Q&A: the Hinkley Point deal in full
Q Why do we need more nuclear power?
A Britain’s energy security is at risk. Network operator National Grid recently warned that the country is at its highest risk of blackouts this winter in five years. Nuclear energy is one (albeit costly) way of diversifying and reducing our reliance on gas imports. Britain also needs to replace 20 per cent of its ageing nuclear and coal power plants over the next 10 years. There are other options, of course, including shale and perhaps one day solar energy.
Q Who will own Hinkley Point C?
A French energy firm EDF Group will own 45 to 50 per cent of the project, French nuclear developer Areva will own 10 per cent and two state-owned Chinese firms – the China General Nuclear Corporation and China National Nuclear Corporation – will together own 30 to 40 per cent.
Q So who benefits?
A The government says the project will employ 25,000 people during the construction phase, but only 900 jobs will be permanent. And four suppliers have won contracts for the project. Bouygues TP/Laing O’Rourke has been awarded a civil work contract, Costain is undertaking marine work, Alstom has a deal to make turbines and Areva is making the nuclear reactors. The deal is a huge positive for EDF – it got the 10 per cent rate of return it was after plus a guaranteed £92.50 per megawatt hour for the energy it produces – almost twice the current wholesale cost of electricity.
Q But doesn’t that mean the government has overpaid?
A Probably. Critics suggest the elevated price could cost the taxpayer as much as £1bn per year if wholesale costs fall.
Q So what now, is the deal done and dusted?
A Hardly. The UK government is applying to the European Commission for state aid clearance to get its nuclear support scheme approved. All parties need to agree the full investment contact and EDF needs to finalise agreements for debt and equity financing.
