There are reports in today’s Times of a deal between Government and EDF involving a strike price of £93 per MWh over 40 years for the Hinkley C project. This obviously involves an enormous public commitment, but how enormous is this? The terms matter very much, including,
1. What agreement is there about ‘underwriting’ the construction risk of the Hinkley C project
2. What are the terms of the £10 billion guaranteed loan
3. Is this strike price to be 'inflation' uprated in line with CPI or RPI? (the renewable incentives are being uprated in line with the inferior CPI)
4. Are there any provisions for altering the ‘strike’ price in future in an upwards direction?
5. Is it not the case that the ‘deal’ will allow EDF to part-complete Hinkley C having overrun costs and exhaust the £10 billion Treasury loan and then demand more money from the taxpayer/electricity consumer to complete the project?
All of this is important in the public knowing what the extent of the liabilities to which the electricity consumer and the taxpayer is being committed. Certainly, just on the basis of the strike price payments, without any of the public risk undertakings being included, this means that the public would be committed to paying around £100 bn to EDF for the electricity generated. Assuming a wholesale electricity price of £50/MWh (roughly what it has been recently), this means a public ‘excess’ payment of at least over £40 billion over this period over and above what is likely to be needed to get the energy from other sources – and even this £40 billion plus excludes the costs of the risk of the project which is being supported by the taxpayer through loan guarantees. The project is said to cost £14 billion.
The prospect of a public underwriting of £10 billion loan guarantee could potentially mean that the nuclear power station could be part-built, that the project costs could overrun, and that the taxpayer would then have to come up with even more funds to complete the project under a further funding regime, much as what happened with Sizewell B.
That is what could happen if EDF gets what could well be (depending on the detail) a blank cheque for the project. The question is will we get to know about the extent of our commitments, or will we, as usual with nuclear power, only find out some of the extent much later on? Remember, just before the 2010 election the Conservatives said that they would not agree to the costs of nuclear power being underwritten by the Government.
What is certain is that when all added together, the costs of getting energy by paying for electricity from Hinkley C are more than what it would cost people to get the same amount of electricity from renewable energy sources such as wind power and solar power, not to mention various energy efficiency possibilities.