UK energy secretary says rival nuclear companies cheaper than EDF

15 July 2013

Ed Davey, the UK energy secretary, has said Japanese and Korean companies are willing to build nuclear reactors in Britain for a lower level of subsidy than that being demanded by France's EDF. Japan's Hitachi bought the Horizon nuclear venture with plans to build reactors on Anglesey and in Gloucestershire last year.

Ministers are locked in negotiations with EDF over subsidies for its proposed £14bn Hinkley Point C plant in Somerset, in the form of a long-term contract guaranteeing a "strike price" for the electricity it will generate.

Mr Davey told The Guardian that EDF was aware of the strike price that he would agree to and that he was "not going to budge an inch".

He said: "Sometimes people said it is EDF or bust. I would like to do a deal with EDF but we don't have to. I was in Korea and Japan recently talking to other investors and vendors. Their interest in the UK market was massive. I got the very strong impression that the sort of price I was happy to agree with EDF, they could match."

In the same interview he said: "We have other nuclear options. Hitachi are very live options. They bought Horizon only last year and their pace of progress is truly impressive." He noted that Hitachi had delivered four reactors "on time and on budget".

The newspaper said Mr Davey indicated there was a lull in negotiations with EDF. "We have made a hell of a lot of progress in our negotiations but we are not there yet. We are down to one or two issues, including the actual price," it quoted him as saying.

Mr Davey is under intense pressure to secure as low a price as possible from EDF as the subsidies will be paid for through levies on consumer bills, running to tens of billions of pounds over coming decades.

The energy secretary has been keen to use the example of Hitachi to suggest competitive pressure on the talks. But critics have suggested ministers are in a weak negotiating position because EDF is the only company ready to start building now. Hitachi's reactor design is still several years away from being approved by UK regulators.

Mr Davey told MPs this week that a new nuclear plant could be running by 2020, but industry sources suggest this is highly unlikely.

Centrica, which abandoned the project in February, warned that the costs had "rocketed" and the timescale doubled.

The Daily Telegraph has said that EDF is increasingly likely to face a windfall tax on its eight UK nuclear power plants - especially if it fails to agree a deal to build new reactors.

The group's existing nuclear plants are in line to make windfall profits thanks to the imposition of the carbon price floor - a tax on carbon emissions that was introduced in April and is due to rise each year.
EDF advocated the introduction of the tax, which was supposed to encourage investment in new "green" plants such as nuclear and wind farms that have low carbon emissions, by making dirty old coal and gas plants less economic to run.