To add to an already complex situation, countries legally objecting to a European Commission decision to facilitate the construction of a new nuclear power plant in the UK have confirmed they are determined to pursue their case, despite the news of Hinkley Point C being approved by owners EDF.
Following EDF’s announcement, however, matters were further complicated by the UK government announcing its intention to delay its consent while it re-examines the detail of the project, which means it is unclear at the moment whether the project will go ahead.Meanwhile, as the fall-out from last night’s events continue, former energy secretary Ed Davey has reminded Power Engineering International that he won a better strike price than then Chancellor of the Exchequer George Osborne agreed to, when negotiating the now much scrutinised deal with EDF.
The Commission judgement (in relation to the UK’s guarantee to pay EDF £92.50 per MWh for power generated by Hinkley C not breaching state aid rules), is just one facet of the ongoing debate amid reaction to the EDF board decision to go forward with the project.
Alexandra Perl, press spokesperson at the Austrian Federal Ministry of Science, Research and Economy told Power Engineering International, “The EDF-decision does not change our position. Besides that, there is no new development. Austria has filed a lawsuit at the European Court of Justice and is now waiting for the further development.”
Olaf Munichsdorfer, top advisor to the Luxembourg ministry of environment, when asked by this website if his government would continue to oppose the facilitating of nuclear power, provided just a one word answer – “Yes”.
Top Austrian lawyer Reinhard Schanda, a partner at the Vienna-based law firm Sattler & Schanda, is also adamant on his government’s stance.
“No Austrian government could withdraw that challenge without risking to lose many voters,” he said. “Austrians are strongly convinced that nuclear power plants are irresponsible to future generations and block the transition to renewable generation, particularly when they are being subsidised on an obscene level.”
It is just one strand to an ever more convoluted circus that has dogged the project’s every move over the last decade.
The British government caught the world unawares last night with its announcement that it would be taking time out to consider the deal and would not be making its position clear until early autumn. According to some commentators, this may lead to an attempt to reduce the price being paid for the electricity or reduce Chinese influence in the country’s energy sector, a necessary by-product (in return for investment) accepted by the previous administration, but not this one led by new Prime Minister Theresa May.
George Osborne, the former chancellor, told his Chinese hosts last year that their investment in Hinkley Point could lead the way to Beijing building its own reactors in Britain, including Bradwell in Essex. Mrs May, a former home secretary, repeatedly raised security concerns about Chinese investment with cabinet colleagues, adding to the tensions between her and Mr Osborne in cabinet.
The FT’S George Parker reports, “Although the feeling inside government is that Mrs May will still authorise the construction of Hinkley Point C, her suspicion over Chinese involvement could throw new doubts over the project.”
“If Beijing were to get the signal from London that it was no longer welcome to build its own nuclear power stations in the UK, China might question whether its involvement in the risky project still made sense.”
The divisions between the coalition partners in the last UK government are also clearly evident. Mr Osborne’s father-in- law Lord Howell, a former Conservative energy minister, asserted on BBC Radio 4’s World at One programme yesterday that Hinkley Point C is a bad idea that came about primarily due to the Liberal Democrats being in charge of the country’s energy portfolio, when the process of delivering the project accelerated.
Liberal Democrat Ed Davey, who was energy secretary during that crucial period, took exception to that view, telling Power Engineering International, “Lord Howell should know from basic political history that the Conservatives have always been the cheerleaders for nuclear power, not the Liberal Democrats.”
“Moreover, Lord Howell could also ask his son-in-law, George Osborne, why he was so enthusiastic about Hinkley Point C, that he was willing to agree to a higher price than I managed to secure.”
“Lord Howell’s statement is similar to the Brexit campaign and Donald Trump in its connection with the truth and integrity,” Mr Davey added.
If the issues afflicting the project came down to price alone, there may be less doubts about its merit but the polarity of opinion even extends to the nuclear sector itself regarding the correct technology to use, particularly with the European Pressurised Reactor (EPR) designated for Hinkley being so far unproven.
RELATED: World Nuclear Association defends EPR technology
Dr Ian Scott, CEO of Moltex Energy told PEi, “The enormous subsidies that have been offered for Hinkley C, with a strike price that will more than double to £240 if the Government reaches its inflation target, ignore new nuclear technologies that are intrinsically safer, cheaper, more flexible, and easier to build. The subsidy cost has quadrupled in the last 3 years to £30 billion. It could easily double again, as global technology innovation drives prices down.
“Positively, the government is already exploring alternative nuclear technologies through its Small Modular Reactor competition. There are massive opportunities here that must be pursued. For instance, the Stable Salt Reactor is a UK-developed technology that can produce electricity at a third of the Hinkley C strike price, can store energy at grid scale – catalysing the further rollout of renewables – and can be powered by the country’s existing nuclear waste.”
Despite differences of opinion on technology, it is price that is the overriding concern.
Although EDF and Chinese partner China General Nuclear are responsible for the up-front costs of the project, Britain has committed to pay a price twice current market levels for the power generated by the plant.
Market intelligence specialists said at the time the original Hinkley strike price was announced in October 2013 the ICIS Power Index (IPI) averaged £52.30/MWh.
“Since then, wholesale energy prices have fallen, as the price of crude oil has come down with oversupply, and the impact of more renewable generation continues to be felt. Prices hit a nine-year low in January this year, with the IPI falling to around £33.50/MWh.”
Since then, gas and power prices have recovered with the increasing oil price, and concerns over gas storage availability – the IPI is currently around £44.00/MWh.
“However, energy prices remain volatile, and electricity from Hinkley will not be delivered until around 2025 at the earliest – the long build period for nuclear plants means that market values (and therefore the level of the top-up payment) could look very different by the time the UK begins to pay.”
The new prime minister, in speeches following her appointment, has consistently pointed out that she wants a fairer society and the prospect of burdening tax payers with possibly unnecessary energy bills is bound to be a sticking point.
The difficulty for the project’s supporters is that EDF’s board carried the decision to approve by a tight margin and rolling back on the strike price might persuade that decision to be reversed, resulting in Hinkley Point C never being built.
Prof. Tooraj Jamasb, Chair in Energy Economics at Durham University Business School and Co-Director, Durham Energy Institute (DEI) believes Mrs May could be playing a chess match, with Brexit lurking in the shadows.
“Having a new government in place offers an opportunity to revisit the merits of the project while being less bound to commitments of the previous government. It is also possible that the government may want to use the project as a card in its post-Brexit negotiation to soften the French stance on trade deals.”
“The new government has not had time to develop a new coherent energy policy but the main alternative to Hinkley is, in the medium term, more combined cycle gas turbine generation which may require revisiting the carbon emission targets.”
Josh Hardie, the Confederation of Business Industry’s Deputy Director-General, said he understands the government wanting to get to grips with the details of the Hinkley contract, but warned, “it must press ahead to finalise the deal as soon as possible.”
“The UK is facing a major investment challenge to ensure a secure, low-carbon and affordable energy supply. It’s crucial that we see clear and timely decisions, and send a definite message that the UK is well and truly open for business.”
“In particular, clarity is needed around the next Contracts for Difference auction and the post-2020 Levy Control Framework, to build investor confidence.”
Despite the complexities involved; the price, the reliability of the technology and the environmental perspective – the fact remains that Britain has, with ongoing power plant closures and greater demand, a looming power shortage that it needs to fill. Whether that opens the door for alternative nuclear, gas-fired power, more renewables, greater energy efficiency initiatives or a more clearly defined combination of all, remains to be seen.
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