While on a five-day tour of China, the Chancellor announces a government guarantee for a new nuclear power station planned for Somerset.
Chancellor of the Exchequer George Osborne has insisted that new nuclear power stations are required to keep the lights on, as he approved the initial government guarantee for the first such plant in Britain in 20 years.
The Chancellor announced the new government guarantee, provided by Infrastructure UK, for a new nuclear power station planned for Hinkley Point C in Somerset while on a five-day tour of China.
The initial agreement is expected to be worth around £2 billion, and it will pave the way for a final investment decision by energy company EDF, supported by China General Nuclear Corporation and China National Nuclear Corporation, later this year, with additional funds potentially available in the long run.
The construction and operation of Hinkley Point C will generate thousands of jobs in Somerset and the nuclear industry more broadly across the UK, while also enhancing Britain’s energy security.
The new plant is expected to produce enough energy to meet 7% of the country’s needs, powering approximately 6 million homes.
It is also expected to pave the way for unprecedented collaboration between the United Kingdom and China in the construction of new nuclear power plants.
The agreement also accelerates work under a Memorandum of Understanding on fuel cycle collaboration signed with China in 2014, which has the potential to leverage UK expertise in waste management and decommissioning while also supporting UK growth.
Britain is expected to need to replace around a quarter of its capacity over the next ten years due to the retirement of ageing nuclear and coal power plants, which the new Hinkley Point power station will help to achieve.
George Osborne, the Chancellor, stated: “Britain was home to the world’s first civil nuclear power stations, and I am determined that we will once again lead the way.
“Nuclear power, along with new sources of energy such as shale gas, is cost competitive with other low-carbon technologies and is an important part of our energy mix.
“So I’m delighted to be in China today to discuss China’s investments in Britain’s nuclear industry, as well as to announce this guarantee for Hinkley Point.
“It is another move forward for the golden relationship between Britain and China – the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.”
Amber Rudd, the Energy Secretary, stated: “New nuclear power is an essential component of our long-term strategy to provide secure, clean energy supplies on which hardworking families and businesses can rely in the coming decades.
“Today’s guarantee is a significant step forward for the first new nuclear power plant in a generation, as well as for the future of our domestic energy supplies.
“We will continue to work with EDF to finalise the Hinkley deal, which will power nearly six million homes and create more than 25,000 jobs – providing more financial security for working people and their families as we transition to a low-carbon future.”
Vincent de Rivaz, CEO of EDF Energy, stated: “The approval of the infrastructure guarantee by the Chancellor demonstrates the government’s commitment to Hinkley Point C.
“This good news demonstrates the government’s determination to renew infrastructure and attract inward investment to the UK.
“It is a step closer to making a final investment decision on a project that will provide reliable, low-carbon electricity for decades.
“We appreciate the government’s support for EDF and its Chinese partners’ industrial participation.
In October 2014, the European Commission approved the Hinkley Point C state aid case. That approval covers the £2 billion, with additional funds available if EDF meets certain conditions and receives full government approval.”
Hinkley Point C’s strike price is £89.50/MWh, fully indexed to the Consumer Price Index. This price includes a £3/MWh upfront reduction based on the assumption that EDF will be able to share first-of-a-kind costs of EPR reactors across the Hinkley Point C and Sizewell C sites. If a final investment decision on Sizewell C is not made, the strike price for Hinkley Point C will be £92.50/MWh.
Each reactor’s contract difference payment period is 35 years. If a reactor does not reach its start date within the target commissioning window, the contract term for that reactor will be reduced.
Final approvals are required for documentation.