Plans for a new nuclear reactor at Hinkley Point are in doubt after EDF experienced setbacks with the technology in France
EDF, the French state-owned power company, can point to one big advantage of the nuclear power station it intends to build at Hinkley Point in south-west England. Once fired up, the plant's reactors will churn out electricity at a steady price, unmoved by volatility in wholesale gas prices.
There is a case for including nuclear in the UK's energy mix. However, stability in this instance comes at a heavy cost. To ensure that Hinkley Point is actually built, ministers have undertaken to guarantee for 35 years an index-linked price of £92.50 per megawatt hour, more than twice the current market rate. It is also higher than for every renewable source, except for offshore wind.
Yet for all this generosity, the deal remains un-inked. EDF may have signed an outline agreement with the government in 2013. But last week it announced the plant would not come on line in 2023 as planned. That is because the group has yet to agree a final deal with its Chinese partners on the split of their investment. The government should seize the chance offered by this pause to look at the whole misconceived project again.
Cash-strapped EDF may find it challenging to finance its side of the bargain. But from the perspective of the UK consumer the terms look even less desirable. Few would bet on wholesale electricity prices holding steady at double their present level for the next half century. Some experts even hypothesise that they might fall, both magnifying the scale of the subsidies and making them permanent. Meanwhile the cost of alternative low carbon sources, such as solar, and better battery technology, is falling fast.
Britain has bet and lost on nuclear before. Work on Sizewell B, the country's last nuclear station, started in 1987 after an increase in gas prices. Like Hinkley Point it was supposed to be the first of a fleet of reactors. The cost of the power generated by the station has been estimated at £85 per megawatt hour. Subsequent plants, had they been built, would have been built more cheaply to the same design. But gas prices fell, politicians lost interest and the private sector would not shoulder the risks of construction. For all the talk of a nuclear renaissance, Hinkley Point may be one of a kind.
Some argue Britain has no option but to return to the nuclear business. The country's existing reactors are reaching the end of their lives. Its dirtiest coal plants are being closed down to comply with EU rules. Stringent carbon targets may require some of the country's "baseload" power to come from atomic sources. But any sensible nuclear strategy must surely involve proven technology and reasonable costs. EDF offers neither. The two EPR reactors it is building in Europe have suffered huge cost overruns and delays. The group has spent £2bn on Hinkley Point before a brick has been laid.
Granted, the government says that the French group and its partners will bear responsibility for any overruns. But this promise may yet be tested. Some of the debt to finance construction will bear a government guarantee.
Before finally signing on the dotted line, ministers should take a fresh look at the underlying assumptions for the project in the light of changing circumstances, then publish and defend them. If the economics does not make sense, it should consider scrapping the deal and retendering it, this time on a properly competitive basis and with more stringent criteria.
Backing out of Hinkley Point might upset the French and embarrass the government. But a wish to spare ministerial blushes is no excuse for saddling the country with costs it cannot afford.