Hinkley Point's costs and risks were not sufficiently considered before consumers were locked in, National Audit Office says

Focus On Bridgwater: Gateway Town To Hinkley C Site
The NAO said ministers had not sufficiently considered the costs and risks of the £18bn project (Source: Getty)

The National Audit Office (NAO) has condemned the planned nuclear power station at Hinkley Point C as a “risky and expensive project with uncertain strategic and economic benefits”.

In a hard-hitting report out today, the government's spending watchdog found that ministers had not sufficiently considered the costs and risks of the £18bn project to consumers. It added that value-for-money tests showed the economic case was “marginal” and subject to significant uncertainty.

Hinkley Point C in Somerset will be the first nuclear power station built in the UK since 1995.

Last September, the Department for Business, Energy & Industrial Strategy (Beis) announced that it reached a deal to support construction of the twin reactor power plant as part of plans to decarbonise the UK economy.

Electricite de France and China General Nuclear Power Group will build and operate it. They will be paid £92.50 per megawatt hour of electricity generated for the first 35 years.

But the government only considered the impact on bills up to 2030, which does not take account of the fact that consumers are locked into paying for Hinkley Point C long afterwards. Beis also did not ascertain whether the forecast top-up payments were affordable.

Delays have already pushed back the nuclear power plant’s construction, and the expected cost of top-up payments under the Hinkley Point C’s contract for difference has increased from £6bn to £30bn. Furthermore, the private sector bears the risk if construction costs overrun.

The NAO’s analysis suggests alternative approaches could have reduced the total project cost.

“The department has committed electricity consumers and taxpayers to a high cost and risky deal in a changing energy marketplace. Time will tell whether the deal represents value for money, but we cannot say the department has maximised the chances that it will be,” said Amyas Morse, head of the NAO.

Jeremy Nicholson at the Energy Intensive Users Group said:

This is a pretty damning report which confirms our concerns about the astonishing cost of the project. New nuclear can certainly help the UK reduce carbon emissions while ensuring our electricity supplies remain secure, but it’s highly questionable whether the Hinkley deal delivers value for money for energy consumers.

“Electricity prices for UK industry are already the most expensive in Europe, and deals like this will make matters worse. This is what happens when governments are desperate to strike a deal with a single supplier, instead of letting the market determine how to keep the lights on at least cost to consumers," Nicholson said.

A Beis spokesperson said: “This was an important strategic decision to ensure that nuclear is part of a diverse energy mix. Consumers won’t pay a penny until Hinkley is built; it will provide clean, reliable electricity powering 6m homes and creating more than 26,000 jobs and apprenticeships in the process.”

It is hoped that Hinkley will generate around seven per cent of Great Britain’s expected electricity requirement from the mid 2020s but the reactor design is unproven and other projects that incorporate it are experiencing difficulties.

Read more: SSE boss: Hinkley will likely be the UK's only new nuclear plant

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