• EDF’s Hinkley Point is set for $39 billion of future subsidies
  • Hinkley secured guaranteed power price at twice current rate

Hitachi Ltd. should be paid less for the power from its planned nuclear plant in North Wales than Electricite de France SA has been promised for reactors in western England, a panel of U.K. lawmakers said, seeking to keep a lid on energy prices paid by consumers.

The government should also ensure the cost of the Wylfa Newydd project by Hitachi’s Horizon unit is competitive with renewable-power plants such as onshore wind farms, the cross-party Welsh Affairs Committee said Tuesday in an e-mailed report. The lawmakers called for a “clear and comprehensible explanation” of the lifetime costs of the 2.7-gigawatt project and for a “demonstrable benefit” to the local community.

The U.K. is struggling to build generating capacity fast enough to keep up with the closure of aging nuclear power stations and a phase-out of coal-fired plants. EDF is set to make a final investment decision on Thursday on whether to proceed with an 18-billion-pound ($24 billion) plan to build two reactors at Hinkley Point. The utility has repeatedly postponed a decision on the long-delayed project, despite securing a U.K. government guarantee that it’ll receive 92.50 pounds per megawatt-hour of power, more than double current rates.

“The government should only build Wylfa Newydd if the strike price is below that agreed for the Hinkley Point C and competitive with renewable sources,” the committee said in a statement. “They must be transparent on cost and provide a clear and comprehensible explanation of the lifetime cost of the project, including decommissioning and waste disposal.”

Fixed Amount

Power from Hinkley Point and Wylfa will be paid for under a so-called contract for difference, which fixes the amount the utility receives per megawatt-hour, making its income predictable. If prevailing power prices are lower than the agreed “strike price,” utilities recoup the difference through consumer bills. If the prevailing price is greater, the utility returns the difference to consumers. 

Because prices have fallen since the EDF contract was agreed in 2013, the future subsidy cost to consumers of Hinkley has increased, according to a report earlier this month from the National Audit Office, which scrutinizes government spending. Using current projections for the wholesale power price, it estimated the lifetime cost of the top-ups has ballooned to 29.7 billion pounds from 6.1 billion pounds originally.

The Welsh Affairs Committee also called on ministers to draw up contingency plans in case the Wylfa plant, consisting of two Hitachi advanced boiling-water reactors, isn’t completed as planned by 2025. EDF had originally envisaged its new reactors would generate power by Christmas 2017. Under its current schedule, Hinkley won’t come online until 2025, the same year as Hitachi aims to complete Wylfa.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE