Britain and nuclear power have never really fused. Reliance on foreign builders left would-be plants stranded when first Toshiba and then Hitachi pulled the plug. Now EDF, the French state-owned energy group, has warned it needs another £500m and six months before Hinkley Point C is operational.
EDF has already busted earlier budget estimates. The latest, pinned on Covid-19, brings the cost of the nuclear power station in Somerset to about £23bn. It will start generating power in mid 2026. Extended deadlines on a 10-year duration imply inflated costs — 3 per cent annually based on indexed gilts — and six months without income. That hits EDF’s bottom line, compressing its expected internal rate of return by 200-300 basis points to slightly more than 7 per cent. Spooked investors pushed the shares down 4 per cent.
Bad for EDF, but neither can UK taxpayers afford a Gallic shrug. The public purse is no longer on the hook for £2bn of debt, which it had originally guaranteed. But in order to make the venture profitable the UK has agreed to top up power prices to ensure Hinkley’s backers receive £92.50 per MWh — over double the average power cost of the past decade.
Consumers will shoulder an annual £10-£15 of this on their bills, according to earlier government estimates. But numbers move all the time. The National Audit Office forecast of the cost of guaranteed power prices rose from £6bn in October 2013, when Whitehall began negotiating the deal, to £30bn in March 2016.
Nuclear requires a long period for profitability. It also lacks offshore wind’s economies of scale and quickly produced turbines. Government, however, remains enamoured: openly applauding the diversity nukes offer and (more quietly) relishing the jobs it brings through the entire supply chain.
Two years ago, then business and energy secretary Greg Clark revealed the government considered taking a one-third equity stake in the Welsh project that Hitachi quit. That would have sent spinal frissons through older Tories who, under Margaret Thatcher, wrenched the state out of utilities. Ironically, Britain’s newest energy plant could see government reverting to older industrial models.
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