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The Government's deal to support the construction of the Hinkley Point C power plant has been dubbed "risky and expensive" by the National Audit Office (NAO).
Following months of analysis and consultation, a NAO report finds that the Department for Business, Energy and Industrial Strategy’s (DBEIS) deal with EDF has failed to sufficiently assess how much the plant will cost the taxpayer and the risks involved with building the nuclear site in Somerset. As well as EDF, the project will be part-funded by the China General Nuclear Power Corporation (CGN).
The NAO report slams DBEIS for its shortsightedness, claiming the department only considered the impact on energy bills up to 2030, "which does not take account of the fact that consumers are locked into paying for Hinkley Point C long afterwards," the report explains. NAO added that the deal failed to conclude whether the forecast top-up payments are affordable and said the deal's strategic and economic benefits are "uncertain".
The deal was announced on September 29 2016 and signed by EDF bosses on September 30, at a private ceremony in London. EDF boss Jean-Bernard Levy travelled to the capital to meet Secretary of State for BEIS Greg Clark and also CGN Chairman He Yu.
£18 billion: Estimated cost to construct Hinkley Point C (in 2016 prices).
7 per cent: Proportion of Britain’s estimated electricity requirement met by output from Hinkley Point C in the mid-2020s.
£21-£24: The Department’s estimate of the average increase on annual electricity bills up to 2030 if Hinkley Point C is delayed by three years and replaced by low-carbon alternatives.
£30 billion: Estimated present value in March 2016 of future top-up payments under the Hinkley Point C contract for difference (2015-16 prices discounted to 2015).
£7.3 billion: NNB Generation Company’s (NNBG’s) estimate of the costs of decommissioning Hinkley Point C and managing its waste (in 2016 prices).
"Britain needs to upgrade its supplies of energy, and we have always been clear that nuclear power stations like Hinkley play an important part in ensuring our future low-carbon energy security," Clark said at the time.
Hinkley Point C will be the first new nuclear power station built in the UK since 1995 and the government expects it to generate around 7 per cent of the UK's electricity requirements from the mid-2020s. The last nuclear plant to open was Sizewell B. Hinkley Point C (and other planned nuclear projects) form part of its strategic aim of managing the energy ‘trilemma’ – to provide a secure supply of electricity, that is affordable for consumers, and contributes to the UK’s target to reduce carbon dioxide emissions by 80 per cent in 2050 compared with 1990 levels.
According to the NAO, the Government’s case for the project has weakened since it agreed key commercial terms on the deal in 2013. Delays have pushed back the nuclear power plant’s construction, and the expected cost of top-up payments under the Hinkley Point C’s contract has increased from £6 billion to £30 billion.
The analysis suggests alternative approaches could have reduced the total project cost and the Department did not assess whether this would offer better value for money for electricity consumers. The Department has, however, negotiated a deal that means some terms can be adjusted in consumers’ favour in future.
"It is a widely shared view that the UK needs some new nuclear power to ensure the lowest-cost route to decarbonisation," said the NAO. "But when the Department finalised the deal in 2016 its value-for-money tests showed the economic case for Hinkley Point C was marginal and subject to significant uncertainty.
"The Government has increasingly emphasised Hinkley Point C’s unquantified strategic benefits, but it has little control over these and no plan yet in place to realise them. It must now ensure it has the right oversight arrangements in place to manage the contract in a way that maximises Hinkley Point C’s value for consumers and taxpayers."
The creation of the £18 billion power station was cast into doubt in July after the Government unexpectedly delayed the project. French energy firm EDF had been due to sign contracts on 29 July. Instead, the Government decided to reconsider its decision over the controversial plant.
The Government later made changes to how the outsourcing process works and a new legal framework for "future foreign investment in Britain’s critical infrastructure" will be introduced following the French and Chinese involvement in the Hinkley Point deal.
July 2006: The government’s Energy Challenge review set out potential for a new nuclear power plant.
January 2008: Government published its white paper – Meeting the energy challenge: A White Paper on Nuclear Power – and, in response, the industry announced plans to develop 16 gigawatts of new nuclear capacity by the end of 2025.
January 2009: EDF purchased British Energy and its eight power stations for £12.5 billion.
April 2009: Government nominated Hinkley Point C as one of 11 potential sites for a new nuclear power plant.
March 2011: Fukushima disaster prompted re-examination of safety of nuclear power.
July 2011: Government published National Policy Statement for Nuclear Power Generation which identified eight potential sites for the deployment of new nuclear power stations.
**March 2013 **: Government published its nuclear industrial strategy setting out key actions and milestones.
October 2014: European Commission gave its State Aid approval decision for Hinkley Point C project.
July 2016: EDF Board approved the Hinkley Point C project to go ahead and takes final investment decision.
September 2016: Government approved the deal for Hinkley Point C after a two-month pause to consider all component parts of the deal.
At the time of the initial delay, Clark said: "The UK needs a reliable and secure energy supply and the Government believes that nuclear energy is an important part of the mix."
Officials were told to "consider carefully all the component parts of this project" before it made its final decision.
The EDF board approved its part in the deal in July. After meeting with former prime minister David Cameron in 2015, the Chinese president Xi Jingping said the CGN organisation would own 33 per cent of the plant.
Before the NAO filed its reports, critics of the power plant raised similar concerns about the increasing cost of Hinkley Point C. One assessment by the Government put the cost as high as £37 billion.
Despite costs associated with creating nuclear power plants, the UK Government has committed to stopping all coal power production in the next decade. In November, climate and energy secretary Amber Rudd said high-emission coal plants were "not the future" adding that a combination of nuclear and renewable energy should be used.
"It cannot be satisfactory for an advanced economy like the UK to be relying on polluting, carbon-intensive 50-year-old coal-fired power stations," Rudd said at the time.
Ahead of the 2025 target the eight coal-burning stations and the coal parts of five dual energy plants will be closed.
This article was originally published by WIRED UK
