Ministers stung by criticism of deal to provide new energy infrastructure at Hinkley. Scheduled to open in 2025 at a cost of almost £20bn, Hinkley is a central part of Britain’s faltering efforts to replace the one-third of its electricity generating capacity that is expected to be lost by 2035 as ageing power stations shut down. Capacity has already fallen by 12 per cent since 2012 as coal-fired plants are phased out to comply with British commitments to tackle climate change. Experts say the obstacles facing new energy infrastructure – especially capital-intensive nuclear plants – have been increased by the government’s refusal to commit public money to the challenge of keeping Britain’s lights on. EDF demanded a hefty premium for bearing the full cost and risk of constructing the plant. This resulted in David Cameron’s coalition government in 2013 guaranteeing a price of £92.50 per megawatt hour for electricity from Hinkley for the first 35 years of its operation, with the figure rising in line with inflation. The sum, to be levied on household bills, has already crept above £100/MWh since the rate was set – more than twice the current average wholesale electricity price. Stung by criticism of Hinkley, there are signs of a government rethink as more nuclear projects edge forward in fits and starts. The most advanced one is led by Hitachi of Japan at Wylfa in Anglesey. Ministers have held talks with Hitachi and the Japanese government about making Wylfa a public-private partnership, which could involve the British state injecting funds into the venture. Tim Yeo, former chair of the Commons energy and climate change committee, said last month the government should commit funds during construction and then recover its equity or loans from private partners once plants are operational. “We can borrow money more cheaply as a government than any private investor,” he added. The government this month appointed Dieter Helm, an economics professor, to lead a review about how the UK can reconcile the often competing objectives of energy security and carbon reduction with keeping household power bills down. “The energy landscape is changing so fast that the government is scared of backing the wrong technology,” says the UK head of a global energy group.
FT 22nd Aug 2017 read more »