Nuclear

Agreement Sets Stage for Construction of New Nuclear Plant in UK

EDF Group and the UK Government have reached an agreement in principle on the key commercial terms for an investment contract for the planned Hinkley Point C nuclear power station.

Finalization of this agreement and construction of the plant are subject to a final investment decision. The government and EDF will work together to address the remaining steps, which must be taken before construction can begin.

One of the more controversial aspects of the agreement involved the “strike price.” The strike price is the price EDF will be paid for every MWh of energy generated by the plant. At a rate of £92.50/MWh ($149.45/MWh) fully indexed to inflation through the Consumer Price Index, the strike price is nearly double the current wholesale electricity price in the UK. Although the rate will be reduced £3 if EDF decides to also go ahead with the Sizewell C nuclear plant, reflecting the fact that some costs can be shared across the two sites, the rate is still substantially higher than many groups opposed to the project felt made sense for consumers.

Vincent di Rivaz, CEO of EDF Energy, believes the deal is fair not only for investors but also for consumers. He said, “The price is a price, which will be paid in 2023 when the first of our units will come into operation. It is a price for the future.” He noted that the price had been negotiated through a long, sometimes tough process, to reach an acceptable agreement. According to government estimates, customers could actually see their average bills £77 lower by 2030 as a result of the deal.

Construction of the plant is expected to create 25,000 jobs, with 5,600 workers onsite at the peak. When finished, 900 permanent employees will work at the site during the plant’s 60-year operational life.

“Today, 40% of our electricity comes from coal, 20% comes from old nuclear. Much of that is due to come offline in the next decade,” said Secretary of State for Energy and Climate Change Edward Davey. “We’ve seen £35 billion invested in new green energy generation since 2010. Hinkley Point C will inject another £16 billion into the economy, with the potential for British firms to get the majority of the work.” When both reactors are at full capacity, the plant will supply around 7% of the UK’s electricity.

The entry of Chinese investors into the UK civil nuclear power industry is another somewhat controversial aspect of the deal. The investment was made possible following last week’s agreement between governments and operators in the UK and China. A similar agreement with France was announced last year.

China General Nuclear Corp. (CGN) and China National Nuclear Corp. (CNNC) will each invest in Hinkley Point C. Between the two, Chinese firms could own up to 40% of the plant. The EDF Group has been working as an industrial partner with CGN and CNNC for 30 years, which includes a joint venture to build two EPR reactors in Taishan, China. The UK is expected to benefit from this long-standing cooperation and proven capability in the construction and operation of nuclear plants.

The agreement is clearly “kick starting the renaissance of the nuclear power industry in the [UK],” said di Rivaz.

—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)

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