Energy security 'at risk' if ministers fail to seal EDF nuclear deal

Sunday, April 14, 2013

Britain's energy security will be put at risk and future generations left to suffer with higher bills if ministers fail to agree a deal with EDF Energy to build Britain’s first new nuclear plant in a generation, the industry’s main representative body has claimed.

In the starkest warning yet over the £14bn Hinkley Point project, Lord Hutton, chairman of the Nuclear Industry Association, argues that failure would undermine Britain’s credibility with investors and threaten other projects across the energy sector.

Writing in The Sunday Telegraph, Lord Hutton also discloses that the industry has calculated cost savings of 20pc could be achieved for a second plant after Hinkley Point. He says that 25pc of any price offered to EDF will go back to the Treasury through taxes.

Failure of the talks would also raise questions about EDF Energy’s future in Britain. The company’s existing fleet of nuclear plants are mostly due to cease generating by early next decade.

Lord Hutton’s intervention comes ahead of what is believed to be a key meeting tomorrow between senior executives of the French company and the Government’s representatives, Treasury minister, Lord Deighton, and energy department permanent secretary, Stephen Lovegrove.

The talks focus on the so-called “strike price” for electricity that the plant will generate, which will be guaranteed for more than 30 years and subsidised through levies on consumer energy bills.

It is thought the two sides have yet to agree on acceptable costs for the project or the rate of return that French-owned EDF should be granted. The talks suffered another setback last week when a meeting between David Cameron and the French President, Francois Hollande, was cancelled because of the death of Baroness Thatcher.

Lord Hutton warns: “Time is of the essence. EDF Energy has spent £1bn already and the project is at present costing the company £1m a day.” More than £100m has now been spent keeping the project ticking over since EDF’s first agreement deadline of December was missed.

Henri Proglio, chief executive of EDF, said last week he now expected a decision within a month after another deadline of March was also missed.

Lord Hutton warns that failure to agree “threatens not only the first new nuclear power station for a generation, but potentially all those that will come in its wake”. He asks: “If a deal cannot be struck for new nuclear, can it be struck for offshore wind or carbon capture and storage?” According to Whitehall sources, the Government is trying to “bear down” on the costs of the project, which are believed to be close to £14bn.

Ministers are attempting to balance the claims of the nuclear industry against those of EDF’s critics, who say a deal will lock consumers into paying billions of pounds of subsidies to the French state for decades. Nuclear industry sources fear that the Treasury may be reticent to agree to subsidies because it sees gas as a cheaper alternative.

Lord Hutton argues: “The energy industry has been told that nuclear should be competitive with all forms of low carbon energy. It is not reasonable to change the rules of the game at the last moment.

“Left to its own devices, the market would not choose to invest in capital intensive lowcarbon infrastructure. This would lead us to a precarious, high carbon future increasingly dependent on imported gas. This would be absolutely the wrong direction for us to take and is why we must not lose sight of this in the current negotiations.”

Lord Hutton suggests that as much as £3bn could be shaved off the costs for a second plant, as the costs associated with it being the first plant of its kind in the UK are eliminated. Sources say the second plant would enjoy cheaper financing, be able to use the same supply chain and would not have to repeat much of the design work.

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