Nuclear plant deal agreed by DECC and EDF amid derision over cost.

Guardian: “The British energy secretary, Ed Davey, has signed the first new nuclear contract with French state-backed utility firm EDF, admitting only a clairvoyant could know the true cost to the taxpayer of the 35-year contract because of the uncertainty of future energy prices.” “Energy academics said on Monday that the deal was a gamble, but estimated the cost would be at least £80bn over the life of the two new reactors to be built in Somerset, or roughly £3.5m a day for each reactor at current rates. The cost will depend on how energy prices move over the next 30 years.
Ministers made it clear that future governments would be locked into the contract, set to run until 2058, or face large penalties to compensate EDF. The Treasury has also been forced to offer loan guarantees to underwrite the finance for the investment, which is being undertaken by a consortium of French and Chinese investors.
The contract – which was signed as npower became the third major energy supplier to announce inflation-busting price rises – attracted strong criticism from some environmental groups, who said the price was excessive and the issue of waste unresolved.
But industry groups and the front benches of all three political parties welcomed the deal as providing low-carbon power, belated investment certainty and up to 25,000 jobs.
….Davey said consumers would pay £92.50 per megawatt hour once electricity was generated from the two reactors at Hinkley Point, falling to £89.50 if another contract is signed for a site at Sizewell. This “strike price” will rise in line with inflation, and will be paid for 35 years after its building, subject to periodic reviews to scrutinise wholesale energy prices.
….The number and quality of UK jobs at the site remains in doubt. Vincent de Rivaz, chief executive of EDF in the UK, made it clear that only up to 57% of the 25,000 jobs in the construction phase could go to British workers. Hinkley Point C will come onstream in 2023 and will be the UK’s first new nuclear power station since 1995.
….Antony Froggatt, from the Chatham House thinktank, said EDF’s costs projection had already increased markedly. “In 2006, its submission to the government’s energy review stated [the type of reactor to be used, a European pressurised water reactor] would cost £28.80 per megawatt-hour in 2013 values,” he said. “This more than threefold increase [to £92.50], over eight years, puts the cost of nuclear electricity at about double the current market rate – higher than that produced by both gas and coal-fired power stations, and more costly than many renewable energy options.”
Tom Burke: “As far as I can see the following is what the combination of Osborne and Davey’s announcements adds up to:-
·         Two Chinese companies will take a minority stake in EDF’s proposed nuclear power station at Hinkley point.
·         At some future point Chinese companies may be allowed to take a majority stake in other nuclear power stations if they are built.
·         Under the current levy control cap there is no money even to build the second EDF station let alone any Chinese stations.
·         The Chinese simply bought – for nothing – an option to participate in something that may never happen.
·         EDF have already announced that they do not expect the civil engineering work to begin at Hinkley before the middle of 2015.
·         This is an optimistic assumption about how long it might take to get state aids clearance.
·         It has already become clear that there will only be limited scope for British companies to supply the high value components for Hinkley
·         On the most optimistic assumptions there will be no electricity from Hinkley before 2023.
·         The price announced by Ed Davey will be about double the current wholesale price of electricity.
·         The wholesale price of electricity is the main component of energy bills.
·          In order to set that price he has had to guess the wholesale price of electricity in 2058 since the contract will last until then.
·         This is courageous. It means that if wholesale prices fall, British consumers will lose out substantially.
·         Wholesale prices for electricity in Germany have fallen about 30% in the past 12 months.
·         In short, this, not quite a deal yet, does nothing to reduce energy bills now, will not help to keep the lights on this winter and offers few high-value jobs for Britons.
·         It is another example of profit being privatised and risk being socialised.
·         No wonder the private sector has declined to take this opportunity.
You might call this a  behind the smoke and mirrors view of the ‘deal’.
So why are the Coalition making such a fuss about it? Because it supports the political narrative that the Coalition is making the economy work and has made Britain an attractive place  for inward investors. In other words, this is whole farrago is about managing the headlines not the country.”