Soon after EDF executives decided to officially give the green light to the Hinkley Point nuclear power plant, the British government called for the decision to be postponed pending review.
EDF met on Thursday afternoon in order to finalise plans for Hinkley, and ultimately voted to go ahead with the final investment decision at a narrow majority of 10 to 7, after one opposing director, Gerard Magnin, resigned ahead of the meeting.
However, celebrations were short lived, as the British government announced that they would be forcing another delay on the final investment decision while another review is conducted into the divisive project.
The Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, said that while the government’s position supporting Hinkley has not changed, the need to exercise caution remains.
He said: “The UK needs a reliable and secure energy supply and the government believes that nuclear energy is an important part of the mix.
“The government will now consider carefully all the component parts of this project and make its decision in the early autumn.”
Opinion has been split on Hinkley from various camps, inside and outside of EDF, the British government, the French government (which owns 85% of EDF) and various environmental groups.
The project is seen as important in terms of maintaining a secure energy supply in the UK, with current projections showing that it should, if/when completed, provide around 7% of the UK’s total energy needs.
However, concerns have been raised about the cost of the plant, from both sides of the channel. On the French side, the worry is that the projected £18 billion cost of Hinkley (which Chinese nuclear company CGN is responsible for a third of), is too much of a financial burden for EDF to take on, given that the company is currently running at a deficit of around £31 billion.
On the British side, the concern relates to the ‘contract for difference’ that the British government signed with EDF in 2013, assuring the company a top up if a ‘strike price’ of £92.50 per megawatt hour is not met. The contract is set to last 35 years from the date that the plant begins producing electricity.
The issue is that wholesale prices for energy are falling (currently, Reuters report the British “day-ahead power price is currently around 40 pounds per MWh”) and as such, this contract for difference could lead to British taxpayers footing a rather large bill for the subsidised payout.
A recent report from the National Audit Office estimated that due to these falling wholesale costs, the cost of the top up payments is currently projected to reach £29.7 billion.
As well as cost issues, there are concerns related to the two other similar projects, one in Finland and one in France, that are both running over budget and behind schedule.
These, as well as suspected concerns about the nature of Chinese investment in significant British infrastructure projects, are thought to be behind the government’s latest delay. The government has assured that the delay is not meant to put the future of the project in jeopardy though, with a government source quoted by the Guardian as saying: “EDF made their announcement, and we have agreed a timetable with the French government, which means we will consider all the component parts of this project and make a decision in the early autumn.”
EDF Energy’s chief executive, Vincent de Rivaz, gave his support to the government’s decision, saying that while the delay is somewhat disappointing, it is understandable given recent political changes, and that, importantly, EDF is ready to go ahead when the government’s review is completed.
He said, in a letter to his staff: “The new prime minister has been in post for just 16 days. Her full cabinet has been in post even fewer.
“We can understand their need to take a little time. We fully respect the prime minister’s method.
“The very good news is that we are ready.”
A spokesperson for CGN made a similar statement, saying: “We understand, given the importance of the Hinkley Point C programme to England’s future energy security, that the new British Government has expressed a need for time to familiarize itself with the programme. CGN understands and respects this.”
