Published: Wednesday 8th October 2014 by The News Editor
The final go-ahead has been given by the European Commission for a new £16 billion nuclear power station in the UK.
Commissioners approved revised plans to subsidise and operate the plant, which will be built by EDF Energy at Hinkley Point in Somerset.
The commission has been examining funding for the power station under state aid rules since December.
Greenpeace and local campaigners attacked the decision, but unions welcomed the move and urged EDF to press ahead as quickly as possible with building the power station.
During the in-depth investigation, the EC said the UK had agreed to “significantly modify” the terms of the project financing.
As a result, the state aid provided will remain “proportionate to the objective pursued, avoiding any undue distortions of competition in the Single Market” said an EC statement, adding: “The modifications also reduce UK citizens’ financial contribution to the project.”
Commission Vice-President Joaquín Almunia, in charge of competition policy, said: “After the Commission’s intervention, the UK measures in favour of Hinkley Point nuclear power station have been significantly modified, limiting any distortions of competition in the Single Market.
“These modifications will also achieve significant savings for UK taxpayers. On this basis and after a thorough investigation, the Commission can now conclude that the support is compatible with EU state aid rules.”
Austria, which strongly supports green energy, has threatened to take the European Commission to the European Court of Justice.
Officials have said other forms of energy were worthy of subsidies, not nuclear.
A so-called “strike price” will be guaranteed to be paid to EDF for 35 years at around £92 per megawatt hour – twice the current market rate.
Greenpeace’s environmental legal adviser Andrea Carta said: “This is a world record sell-out to the nuclear industry at the expense of taxpayers and the environment.
“It’s such a distortion of competition rules that the commission has left itself exposed to legal challenges.
“There is absolutely no legal, moral or environmental justification in turning taxes into guaranteed profits for a nuclear power company whose only legacy will be a pile of radioactive waste. This is a bad plan for everyone except EDF.”
The Government predicted last year that the new Hinkley Point C station, coupled with the prospect of other new nuclear sites, could reduce bills by an average of £77 a year.
The agreement with French-owned EDF Energy, will see the Somerset station begin operating in 2023.
Ministers, business leaders and unions welcomed the prospect of a new generation of nuclear power stations, although environmental campaigners warned that energy policy will be distorted by displacing newer, cleaner, technologies that are dropping “dramatically” in price.
Gary Smith, national officer of the GMB union said: “Nuclear new build is crucial to delivering low carbon electricity and keeping the lights on. Our energy infrastructure is creaking and we need to get on with this and building other nuclear power plants as a matter of urgency.
“This won’t solve the immediate crisis in energy but the longer we delay the worse it will get and the more expensive the construction project will be.”
Energy Secretary Ed Davey said during last year’s announcement that a new generation of nuclear power stations, alongside other forms of electricity generation, would be a key part of the future energy mix.
He said the UK was facing a “looming energy crisis” in the next decade thanks to years of neglect and under-investment, with much of coal and nuclear-generated energy stopping.
“We have known for years this is coming, but no one was willing to take tough decisions.”
Mr Davey stressed the project included plans to cover the costs of decommissioning, with operators required to pay into a fund from day one.
The power station will have a 60-year operating life.
The Stop Hinkley Campaign expressed “extreme disappointment”.
Spokesperson Allan Jeffrey said: “This deal is clearly illegal under European law. It will saddle UK consumers with the bill for paying huge subsidies for decades, and yet there are more cost effective and safer ways of providing low carbon electricity or not using the energy in the first place. It is mind boggling how the UK government managed to convince the Commissioners to go along with this crazy plan without even the pretence of a competitive process.
“The technology proposed for Hinkley Point C is well past its sell-by-date. It’s time for Somerset to look to the future and develop a locally-controlled sustainable energy industry which doesn’t involve leaving a toxic legacy for our grandchildren’s children and which can tackle climate change and fuel poverty in a much more cost effective way.”
Garry Graham, deputy general secretary of nuclear workers’ union Prospect, said: “This is fantastic for jobs, consumers and the UK economy. Nuclear new-build is a key component in providing the UK with low-carbon energy generation for the future.
“When operational, Hinkley Point C will provide 7% of our energy needs for generations to come. Its construction and operation will provide thousands of high-quality skilled jobs while the £16 billion investment will give a real boost to businesses on both a local and national level.
“More importantly, this will give confidence for what has been termed the UK nuclear renaissance and provide the impetus for other nuclear new-build sites, including NuGen in Cumbria and Horizon at Oldbury and Wylfa.”
The union warned that any further delay could deter the “much-needed” investment at a time when capacity margins are shrinking fast and the UK faces threats of blackouts.
“Ofgem has been warning since before 2012 that we risk running out of spare electricity capacity by 2015 and the threat is becoming more and more real as older plant comes offline.
“Prospect has been campaigning for nuclear new-build as part of a balanced low-carbon energy mix for over a decade. It could provide much-needed capacity, help aid energy security and deliver low-carbon base-load generation for years. But we can’t delay any longer. We need to start building now.”
The EC said that during its investigation, the UK authorities demonstrated that the support would address a genuine market failure, dispelling the Commission’s initial doubts.
“In particular, the promoters of the project would not be able to obtain the necessary financing due to its unprecedented nature and scale,” said a statement.
The Commission said it found that the initial guarantee fee which the operator would have paid to the UK Treasury was too low for a project with this risk profile
The guarantee fee was “significantly” raised, reducing the subsidy by more than £1 billion and procuring the UK Treasury an equivalent gain.
After the Commission’s intervention the gains generated by the project will be better shared with UK consumers, and if the construction costs turn out to be lower than expected, the gains will also be shared.
The two reactors at the new power station will produce in total 3.3 GW of electricity – the largest output produced by a single plant in the UK and representing 7% of UK electricity generation.
The UK will need about 60 GW of new electricity generation capacity to come online between 2021 and 2030 due to the closure of existing nuclear and coal power plants.
The Hinkley Point nuclear power station will use the EPR technology which is not yet operational anywhere in the world. There are only three projects currently under construction in France, Finland and China which will rely on this technology.
Shadow energy minister Tom Greatrex said: “Nuclear has an important part to play in the UK’s transition to a low-carbon power sector.
“Along with renewables and CCS, new nuclear power stations can help us achieve the effective decarbonisation of our power sector by 2030.
“The Commission’s decision emphasises the delivery of value for the consumer, and serves as a reminder to the Government that transparency and accountability are important principles.
“As they and EDF move towards finalising decisions on Hinkley, we will hold the Government to account on the assurances they gave while the Energy Act was going through Parliament that new nuclear deals will be subject to thorough scrutiny to ensure value for money.”
Lord Hutton of Furness, chairman of the Nuclear Industry Association, said: “This is an important step in securing the UK’s home-grown low-carbon electricity generation while adding jobs and prosperity to the economy.
“Reaching this decision has been a long process, but it was right the Commission should thoroughly review all the relevant issues.
“We look forward to EDF Energy taking its final investment decision with the interested investors. This will set in train an important time for the nuclear sector in the UK as new build projects get under way to replace the current ageing generation. It also gives certainty to other European countries looking at the UK system of contracts for difference as a mechanism to secure their own supply.”
Friends of the Earth policy and campaigns director Craig Bennett said: “This shocking decision will funnel billions of pounds of public money into the hands of EDF, and add to the mountain of nuclear waste that countless future generations will struggle to deal with.
“UK households and businesses will now be forced to pay for nuclear power at twice the current market price for the next 35 years.
“Scarce public funds should be targeted at clean technologies like wind and solar, whose costs are rapidly falling, rather than trying to breathe new life into the failing nuclear experiment – which remains extremely expensive after six decades of operation.”
The Austrian government said it would bring legal action against the Commission’s decision to the European Court of Justice.
In a statement Chancellor Werner Faymann and Vice Chancellor Reinhold Mitterlehner said Hinkley Point set a “bad precedent” because guaranteed payments had previously been reserved for renewable forms of energy.
They said they were opposing the Commission’s decision on economic and environmental grounds, claiming nuclear power was not a sustainable form of energy, was a mature technology an d was not an option for combating climate change.
Energy and Climate Change Secretary Ed Davey said: “This is an important next step on the road to Britain’s first new nuclear power station in a generation. While there is much work still to do before a final contract can be signed, today’s announcement is a boost to our efforts to ensure Britain has secure, affordable, low-carbon electricity in the 2020s.
“After a thorough, detailed and independent analysis of our proposed project with EDF, this decision shows the European Commission agrees that this is a good deal for consumers and enables us now to proceed to the next stage.”
The Energy Department said Hinkley Point C represented the start of investment in a new fleet of nuclear power stations replacing old, polluting power plants.
Building a new fleet of nuclear power stations could reduce household bills by around £95 in 2030, said the department.
Published: Wednesday 8th October 2014 by The News Editor