Government agrees plan with EDF for cost overruns on nuclear plants – we lose, French and Chinese win

It’s OK – our Local Enterprise Partnership (for whom it is their flagship project) will just pump more of our Devon and Somerset funds into it. After all, after many if them were chosen for their nuclear business connect, they at least will be amongst the few who prosper.

“Energy consumers and taxpayers could have to pay for cost overruns at new nuclear plants after the government backed a funding model proposed by EDF.

The business department said last night it believed the “regulated asset base” model that the French energy giant wants for its proposed Sizewell plant in Suffolk could reduce consumer bills compared with the subsidy contract used to back the £20 billion Hinkley Point plant EDF is building in Somerset.

A consultation document published last night confirms that consumers would, however, be asked to start paying for the plants on energy bills while they were still under construction and to share in the risks of cost overruns.

In the case of an extreme overrun, the government — effectively the taxpayer — could either have to step in and pay the extra cost or scrap the project and pay compensation to investors.

Nuclear power provides about a fifth of the UK’s electricity needs but all bar one existing plant is due to close by 2030. Hinkley Point is the only new project under construction and over the past year developers have abandoned plans for new plants in Cumbria, Anglesey and Gloucestershire amid difficulties securing financing.

Under the regulated asset base model, the developer would receive a regulated price to give it a return on its investment expenditure, including during the construction period, and this would be levied on energy bills.

By contrast, EDF and its Chinese partners CGN are paying upfront to build Hinkley in return for a guarantee that consumers will pay them a fixed price for electricity when it eventually starts generating. The contract, well above current market prices, was widely criticised as poor value for money.

The government said the subsidy contract had been “appropriate” for Hinkley because at the time it was awarded, the reactor technology “was not operational anywhere in the world” and similar projects had suffered from significant delays and cost overruns.

The government said that construction at Hinkley, due to start operating in 2025, was on schedule and the same design of reactor had started up in China. It said that financial investors remained unwilling to put money in “during the construction phase”.

Source:Times (pay wall)