The biggest nuclear deal ever made in this country will see Britain’s first new nuclear power station in a generation built under a £16 billion project which will create thousands of new jobs and lead to prospects of a cut in energy bills.
The Government predicted that the new Hinkley Point C station, coupled with the prospect of other new nuclear sites, could reduce bills by an average of £77 a year.
The agreement with French-owned EDF Energy, which will see the Somerset station begin operating in 2023, was welcomed by ministers, business leaders and unions, although environmental campaigners warned that energy policy will be distorted by displacing newer, cleaner, technologies that are dropping “dramatically” in price.
Shortly after the go-ahead for Hinkley was revealed, energy giant RWE npower announced that electricity and gas prices will jump by 9.3% and 11.1% respectively from December 1.
The 10% average bill increase will affect about 3.1 million customers, the group said, and follows recent price hikes by British Gas and SSE.
EDF chief executive Vincent de Rivaz said his company had not taken a decision on whether to follow suit and increase prices, but any rise would be “at the lowest possible level”.
Energy Secretary Ed Davey said it was a “historic” day, adding that a new generation of nuclear power stations, alongside other forms of electricity generation, would be a key part of the future energy mix.
He said the UK was facing a “looming energy crisis” in the next decade thanks to years of neglect and under-investment, with much of coal and nuclear-generated energy stopping.
“We have known for years this is coming, but no one was willing to take tough decisions.”
Mr Davey stressed the project included plans to cover the costs of decommissioning, with operators required to pay into a fund from day one.
The power station will have a 60-year operating life, said Mr Davey, adding: “We have to replace nearly 60% of our electricity generating capacity in a relatively short space of time. If we rely on gas, that would be too risky for consumers.
“The average consumer bill will be £77 lower with our nuclear strategy.”
Ministers faced criticism over the £92.50 per megawatt hour that will be paid for electricity produced at Hinkley – around double the current market rate.
The so-called “strike price” could fall by £3 if EDF goes ahead with proposals to build two reactors at Sizewell in Suffolk.
The Hinkley Point contract is due to run for 35 years, with the electric price increasing annually in line with CPI inflation. At full capacity the two reactors could provide up to 7% of the country’s energy needs.
China General Nuclear Power Group and China National Nuclear Corporation will be investing between 35% and 40% in the scheme, EDF between 45% and 50%, and Areva 10%, while discussions are taking place with a shortlist of other interested parties who could take up to 15%.
Preliminary works for the project are said to be well advanced, and subject to a final investment decision by July next year, the power station is expected to complete commissioning of the first unit in 2023.
EDF said 57% of the project’s construction value could be spent in the UK, while 25,000 jobs will be created in the UK during the construction phase, including 400 apprentices, with 900 jobs when the site is operational.
Mr Davey insisted he had secured “good value” following more than a year of intense negotiations. The project will cut the UK’s carbon emissions by nine million tonnes a year,
Mr Davey stressed that the construction risks were being borne by the companies, and the Government would not be liable for any overspends.
If costs fell, the taxpayer would share in the savings.
The initial commercial agreement is not legally binding until EU clearance has been secured for the state aid, with a final contract expected to be signed next year.
Prime Minister David Cameron said: “As part of our plan to help Britain succeed, after months of negotiation, today we have a deal for the first nuclear power station in a generation to be built in Britain.
“This deal means £16 billion of investment coming into the country and the creation of 25,000 jobs, which is brilliant news for the South West and for the country as a whole.
“As we compete in the tough global race, this underlines the confidence there is in Britain and makes clear that we are very much open for business.
“This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer term security of supply.”
EDF group chairman and chief executive Henri Proglio said: “The agreement in principle reached today with the British Government significantly strengthens the industrial and energy co-operation between France and the United Kingdom.
“This project will deliver a boost to the economy and create job opportunities on both sides of the Channel and will enable the United Kingdom, a country in which EDF is already the leading producer of electricity, to increase the share of carbon-free energy in its production mix.”
Hinkley Point C will be the first new nuclear power station to be built since Sizewell B, which started generating electricity in 1995.
Shadow energy secretary Caroline Flint claimed the deal put the Prime Minister in a “ridiculous” position, adding: “Labour supports the development of new nuclear power stations in Britain as part of a balanced, secure and clean energy mix.
“The potential costs of this agreement make it all the more crucial that we end the rip-offs and have an energy market that people trust.
“Labour will freeze energy bills through to the start of 2017 while we reset the energy market to make it more competitive, transparent and fair for consumers.”
Unite union national officer Kevin Coyne said: “The go-ahead at Hinkley Point will deliver thousands of skilled jobs in construction, manufacturing and the operation of the power station.
“The deal will hopefully pave the way for more power stations which will in turn generate more skilled jobs.”
Which? executive director Richard Lloyd called for the deal to include a clause which would trigger a refund to consumers if it turns out that the Government has overpaid.
Greenpeace UK executive director John Sauven said: “Hinkley C fails every test – economic, consumer and environmental.
“It will lock a generation of consumers into higher energy bills via a strike price that’s nearly double the current price of electricity, and it will distort energy policy by displacing newer, cleaner, technologies that are dropping dramatically in price.”
John Longworth, director general of the British Chambers of Commerce, said: “After months of uncertainty, British business will be pleased that negotiations for the UK’s first new nuclear power plant in decades have been successfully concluded.”
John Cridland, director general of the CBI, said: “This is a landmark deal which will help us meet our future energy challenges, while boosting jobs and growth.”
Construction union Ucatt said Hinkley Point will become the best-paid building project the industry has seen, with workers receiving basic pay of £13 an hour.
Clear rules have been agreed for a bonus scheme, productivity and “milestone” payments, as well as “significant” pension contributions, said the union.
General secretary Steve Murphy said: “This agreement provides excellent employment conditions and industrial relations for workers. Ucatt will be using this agreement as a template for future projects in order to ensure that its provisions become standard throughout the industry.”
CND general secretary Kate Hudson said: “The 2010 coalition agreement explicitly states that there will be ’no public subsidy’ for new nuclear power and yet the deal announced today commits taxpayers’ money to bailing out an industry which has proven time and time again that it does not offer value for money.”
Caroline Lucas, Green MP for Brighton Pavilion, said: “This is a terrible deal for bill payers. At a time when the costs of renewable energy are rapidly falling, it’s reckless for the Government to subsidise the nuclear industry in this way.”
Friends of the Earth’s policy and campaigns director Craig Bennett said: “With rocketing gas prices sending fuel bills soaring and fresh warnings over climate change, investment in low-carbon power is crucial – but nuclear power isn’t the answer.”
Scottish government energy minister Fergus Ewing criticised what he called a misguided enthusiasm for nuclear power.
Power from Hinkley Point C will be enough for six million homes, equivalent to 6,000 wind turbines, said the Government.
The new site will use three million tonnes of concrete and 230,000 tonnes of steel reinforcement, while four million cubic metres of earth will be excavated.
Recommended for you
