Chancellor of the Exchequer George Osborne has insisted new nuclear power stations are essential to make sure the lights stay on, as he gave the green light to the initial government guarantee for the first such plant in Britain for 20 years.
While on a five day tour of China, the Chancellor announced the new government guarantee, provided by Infrastructure UK, for a new nuclear power station planned for Hinkley Point C in Somerset.
The initial deal is set to be worth around £2 billion and will pave the way for a final investment decision by energy company EDF, supported by China General Nuclear Corporation and China National Nuclear Corporation, later this year, and with further amounts potentially available in the longer-term.
The construction and operation of Hinkley Point C will create thousands of jobs in Somerset and more widely in the nuclear industry across the UK, as well as boosting Britain’s energy security.
The new plant is expected to produce enough energy to supply seven per cent of the country’s needs, powering around six million homes.
It is also expected to open the door to unprecedented collaboration in the UK and China on the construction of new nuclear power stations.
The agreement also boosts work being carried out under a Memorandum of Understanding on fuel cycle collaboration signed with China in 2014, which has the potential to leverage UK expertise in waste management and decommissioning as well as support UK growth.
During the next ten years, Britain is expected to need to replace around quarter of its capacity due to ageing nuclear and coal power plants retiring, which the new Hinkley Point power station will help achieve.
Chancellor George Osborne said:
Britain was the home to the very first civil nuclear power stations in the world and I am determined that we now lead the way again.
Nuclear power is cost competitive with other low carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas.
So I am delighted to announce this guarantee for Hinkley Point today and to be in China to discuss their investments in Britain’s nuclear industry.
It is another move forward for the golden relationship between Britain and China – the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.
Energy Secretary Amber Rudd said:
New nuclear power is a vital part of our long-term plan to provide secure, clean energy supplies that hardworking families and businesses can rely on in the decades ahead.
Today’s guarantee is an important step forward for the first new nuclear power station in a generation and the future of our home-grown energy supplies.
We will continue to work with EDF to finalise the Hinkley deal, which will power nearly six million homes and create more than 25,000 jobs – providing more financial security for working people and their families as we transition to a low-carbon future.
Vincent de Rivaz, chief executive of EDF Energy, said:
The Chancellor’s approval of the infrastructure guarantee is a clear sign of the government’s commitment to Hinkley Point C.
The government’s determination to bring about a renewal of infrastructure and to attract inward investment to the UK are demonstrated by this good news.
It is further progress towards a final investment decision on a project which will provide reliable, affordable low carbon electricity for decades.
We welcome the government’s support for the industrial participation by EDF and its Chinese partners.
The European Commission approved the Hinkley Point C state aid case in October 2014. The £2 billion is covered by that approval with further amounts available should EDF meet certain conditions and subject to fuller government approvals.
The Strike Price for Hinkley Point C is £89.50/MWh fully indexed to the Consumer Price Index. This price benefits from upfront reduction of £3/MWh built in on assumption that EDF will be able to share first of a kind costs of EPR reactors across Hinkley Point C and Sizewell C sites. If the final investment decision is not taken on Sizewell C, Strike Price for Hinkley Point C will be £92.50/MWh.
The contract difference payment duration for each reactor is 35 years. The contract term for a reactor will be reduced if that reactor does not reach its start date within its target commissioning window.
Documentation is subject to final approvals.