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Senior MP says nuclear talks between UK Government and EDF could collapse

04 March 2013

The Government risks future energy shortages and possible blackouts, according to the House of Commons Energy and Climate Change Committee. The cross-party panel of MPs says that as all but one of the country’s existing nuclear power stations will have to close within 10 years, the country needs a ‘Plan B’ in case new reactors are not built on time.

EDF Energy CEO Vincent de Rivaz is holding out for a high strike price for new nuclear-generated electricity
EDF Energy CEO Vincent de Rivaz is holding out for a high strike price for new nuclear-generated electricity

Speaking to BBC News on March 4, the Conservative MP Tim Yeo - Chairman of the Committee - said: "We've had a decade of neglect of nuclear policy, and we do need nuclear, it's an essential part of our energy mix."

He added: "The danger is there's only one company ready to build nuclear power stations, EDF, and the negotiations which they're having with the government are at a crisis point - they may even fail. It will then be at least 10 or 12 years before any nuclear power stations are built in this country."

Yeo said the Treasury was taking a rigid line with EDF Energy on the ‘strike price’ to be paid per megawatt-hour (MW/h) of nuclear-generated electricity, effectively the subsidy to be paid over a given period to ensure the construction and operation of the plant is profitable for the company.

The utility is seeking a strike price of £95-£100 pounds per MW/h from its planned new nuclear plant at Hinkley Point in southwest England, about twice the current wholesale market rate, Bloomberg said, quoting a person with knowledge of the negotiations. 

The BBC said EDF Energy CEO Vincent de Rivaz was holding out for a 10% return on its investment on energy generated from Hinkley Point C, where the preparatory works have been completed. He has cut 150 staff at the site, 20% of the total, and has announced a freeze on recruitment in a move interpreted as showing the utility was prepared to play hardball over the issue.

A report from the Committee said that failure to build the planned 16 gigawatts of new capacity by 2025 will jeopardize legally binding emission targets. It said lessons should be learned from other reactor delays in Europe.

In his BBC interview, Yeo said that over-dependence on gas had led to the large increases seen in UK energy prices over the last few years, and that shale gas was unlikely to be a panacea.

“The government seems to be crossing its fingers that private companies will deliver a fleet of new nuclear power stations on time and on budget. Ministers need to urgently come up with a contingency plan in case the nuclear industry does not deliver.”

“The consequence of not having a Plan B means that the government’s negotiating position vis-a-vis EDF is very weak,” Yeo told Bloomberg. It may be easier for the government to compromise by awarding longer contracts rather than by agreeing to pay higher prices, he said.

The UK parliament is looking at new energy legislation designed to spur £110 billion ($165 bn) of investment in power generation and distribution by 2020. 

Power blackouts could become a possibility over the next few years, the chief executive of UK energy regulator Ofgem, Alistair Buchanan, said recently. This was echoed by Iberdrola Chairman Ignacio Galan, who said last month that Britain risks blackouts this decade unless it details proposed capacity auctions soon, which would drive the development of gas-fired plants.






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