The UK government today gave the go-ahead for French power group EDF to build a new nuclear power station at Hinkley Point in England.

Energy Secretary Ed Davey made the announcement in the House of Commons this afternoon and said the decision to build the UK’s “first new nuclear power station in a generation” was a “milestone” for the country.

He said the plant would make a “very significant contribution” to Britain’s energy and climate change policies.

The announcement is another hurdle cleared for EDF to build the plant, which it claims will provide up to 7 per cent of the UK’s electricity.

However a final obstacle remains: the strike price negotiations between EDF and the government.

Under its Electricity Market Reform, the government intends to pay a guaranteed price – or strike price – for electricity produced by generators.

Just what that price will be is the final sticking point preventing EDF signing off on Hinkley Point C.

Davey said the strike price talks were “ongoing and intense” and added that he expected them “to be concluded shortly”.

Dr Tim Fox, head of energy and environment at the Institution of Mechanical Engineers, said the strike price “will need to be sufficiently attractive to investors from at home and outside of the UK for the plant to go ahead”.

He added that it also “needs to be acceptable to the public when considered alongside strike prices agreed for electricity from renewables and other low carbon sources of power”.

“Hopefully a deal will be reached between the government and EDF soon so that we will be able to make a start on the big engineering challenges ahead.”

Fox, a long-term advocate for a revival in Britain’s nuclear engineering industry, said that “the scale and complexity of the engineering required to build a nuclear power plant will require a highly capable workforce led by skilled engineers and project managers” and “more needs to be done to increase the number of people choosing engineering as a career to overcome a skills shortage”.

Today’s announcement was welcomed by UK business. Katja Hall, chief policy director at the CBI (Confederation of Trade and Industry), said: “This is a big step forward on a critical energy infrastructure scheme. Major projects like this not only help us to overcome our energy challenges, but provide a real boost to growth, creating thousands of jobs directly and through the supply chain.

“A balanced energy mix is essential in order to ensure secure, low-carbon and affordable supply in the future, and new nuclear is a key part of this.”

Tony Ward, head of power & utilities at Ernst & Young, said today’s announcement “delivers on one of the most important elements of the reform of the UK’s energy policy”.

“The granting of planning permission for Hinkley Point C within the three month deadline required under the new planning regime signifies the tangible delivery of a key part of that reformed framework. This is also another significant step towards enabling the final investment decision to be taken.”

He added that “demonstrating that the UK has a robust, timely and reliable planning process is a hugely important milestone on the road to delivering the renewal of the UK’s otherwise declining energy infrastructure capacity and enhances the UK’s position as one of the leading markets internationally for investment.”

However, Claudia Belahmidi, an analyst at IHS Energy, said the real issue with new nuclear in the UK “is not the regulatory permitting process, but the high capital risk associated with EDF’s Hinkley Point C investment and the continuing absence of clear strike price guidance from the government”.

She said if Hinkley Point C’s construction were to go ahead, “it would be the first time in UK history that a nuclear power plant was constructed by a publicly-listed company, for which the associated risks are enormous”.

She added that the ongoing negotiations with EDF over the strike price “reveal just how much muscle the French company has in this process, as other potential investors have pulled out of the race to build new nuclear plants in the UK”.

“Given the fact that the UK is faced with the mammoth challenge of having to replace 40 per cent of old power stations by 2025 and that nuclear power is the single most scalable way of achieving this target, EDF is indeed in a strong position to win this battle.”

She said IHS expected the government “only to be able to negotiate a modest discount on the alleged strike price demanded by EDF of £100 per MWh, helping it save face given consumer anger over rising bills and with a view towards 2015 elections”.