2019s remaining coal fired power stations by 2025. But repeated delays mean that Hinkley Point, which could&nbsp;supply up to 17%&nbsp;of the&nbsp;UK&#8217;s power demand on some days, will not come on line before 2025, if at all.<\/p>\n<p>Meanwhile, there is a growing chorus of criticism of the project. Giving evidence to the <a href=\"mailto:https:\/\/www.parliament.uk\/business\/committees\/committees-a-z\/commons-select\/energy-and-climate-change-committee\/news-parliament-2015\/new-nuclear-update-evidence-15-16\/#%20\">Parliamentary Committee on Energy and Climate Change<\/a> in March, Peter Atherton, managing director and head of European utility sector research at <a href=\"https:\/\/www.jefferies.com\/\">Jefferies bank<\/a>, said&nbsp;the project offered \u201cvery poor value for money in the contract, and a very high level of risk to the UK consumer and taxpayer.\u201d Since the UK government had not publicly costed the benefits that they claimed the project would bring in energy security, climate mitigation or guaranteed baseload power,&nbsp;it was not possible to determine whether those benefits outweighed the escalating costs, Atherton added.<\/p>\n<p>Simon Taylor of the <a href=\"https:\/\/www.jbs.cam.ac.uk\/home\/\">Judge Business School,<\/a> a supporter of nuclear power in the UK, agreed that Hinkley Point offered poor value for money, though he saw some benefit to keeping the UK\u2019s nuclear option open.<\/p>\n<p>Douglas Parr, the chief scientist and policy director of Greenpeace UK, which opposes nuclear power, pointed out that since the decision was taken to build new nuclear capacity, the UK has saved the equivalent of Hinkley Point\u2019s output through energy efficiency measures and built enough wind power to generate as much as Hinkley would&nbsp;produce. Rapid developments in renewable generation and in storage, he argued, had moved the focus away from nuclear and now, outside China, few countries have planned to build <a href=\"https:\/\/Hinkley Point represents a 'terrible deal' for the UK\">new nuclear<\/a> on a&nbsp;major&nbsp;scale.<\/p>\n<p>The lack of new projects means that there are several suppliers chasing very few opportunities, which all three experts agreed made Hinkley Point even <a href=\"https:\/\/www.chinadialogue.net\/article\/show\/single\/en\/8287-Case-for-nuclear-wanes-as-grids-adapt-to-renewable-energy\">poorer value<\/a> for UK consumers.<\/p>\n<p>EDF has been obliged to appeal to the French government for support through its financial difficulties. Once the plant comes on&nbsp;line, the British government has promised to pay EDF a price equivalent to twice the current wholesale price of electricity for 35 years, under a so called \u201ccontract for difference.\u201d<\/p>\n<p>Under these terms, agreed in 2013, the UK government has committed domestic consumers to pay a \u201cstrike price\u201d of \u00a392.50 per megawatt hour (MWh), index linked. The wholesale price of electricity in the UK at present is about \u00a344\/Mwh. In the unlikely event of the market price of electricity rising above &nbsp;\u00a392.50\/Mwh, EDF would have to refund the difference to consumers.<\/p>\n<p>As&nbsp;Peter Atherton explained, the price difference made Hinkley Point C a \u201cterrible deal\u201d for the UK.<\/p>\n<p>\u201cIn 2025,\u201d he explained, \u201cwhen Hinkley Point C is due to come on line, the strike price, index linked, will be \u00a3125.00\/Mwh. &nbsp;For this to be a reasonable price, oil would have to be at US$230 a barrel&#8230; It is expensive to build, but once it starts to produce, it is pure gold for the company since it gives them a 30 year guaranteed cash flow.\u201d<\/p>\n<p>It was a particularly bad deal for the consumer, he explained, since the UK could have commissioned much cheaper plants with proven technology. &nbsp;As it is, the cost, uncertainty and delays at Hinkley Point threaten to become a political and economic embarrassment for the UK government.<\/p>\n<p>Vincent de Rivaz, the CEO&nbsp;of EDF Energy and the man in charge of the Hinkley Point project, insisted that he is \u201cabsolutely confident\u201d that the plant will be built because it had the backing of the French government. He cited a recent statement by the French economy minister, Emmanuel Macron, who said that EDF would make a final investment decision in \u201cearly May,\u201d but he was unable to clarify the date of a decision that has already been postponed several times.<\/p>\n<p>Zhu Minhong, the general manager of International Nuclear Business Development Department and general director of UK Nuclear Projects for CGN, told the committee that CGN also remained committed to Hinkley Point and that the company hoped to learn through its participation how to deal with the UK regulatory environment. \u201cOur commitment remains,\u201d he said, \u201cand we will be helping EDF to make it a success.\u201d CGN also plans to built new nuclear plants at Sizewell and at Bradwell in the UK,&nbsp;where CGN hopes to deploy Chinese EPR1000 technology.<\/p>\n<p>Asked&nbsp;what effect it would have on his confidence if Hinkley Point&nbsp;did not proceed, Mr Zhu declined to answer, beyond listing the benefits that he claimed Hinkley Point would bring to the UK.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Repeated delays, doubtful technology and rising costs have\u00a0united supporters and opponents of nuclear energy in criticism of Hinkley\u00a0Point, writes Isabel Hilton\u00a0<\/p>\n","protected":false},"author":59,"featured_media":58625,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758,757],"tags":[570,585],"hashtags":[],"country":[],"class_list":["post-33801","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-energy","tag-nuclear","tag-renewables"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Hinkley Point represents a &#039;terrible deal&#039; 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