21 October 2013
Last updated at 09:50
The government has given the go-ahead for the UK’s first new nuclear station in a generation.
France’s EDF Energy will lead a consortium, which includes Chinese investors, to build the Hinkley Point C plant in Somerset.
Ministers say the deal will help take the UK towards low-carbon power and lower generating costs in future.
Critics warn guaranteeing the group a price for electricity at twice the current level will raise bills.
“For the first time, a nuclear station in this country will not have been built with money from the British taxpayer,” said Secretary of State for Energy Edward Davey.
The two reactors planned for Hinkley, which will provide power for about 60 years, are a key part of the coalition’s drive to shift the UK away from fossil fuels towards low-carbon power.
Ministers and EDF have been in talks for more than a year about the minimum price the company will be paid for electricity produced at the site, which the government estimates will cost £16bn to build.
The two sides have now agreed the “strike price” of £92.50 for every megawatt hour of energy Hinkley C generates. This is almost twice the current wholesale cost of electricity.
This will fall to £89.50 for every megawatt hour of energy if EDF Group goes ahead with plans to develop a new nuclear power station at Sizewell in Suffolk. Doing both would allow EDF to share costs across both projects.
Mr Davey said the deal was “competitive” with other large-scale clean energy and gas projects.
“While consumers won’t pay anything up front, they’ll share directly in any gains made from the project coming in under budget,” he added.
John Cridland, director-general of business lobby group the CBI, welcomed what he said was a “landmark deal”.
“It’s important to remember this investment will help mitigate the impact of increasing costs. The fact is whatever we do, energy prices are going to have to go up to replace ageing infrastructure and meet climate change targets – unless we build new nuclear as part of a diverse energy mix.”
However, Dr Paul Dorfman, from the Energy Institute at University College London, said “what it equates to actually is a subsidy and the coalition said they would never subsidise nuclear”.
He added: “It is essentially a subsidy of between what we calculate to be £800m to £1bn a year that the UK taxpayer and energy consumer will be putting into the deep pockets of Chinese and French corporations, which are essentially their governments.”
Chinese companies China National Nuclear Corporation and China General Nuclear Power Corporation will be minority shareholders in the project.
The move follows Chancellor George Osborne’s announcement last week that Chinese firms would be allowed to invest in civil nuclear projects in the UK.
Prime Minister David Cameron said that the new Hinkley Point plant was “an excellent deal for Britain and British consumers”.
“This underlines the confidence there is in Britain and makes clear that we are very much open for business,” he added.
The existing plant at Hinkley currently produces about 1% of the UK’s total energy, but this is expected to rise to 7% once the expansion is complete in 2023.
The announcement is not legally binding and it will be 2014 before EDF makes a final investment decision on the project. The plans will also require state aid clearance from the European Commission.
But it comes as concerns about domestic energy bills move up the agenda, with SSE, British Gas and Npower, three of the UK’s “big six” gas and electricity suppliers, all having announced price increases.
The government estimates that with new nuclear power – including Hinkley – the average energy bill in 2030 will be £77 lower than it would have been without the new plants.
About 25,000 jobs are expected to be created during construction of the power plant, as well as 900 permanent jobs during its 60-year operation.