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UK guarantees for minimum price for nuclear-produced electricity – an expensive disaster

Holger Hadrich

 ‘A little background on nuclear energy in the UK. France, or more precisely EDF, is also an important player there. For decades, however, attempts have been made to secure financing and risks for such projects through partnerships. Typically, the larger nuclear nations are involved: the USA, Japan and later China. But guarantees are also usually demanded from the countries where construction is taking place.

In the UK, for example, the government has not only guaranteed the operators of Hinkley Point a minimum price for the purchase of electricity, but has also tied this price to inflation. The price therefore continues to rise. These CfDs are officially registered and the data can therefore be easily read: At the start of the contract, the equivalent of 10.3 cents per KWh was guaranteed. The current figure is 14.8 cents. After various delays, the state-of-the-art blocks currently under construction are now scheduled to deliver in June 2026 to 2027. If this works out and the average inflation of recent years remains the same, a price of just under 17 cents can be expected by then.

For comparison: the tender prices for new offshore wind farms around the UK are between 3-6 cents per KWh. This roughly corresponds to the range for minimum prices with which renewables are guaranteed in Europe. Exchange electricity prices are around 10 cents, but vary greatly from country to country, and are slightly higher in the UK. Because of the gas price, they are still at double that level.

This guarantee contract from previous governments in the UK is therefore an expensive disaster for electricity customers. Here, purchases are already up to 100% too expensive, and if the electricity and gas markets continue to normalise, they will be 300% or even more so. Theresa May, who was in office for a very short time, wanted to get out of the contract, but did not found a way.

Anyone who now thinks this is expensive should know that investors from Japan already pulled out of the UK market many years ago and recently the Chinese have also bailed out.

This will not be a good deal even at the prices for EDF, which now has to shoulder the burden largely on its own. The only question is who will bleed more, the electricity customers in the UK or the state budget in France. If the true cost of nuclear power is taken into account, it will probably even be EDF.

As Paris is now raising electricity prices in its own country by almost 70% – which is certainly not politically desirable – in order to relieve the state coffers of at least some of the deficits, it will be interesting to see whether Paris will continue to pursue such foreign adventures by EDF&Co. The last and most modern nuclear power plant, the one in Finland, was offered at a fixed price, at least three times more expensive and the deficit is now in a special purpose vehicle in France, one more “bad bank” of Framatome.

France will not continue to do this and most European countries’ plans to expand nuclear energy are presumably effectively over.

The talk of some parts of German politics about such ideas should be taken into account. As long as no real progress is made on nuclear energy, this is purely a populist political show to revive age-old emotionalisation, especially in Germany.

Both sides should bear this in mind, because there is no point in getting worked up about it. As things stand today, nobody needs to ban nuclear energy or fear that the industry has to be discouraged from using it. It is enough to agree that you don’t want to pay a ridiculous price for it – neither as a taxpayer nor as an electricity customer.

Perhaps we can agree on that quickly?’

Via Dirk Specht

December 28, 2023 - Posted by Christina Macpherson | Uncategorized