QuickTake Q&A: The Nuclear Plant That Has U.K., France on Edge
Just how big is the price tag on the U.K.’s first nuclear-power plant in 20 years? So big that some wonder if it would be the most expensive object ever built. The plant, known as Hinkley Point C, is to be built in the county of Somerset in southwest England, near two existing plants, one of which has been closed. The French energy company Electricite de France SA is to build the plant and its two reactors along with a Chinese partner. Expected price tag: 18 billion pounds ($23.6 billion). Though EDF has given the project a green light, there’s cold feet on both sides of the English Channel. The U.K. government must still ratify the contract terms and has decided to delay a final decision until the fall.
1. Why does Britain plan this new nuclear plant?
Hinkley Point is expected to satisfy about 7 percent of the U.K.’s power demand, providing enough electricity for about 5 million homes. The former Prime Minister David Cameron backed the plan to create jobs and meet commitments to reduce greenhouse gas emissions. In addition, the U.K. is relying on new nuclear plants to plug an electricity production gap as it closes all coal-fired generation by 2025 and older reactors are shut down.
2. Will Hinkley C definitely be built?
That’s suddenly up in the air. On July 28, EDF’s board voted to give the go-ahead to the project, despite opposition from some board members and trade unions in France. But just hours later, the British government said it was delaying its approval and would review the terms of the deal before reaching a decision later this year.
In contrast to Cameron’s enthusiasm, there are signs Britain’s new prime minister, Theresa May, could be listening to warnings the project is too expensive and will saddle consumers with billions of pounds of extra costs for a generation. In a recent meeting with Francois Hollande, she was non-committal about the project, according to people in the room.
3. Why is it so expensive?
The plant is huge -- equivalent to about three large coal-fired stations -- and nuclear plants are among the most complex of all engineering projects. To make the project viable, the U.K. pledged to pay EDF 92.50 pounds for every megawatt-hour of electricity it produces for 35 years, more than twice the current market price. While that would give the French company an annual rate of return of 9 percent, British consumers could pay $48 billion above the market rate over the lifetime of the project, according to one forecast.
4. Why does this matter?
There’s a lot at stake for both countries. The French government and EDF see the project in southwest England as essential to the future of France’s giant nuclear industry, which supports tens of thousands of skilled jobs.
For Britain, backing away from Hinkley would mean tearing up its entire energy policy. It would also end the biggest Franco-British industrial project in a generation as the U.K. looks to reconfigure relationships with its continental neighbors after last month’s vote to leave the European Union.
5. What’s next?
Hinkley’s fate now rests on the review being undertaken by U.K. Business and Energy Secretary Greg Clark. He’s promised to make a decision in the “early autumn.” It’s possible the government may try to renegotiate the power price underpinning the deal, but the French would probably balk at that.
Meanwhile, EDF faces a legal challenge to the board’s decision by unions worried the cost of the plant will endanger jobs in France.
The Reference Shelf
- A QuickTake explainer on the never-ending debate over nuclear power
- A story on U.K. industrial policy after the vote to leave the EU
- A Bloomberg New Energy Finance note on outlook for U.K.’s power industry
- EDF’s presentation on Hinkley Point