The UK’s Chancellor of the Exchequer has had to rigorously defend the government’s position in moving forward with the Hinkley Point C nuclear power project.
George Osborne was subject to a strong line of questioning by the House of Lords’ Economic Affairs Committee, with Lord Turnbull putting it to him that the French nuclear reactor was an unproven technology.
Lord Turnbull referred to the proposed facility as a “big white elephant” and a “bottomless pit”. He added that since the coalition government struck a deal in 2013 with EDF and Chinese investors to build the UK’s first new nuclear plant in two decades, the price of oil had collapsed and the French energy company had run into serious technical problems with its reactor design. He urged the chancellor to pursue gas-fired power instead.
“It’s not ‘can we do the deal’ but ‘should we do the deal’” he suggested. “This thing at £92 per kWh is turning out to be incredibly expensive and a huge commitment and for a design which the French can’t get to work.”
In response, Mr Osborne suggested the £92 strike price at which the Government agreed in October 2013 to buy nuclear energy from EDF from Hinkley Point was not set in stone. “When it comes to the strike price that is all, of course, subject to final negotiation” he said. Mr Osborne added: “It’s still substantially cheaper than other low-carbon technology such as offshore wind and onshore wind.”
Asked why he did not follow the successful South Korean model of building new reactors directly, Mr Osborne stressed that he did not want the construction costs to be on the Government’s balance sheet.
“That means, inevitably, that there are certain complex arrangements for guaranteeing certain prices. But it does mean I’m not bearing the construction risk or the design risk. At the moment getting the reactor design approved is the responsibility of EDF.”
Mr Osborne suggested that EDF, which is majority-owned by the French state, had a powerful incentive to overcome the technical problems that have beset its European Pressurised Reactor. “There’s a huge amount riding on this for EDF in getting this working – not just here but in Flamanville.” he said.
Mr Osborne added that he was “pretty confident” that a final deal for the £24.5bn plant would ultimately be done, adding that he was shortly due to visit China to discuss the project.
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