The European Commission (EC) approved hotly contested subsidies between the UK government and EDF Group to build a new nuclear reactor at the Hinkley Point plant.
The EC found the long-term contract and the guarantee were an “appropriate and proportionate way” to build the dual-unit, 3.2-GW Hinkley Point C on the northern Somerset coast. Terms of the contract include:
- The “strike price” will remain set at £92.50/MWh ($148.67/MWh), or £89.50/MWh ($143.85/MWh) if the planned project at the Sizewell Station moves forward.
- The strike price is fully indexed to inflation through the Consumer Price Index
- The contract will last for 35 years.
- The project will be protected from certain changes in law.
EDF Energy, the company picked to develop and build Hinkley Point C, agreed to sell the electricity output at market price. The company also says it expects the cost to build the plant will still be around £16 billion ($25.7 billion) as it was first announced in October 2013. UK consumers initially expected to pay up to £17 billion ($27.8 billion) in subsidies to EDF, which was more than the price tag of the project. The figures triggered a 12-month investigation by the EC that concluded with this decision. The plant will require debt financing of £17 billion and will eventually have a capital of about £34 billion ($54.7 billion). The construction costs are estimated at £24.5 billion ($39.4 billion).
“The approval of the European Commission demonstrates that the proposed package of agreements between the government and EDF is fair and balanced for investors and consumers now and for the long term,” said EDF Energy Chief Executive Vincent de Rivaz in a statement. “The Commission rigorously examined the costs of the project in detail, potential returns for investors and benefits for customers. The engagement with Brussels was thorough, demanding, but constructive.”
The project has already received planning permission by the Secretary of State, nuclear site licenses and the approval of the European Pressurized Reactor (EPR) design by the UK nuclear regulator. Remaining steps include completing agreements with strategic and financial partners, including China General Nuclear Corp. and China National Nuclear Corp. In addition, the EC and the Secretary of State must approve waste transfer contract arrangements.
Commission Vice-President Joaquín Almunia, in charge of competition policy, said: "After the Commission's intervention, the UK measures in favour of Hinkley Point nuclear power station have been significantly modified, limiting any distortions of competition in the Single Market. These modifications will also achieve significant savings for UK taxpayers. On this basis and after a thorough investigation, the Commission can now conclude that the support is compatible with EU state aid rules."
The World Nuclear Association (WNA) said the subsidies will give other developers incentives to build new nuclear in the UK.
“Today’s announcement takes the UK forward towards joining the global investment trend in a new generation of clean, affordable and reliable nuclear energy,” said Agneta Rising, director general of WNA. “The move puts nuclear alongside other forms of clean generation in a market mechanism called Contract for Difference, which is part of the UK government’s pioneering Electricity Market Reform.”
Not everyone is happy to hear the news. Austria said it may file a lawsuit in the European Court of Justice to reverse the decision if the subsidies were approved. A spokesman for the Austrian chancellor told Reuters that he and the vice chancellor believed nuclear power does not deserve the subsidies and that the decision would set a bad precedent.
The first unit is expected to complete commissioning in 2023.
Subscribe to Nuclear Power International magazine