nuclear-news

Ten years ago, when the British government first considered launching a new nuclear programme, Areva, the French nuclear technology company, said it could build reactors that would produce electricity profitably at £24 per megawatt-hour.

It seemed an attractive proposition. Not only was this less than previous reactors, it was competitive with other power sources. New technology seemed to have opened the door to affordable carbonless electricity; Britain could meet its ever-tougher climate goals without shaking the public down.

A decade on and a major nuclear accident later, the world knows better. Nuclear projects elsewhere have been scrapped and existing stations shuttered or scheduled for early closure. Meanwhile stringent regulations have exposed Areva’s promise as a chimera. It turns out that the price of new nuclear for Britain is not £24 per MWh but nearly four times as much.

Even at these elevated prices, Britain’s first proposed new station, at Hinkley Point, is in difficulty. Despite agreeing a deal in 2013, EDF, the developer, has yet to commit to the £18bn project. There are concerns about technology and the French group’s financial capacity. Hinkley Point C — if it opens — may be materially delayed.

The government has done its best to make things easy. It eschewed a competitive bidding process and guaranteed to buy electricity from Hinkley Point at a £92.50 per MWh index-linked for 35 years after the station has been commissioned.

That is no small commitment. Few would bet on wholesale energy prices holding steady at more than double their present level for the next three and a half decades. Indeed some expect them to fall. The idea, though, was to get the station built fast, kick-start other nuclear projects and, critically, underpin the government’s self-imposed intention to cut carbon emissions by an EU-beating 60 per cent by 2030.

The French face several obstacles. First, there is the question of EDF’s balance sheet, groaning under a €37bn debt pile. The company’s share price has more than halved in the past year and its market capitalisation is now about €21bn. That is not much more than the company’s 67 per cent share of the cost of Hinkley C.

Linked to this are worries about the reactor technology it is employing. The two projects under construction, including EDF’s at Flamanville in France, are delayed and over budget. It might be difficult to entice lenders while it is possible that problems with Flamanville might cause construction to be halted or scrapped.

Politicians have come this far down the road with Hinkley Point because of the constraints they are under. Despite life-extensions, the UK’s existing nuclear stations are near to closing and its dirtiest coal plants are being shut to comply with EU rules. New capacity is needed. Replacing coal with gas would reduce carbon emissions but not enough to meet the targets the government has set itself.

New nuclear might not be needed were the UK to rethink its costly promises and reduce its carbon targets to match those of other EU states. If new reactors are to be considered, however, they must be subjected to the rigours of competition. That is the only way to get the right technology at acceptable cost.

Britain is saddled with the worst of all worlds. The government has effectively written the French a long-dated option to sell it unproven technology at an extremely generous price. Politically painful it may be, but the case for halting Hinkley Point C is becoming hard to refute.