16 Oct (NucNet): A deal between EDF Energy and the British government for a “strike price” for electricity produced by the proposed Hinkley Point C nuclear plant in southwest England has “pretty much been completed”, an energy industry analyst has said.
Nick Butler, visiting professor and chair of the King’s Policy Institute at King’s College London, told the BBC today that the strike price – the guaranteed price at which EDF will be able to sell the electricity it generates at Hinkley Point C – will be “somewhere around” 90 to 93 pounds (GBP) (around 106 to 109 euros, or 144 to 148 US dollars) per megawatt-hour. He said this is double the current wholesale price and this price deal will last for “two or three decades”.
Mr Butler, who also writes the energy blog for the Financial Times newspaper, said that along with EDF and Areva there will be “some Chinese investment” in Hinkley Point C with the possibility that China will be allowed to operate their own nuclear plant in the UK in the future.
He said a deal to agree a strike price is not normal, but “some deal was necessary” because of the size of the investment, around GBP 10 to 12 billion, and because the payback time for investing in new nuclear is so long, at “10 years or more”.
“It’s fair to set a price that is secure for investors,” he said. “They are normal companies so they deserve to make a reasonable profit, but I do think this wholesale price is too high for the UK consumer.”
The deal would effectively be a “take or pay deal” so even if the energy produced by the plant is not bought – or a major technical advance in coming years results in energy coming from other sources – EDF will still be paid.
Mr Butler also called for a bigger focus on energy efficiency. He said nuclear power does not have carbon emissions associated with it, but the real challenge in terms of reducing greenhouse gases is not in the UK.
He said: “We can’t solve climate change in one country. The pace of development of China’s new coal plants, which are high emitters of greenhouse gases, will overwhelm in about six weeks the savings of emissions from Hinkley Point C.”
The British press is widely reporting that Chancellor of the Exchequer George Osborne will sign a deal in China this week allowing China’s state-owned Chinese General Nuclear Power Group (CGNPG) to build nuclear power stations in the UK.
Under the deal, the government will give its backing to CGNPG entering EDF Energy’s planned new nuclear plant at Hinkley Point in Somerset as a co-investor, the Financial Times said earlier this week.
The UK and China yesterday signed a nuclear agreement that Mr Osborne said could provide the foundation for “specific areas of commercial cooperation”.
Mr Osborne said the special memorandum of understanding on civil nuclear cooperation is “the first of its kind” between the two countries.
He said: “And I hope this strategic agreement will form the foundation for specific areas of commercial cooperation.”
