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UK government gives go-ahead for new nuclear power station

21 October 2013

On October 21 the UK Government and EDF of France announced that an agreement had been reached on the terms for the construction of a new nuclear power station at Hinkley Point in Somerset after more than a year of talks.  Two Chinese companies, CGN and CNNC, will join the EDF-led consortium as minority shareholders.

Artist’s impression of the completed Hinkley Point C nuclear power station. The project will employ up to 25,000 people over the course of construction, with 5,600 people on site at peak
Artist’s impression of the completed Hinkley Point C nuclear power station. The project will employ up to 25,000 people over the course of construction, with 5,600 people on site at peak

Energy Secretary Ed Davey said potential benefits of the construction of Hinkley Point C would include up to 25,000 jobs for skilled workers with over the course of construction and 900 long-term jobs during the 60 year life-span of the plant;

Davey said the deal would result in a £16bn injection into the economy, with the potential for British firms getting the majority of the work and over £4.5bn paid in corporation tax. EDF estimate that £100m will go into the local economy every year during peak construction.

Hinkley Point C would supply a stable source of low-carbon, climate friendly power for nearly six million homes, he said, supplying 7% of the UK’s electricity by 2025.

The plant will be the first to be built under the new system of ‘Contracts for Difference’ (CfDs), providing low carbon energy suppliers with predictable future revenues. The duration of the payments under the Contract for Difference for Hinkley Point C will be for 35 years which is around 60% of the 60 year operating life of the plant, proportionally similar to the length of CfDs being offered to most renewables technologies.

Under CfDs low carbon generators receive a stable price for the electricity they sell – known as the ‘strike price’. A ‘strike price’ of £89.50 per megawatt hour, fully indexed to CPI, has been agreed. This is around twice the current level paid for electricity in the UK.

The strike price includes a reduction of £3 per megawatt hour on the basis that EDF’s subsidiary NNB Generation Company Limited (NNBG) would share ‘first of kind’ costs of the EPR reactors across the Hinkley Point C and Sizewell C sites. If a final decision on Sizewell C is not taken, the Strike Price for Hinkley will be £92.50.

Government estimates put completion costs at £16bn. Hinkley Point C will take 10 years to become fully operational and will have two nuclear reactors built next to the Hinkley Point A and B nuclear plants.

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.

Energy UK, the trade body for the industry, said the agreement on Hinkley was good news. "Building new power stations is never quick or cheap, but in the case of Hinkley development, nothing goes on the bill until 2020," it said.

John Cridland, director-general of business 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."

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.




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