The folly of Hinkley

Hinkley Point C is an expensive gamble—especially for the customers

by Simon Taylor, Bronwen Maddox / April 21, 2016 / Leave a comment

Published in May 2016 issue of Prospect Magazine

BRIDGWATER, ENGLAND - OCTOBER 03: Anti-nuclear protestors gather at the gates of Hinkley Point nuclear power station on October 3, 2011 in Bridgwater, England. Anti-nuclear protestors have blockaded the Somerset power station in reaction to EDF Energy's plans to build two new reactors next to the existing site. (Photo by Matt Cardy/Getty Images)

Anti-nuclear protesters gather outside Hinkley Point in 2011 in reaction to EDF Energy’s plans to build two new reactors at the site ©Matt Cardy/Getty Images

British electricity customers will soon find out whether they will be saddled with paying for the world’s most expensive power station, Hinkley Point C. The first new nuclear station to be built in the UK for 21 years, Hinkley is the centrepiece of the government’s plan to cut carbon emissions and reduce British dependence on imported gas. In order to persuade French and Chinese investors to commit £18bn for this project the government, having repeatedly stated there would be no subsidy for nuclear energy, has promised that British electricity customers will pay for all the power the station produces at a price of £92.50/MWh (megawatt hour)—more than double the current market price of £35/MWh—for 35 years after the station is completed, and indexed to inflation (the price includes £2/MWh for decommissioning). On top of that, the government will guarantee (for a fee) that lenders to the project bear no risk. And it has undertaken that no future government can pass any law or policy that would hurt the investors, on pain of compensation.

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Comments

Borje W.
April 23, 2016 at 16:58
Those argument is just bullshit. Nowhere in the worldcan You build new nuclear power at competitive prices. US is an interesting case, they have approx 100 reactors. Half of this are so called merchant reactors , selling the electricity they produce at competitive prices, five of this are already in a close down process. The other half are subsidized reaktors where the authorities (politicians ) have decided that the are eligible to sell the electricity they porduce at a price that covers costs and a reasonalble profit even when that means a price way above the market price. All the new reactors planned ( approx. the same number as the one under closure ) are of the latter type. Börje Widerberg
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Simon Taylor

Simon Taylor is the Director of the University of Cambridge Master of Finance (MFin) degree and a member of the finance and accounting faculty group at Cambridge Judge Business School