Hinkley Point C in Question as UK Government Rethinks EDF Agreement

In an abrupt turn, the UK government has signaled that it will carefully consider its backing of a deal to build two nuclear reactors at Hinkley Point C in Somerset, England, throwing French firm EDF’s July 28 final investment decision to proceed with construction of the EPR units into flux.

Following a lengthy review process and several postponements of the decision, EDF’s board of directors finally gave the go-ahead for the new plant on July 28. The announcement meant that the company could move forward with the long-anticipated project. Several contracts were planned for execution, including deals with the British government, China General Nuclear Power Generation (EDF’s partner on the project), and several other suppliers. However, things began falling apart almost immediately.

According to the BBC, contracts between EDF and the UK government were to be signed on July 29, but Vincent de Rivaz, EDF Energy CEO, canceled his trip to England after UK Business Secretary Greg Clark said the government would “consider carefully” before backing Hinkley Point C. The government’s about-face came as a surprise to EDF.

An agreement in principle between EDF and the UK government on the key commercial terms for the Hinkley Point C investment contract had been reached in October 2013. The pact included a very controversial “strike price” for power generated by the facility. At a rate of £92.50/MWh ($149.45/MWh), fully indexed to inflation through the Consumer Price Index, the strike price was nearly double the wholesale electricity price in the UK.

On June 23, the UK electorate decided to leave the European Union in the historic Brexit vote. Some experts feared that the result would put a halt to Hinkley Point C; even though EDF and the French government assured stakeholders that they remained committed to the project. It now appears the fears were warranted.

GMB, the labor union for energy and engineering construction workers, was quick to condemn the government’s wavering.

“Theresa May’s decision to review the go-ahead on Hinkley Point C is bewildering and bonkers. After years of procrastination, what is required is decisive action not dithering and more delay. This unnecessary hesitation is putting finance for the project in doubt and 25,000 new jobs at risk immediately after Brexit. It is a gross error of judgement and must be reversed,” said Justin Bowden, GMB national secretary for energy.

The UK government is not expected to make a final decision until at least early autumn.

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

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