Hinkley Point C deal is 'high cost and risky’

By Aaron Kendall   |   Assistant Editor   |
Friday 30th June 2017 1:17 pm
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THE Government’s decision to build Hinkley Point C nuclear power station was described as a “high cost and risky deal with uncertain benefits for consumers” in a scathing report released this week.

Amayas Morse, head of the National Audit Office, which scrutinises Government spending, criticised the Department for Business Energy and Industrial Strategy for “not considering the costs and risks for consumers in a changing energy market-place”.

He added that the reactor design for the station was unproven and EDF’s financial position had weakened since the original terms were agreed.

“Time will tell whether the deal represents value for money but we cannot say the Department has maximised the chances that it will be.”

And Mr Morse warned that the taxpayer or energy-consumer might end up footing the bill if Hinkley C hit major problems: “Past experience shows that ultimately these risks could shift back to tax-payers and consumers.”

But an EDF spokesman believed that the report showed that the project remained good value for consumers compared with alternative choices.

He added: “Consumers won’t pay a penny until the power station is operating and it is EDF Energy and CGN (China General Nuclear Power), who will take the risk and responsibility of delivering it.

“The project is having a major impact on the UK’s industrial capacity, jobs and skills.”

The NAO report said it was a widely shared view that the UK needed new nuclear power to ensure the lowest-cost route to decarbonisation. But when the Department finalised the deal in 2016, its value-for- money tests showed the economic case for Hinkley Point C was marginal and subject to significant uncertainty.

“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. It also did not conclude whether the forecast top-up payments are affordable.

“Delays have 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 £6 billion to £30 billion.

“But the Department’s capacity to take alternative approaches to the deal were limited after it had agreed terms. The Government has increasingly emphasised Hinkley Point C’s unquantified strategic benefits, but it has little control over these and no plan yet in place to realise them.”

The report found that the Department aligned its approach to the Hinkley Point C deal with its support for other low-carbon technologies. This meant the private sector bore the risk that construction costs overran.

The NAO’s analysis suggested that alternative approaches could have reduced the total project cost, but the Department did not assess whether this would have resulted in better value for money for electricity consumers.

Mr Morse said it would not be known for decades whether Hinkley Point C will be value for money. This would depend on whether the current contractual arrangements endured, along with external factors and developments in energy technology and the wider electricity system.