Monday, 3 March 2014
UK taxpayer now even more likely to bail out Hinkley C
As construction delays for the French and Finnish EPR nuclear power schemes lengthen, the odds that the British taxpayer will end up bailing out the EPR planned for Hinkley C in Somerset are rising higher and higher. Put simply, if the British scheme experiences similar delays, then the British taxpayer is bound to pick up the tab, over and above the already high price that we will be paying for the plant's construction. Reports from Reuters indicate that the EPR being built in Finland will now take at least 13 years to build, and also the reactor being built in France is becoming more and more behind schedule. See http://uk.reuters.com/article/2014/02/28/tvo-olkiluoto-idUKL6N0LX3XQ20140228
The Hinkley C project is scheduled to be built in eight years, starting in 2015 (assuming an early positive go-ahead from the European Commission). The UK Government's deal for Hinkley C involves not just paying them £92.50 for 35 years in 2013 prices (increasing in line with CPI - so much higher by 2023), but also that the Government will provide £10 billion of loan guarantees. The Government insists that there will be no taxpayer subsidies, and that the loan guarantees will allow the project to access much lower interest charges (unlike renewable energy of course which does not get loan guarantees). However, that depends on the plant generating electricity, and income, before the loan repayments are due. If the constructors take out loans with an eight year maturity, it follows, that if the plant is not complete then the constructors will call in the loan from the Treasury.
Let us not stand for any nonsense from the Government that the constructors will have to foot the bill. The Government will be under great pressure to allow a partly build nuclear power station to be completed. Perhaps the Government will cover its embarrassment by making the electricity consumer reimburse the Treasury, but that will simply increase the price of the project for the electricity consumer even further. Indeed, this is precisely what happened with the last nuclear power station that was built in the UK, Sizewell B. This was still being built when the electricity industry was privatised in 1990, and the new private electricity companies would not fund its completion. So the Government stepped in and it was completed with support from the 'fossil fuel levy' on consumer electricity bills.
Meanwhile the Daily Telegraph is busy crowing about reduced incentives being made available for wind power. They are perhaps (from their point of view) being over-hopeful about the proportion of projects likely to be abandoned under the Government's 'competitive' scheme for awarding contracts to onshore windfarms. However the Telegraph completely misses the irony that windfarms are going to be built at much lower prices than Hinkley C, with much shorter 15 year contracts and without the benefit of any loan guarantees. See http://www.telegraph.co.uk/earth/energy/windpower/10670115/Wind-farm-plans-in-tatters-after-subsidy-rethink.html
See also last but one blog entry 'Does Caroline Flint need Maths lessons?' on relative payments to nuclear and renewables