Nuclear power plant

Counting the real cost of the Hinkley Point C project

Yet again EDF has called into question the financial viability of the proposed Hinkley Point C power station. In the latest turn the French state-owned utility has asked for further guarantees from its own government for the £multi-billion project, just a week after the company’s finance chief handed in his notice. However most commentators fail to mention the true cost of the power plant which is grossly understated and whose hidden costs will fall directly on the UK taxpayer.

The cost per megawatt hour (MWh) is usually quoted at £92.50. However, this is in 2012 prices and the tariff inflates at a rate equivalent to the consumer price index or CPI. If this remains at 1.5 percent until the plant becomes operational in 2025 the cost will be over £112 per MWh and if CPI defaults to 2 percent the cost will be £120 per MWh. And few expect the plant to complete anywhere near on time.

Less obvious are the other significant costs to be borne by the UK taxpayer.

The operator is only liable to carry insurance to the value of £1bn. If – heaven forbid – there was a nuclear accident at Hinkley Point C the cost of any cleanup would be paid by the taxpayer. The initial cost estimate at Fukushima was £1.5bn; however the cost to date is over £100bn and rising. In effect, everyone in Britain bears the insurance risk. If Hinkley Point, in common with any other energy generator, had to pay its own full insurance, it would never leave the drawing board.

Other significant costs include the UK underwriting guarantee (whose extent is unpublished) and our centuries-long waste disposal commitment via the as-yet unbuilt UK Deep Geological Store with a conservative forecast cost of £12bn. Tot these up and new nuclear looks like a very poor deal for the UK consumer.

Contrast the plant’s 35-year £1 billion annual subsidy (which will go to the station’s French owners EDF – in other words the French Government) with the current 15-year cost of onshore wind at around £80 MWh and offshore wind around £117 per MWh (which is only paid when the wind blows and turbines are generating power). The cost of renewable energy is continuing to fall over time, although the cost of nuclear seems to rise inexorably.

Irrespective of people’s individual preference for generation by gas, nuclear, coal, hydro, tidal, wind or – incredibly – Diesel, the UK Government’s continual interference in the energy market has spooked investors (EDF included) and we now have virtually no new investment in any type of energy plant at all – even gas.

The UK has an aging fleet of coal and nuclear stations which will largely shut down by 2030. As Angus MacNeil MP, Chair of the Energy and Climate Change Committee, has pointed out, their replacement could signal billions of pounds of new investment if only investors were not left wondering “what next?” in on-the-hoof energy policy.

What Britain requires is a coherent energy strategy including all types of generation. Our country needs to back a number of energy horses – which all bring different costs and benefits – and not stake all its money on a single (very pricey) long-odds bet. Get this wrong, and the lights really could go out.