The 14 Words

Monday, 21 October 2013

Power plant deal leaves the UK handing £90bn to France and paying DOUBLE the going price of electricity for 35 years

President Francois Hollande will be rubbing his hands with glee this week when the British Government is expected to sign a deal on nuclear power that could funnel £90billion into French coffers.


The agreement with French state-owned EDF Energy will create a price the Government guarantees will be paid for the electricity generated. This is likely to provoke fury as it is twice the market level. 

Osborne last week announced plans to allow Chinese firms to take a minority stake in Britain’s nuclear power industry. But remarkably, even after that announcement, the Department of Energy issued a terse statement saying the exact terms of the deal with EDF were ‘still being negotiated’.

The Government appeared to have made promises to the Chinese before agreeing the guaranteed price with the French, though it refused to comment on its apparent blunder.

Critics say the Government found itself ‘over a barrel’, with the French and Chinese the only bidders left offering to build two nuclear reactors at Hinkley Point in Somerset – the first in the UK since 1995 – at a price of £14billion.

With the inflation-linked price per megawatt hour likely to be about £90, many are questioning whether this is too much or simply what Britain must pay to keep the lights on and meet environmental targets.

A spokesman for the Energy Intensive Users Group, representing big business users of electricity, said: 
‘Major industry needs security of supply and nuclear power can give us that – but not at any price.
‘This deal will cost the consumer more than coal and gas would, but as we decarbonise it is vital that nuclear is part of the mix. Renewable energy, like wind power, is just not reliable enough. 
‘Nuclear is not going to come cheap, but it is secure and that is what big users need. 
‘Given that we have lost control of our energy industry it is far better that this project is going ahead than not.’
China has even been told it may be allowed to operate nuclear power plants in the UK on its own in the future. Angela Knight, chief executive of the energy companies’ trade body Energy UK said: 
‘Energy is a global business and the massive sums needed mean we must attract multi-national investment.’ 
The £90 per megawatt hour will be guaranteed to EDF through customers’ bills no matter what happens to prices in the wholesale energy market. Offshore wind power has a higher price, at £155 per megawatt hour, but that will last only 15 years.

EDF will make an estimated £90billion over the length of the contract, which is likely to be 35 years, almost as much as the £110billion that the Government estimates is needed to invest in the UK energy market over the next decade. It is a far cry from the £80 per megawatt hour the Treasury was apparently seeking originally.

The Government strongly denies that it is a subsidy. If it were, the whole deal could fall foul of European Union rules against state aid.

Current guidelines do not explicitly exclude nuclear power from receiving state aid and the EU declined to comment on the deal, since it has yet to be signed, but there has never been a test case on the issue so Britain’s would be the first.

Germany, which abandoned its nuclear power programmes after the Fukushima disaster in Japan in 2011, is expected to raise questions about what it may regard as a UK subsidy. 

The guaranteed price has been at the crux of tortuous negotiations between the Government and EDF for months. But as coal-fired power stations are forced to close to meet EU climate-change rules, the UK’s spare capacity in the electricity market is predicted by the National Grid to be as low as 5 per cent this winter, which compares badly with an average of about 15 per cent in America.

Green energy schemes are not able to take up the slack and any doubt over the provision of nuclear power would throw the energy industry into chaos.


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