British MPs question value of Hinkley Point project

The House of Commons public accounts committee has concluded that UK households have been dealt a "bad hand" by the cost of the so-called strike price - the fixed cost for electricity generated - for the Hinkley Point C nuclear power plant project in Somerset, England. The committee of British members of parliament scrutinised the terms of the contract-for-difference (CfD) agreed between the government and the planned plant's operator EDF.

In a report on the project published yesterday, the committee said the strike price of GBP92.50 ($123.12) per megawatt hour, agreed in 2013 and confirmed last year, would cost billpayers GBP30 billion over the length of the 35-year contract. This would mean, it said, an increase of GBP10-15 to the average household energy bill.

Hinkley Point C is the first nuclear power station to be built in the UK since 1995 and will cover 7% of the country's electricity needs from the mid-2020s.

"The committee is concerned consumers are locked into an expensive deal lasting 35 years and that the government did not revisit the terms between the original decision to go ahead and now, despite estimated costs to the consumer having risen five-fold during that time. Over the life of the contract, consumers are left footing the bill and the poorest consumers will be hit hardest. Yet in all the negotiations no part of Government was really championing the consumer interest," the report says.

The government sees Hinkley Point C and other planned nuclear projects as central to its strategic aim of managing the energy 'trilemma' - ensuring a secure supply of energy that is affordable for consumers while helping the UK meet its statutory target to reduce carbon dioxide emissions by 80% in 2050 compared with 1990 levels, the report noted. The Department for Business, Energy and Industrial Strategy (BEIS) therefore agreed a deal to support construction of Hinkley Point C in September 2016. The deal is with NNB Generation Company Limited, which is owned 66.5% by EDF and 33.5% by China General Nuclear Power Group.

In preparing its report, the committee took evidence from Alex Chisholm, permanent secretary at BEIS, Charles Roxburgh, second permanent secretary to the Treasury, Stephen Lovegrove, former permanent secretary at the Department for Energy and Climate Change, Hugo Robson, chief commercial negotiator at BEIS, and John Kingman, former second permanent secretary to the Treasury and now chairman of UK Research and Innovation.

Recommendations

The committee makes six recommendations.

Firstly, as part of its development of the industrial strategy, BEIS needs to put a plan in place for realising the wider strategic and economic benefits of Hinkley Point C, it said. The plan should explain how it will prove those benefits have been achieved.

Secondly, by next March, BEIS should tell the committee how it will ensure there is an independent and transparent assessment of the impacts on consumers, including the impacts on the poorest households, when agreeing future energy infrastructure deals that are paid for through consumers' bills.

Thirdly, BEIS should re-evaluate and publish its strategic case for supporting nuclear power before agreeing any further deals for nuclear power stations.

Fourthly, BEIS and the Treasury should show decision makers the cost and risk implications of different possible financing structures when appraising large infrastructure projects, including its further nuclear deals, even if they are outside the prevailing policy.

Fifthly, BEIS should ensure it publishes its 'Plan B' for achieving energy security, while at the same time delivering on its decarbonisation and affordability ambitions, before the end of this year and should review and revise it every year in light of the latest progress at Hinkley Point C.

Finally, BEIS must ensure on an ongoing basis that the Low Carbon Contracts Company has the skills, capacity and access rights that enable it to monitor delivery on the Hinkley Point C project effectively.

EDF said in July that it estimates the cost of the project to build two UK EPRs to now total GBP19.6 billion, up from its earlier estimate of GBP18.1 billion. The target date for first operation of unit 1 remains by the end of 2025.

The UK EPR design became the first reactor design to complete the country's Generic Design Assessment process and receive a Design Acceptance Confirmation from the Office for Nuclear Regulation (ONR) and a Statement of Design Acceptability from the Environment Agency, in December 2012. In March, the ONR granted its first consent for the start of construction of a nuclear power plant at Hinkley Point C.

The government also has 34 CFDs as part of its renewable energy programme, which will provide another 7% of UK electricity.

In November 2016, Paul Spence, EDF's director of strategy and corporate affairs told the House of Lords Economic Affairs Committee in its inquiry The Economics of UK Energy Policy that those 34 CfDs on average will cost consumers GBP120-130/MWh. By contrast, Hinkley will cost consumers GBP92.50/MWh and is thus cost competitive, he said.

Researched and written
by World Nuclear News