- U.K. prime minister to meet Chinese leaders at G-20 summit
- China concerned about delay to $24 billion Hinkley Point plant
Theresa May has a delicate balance to strike this weekend when she arrives in China, attempting to foster confidence that Britain remains open for business despite its decisions to leave the European Union and delay an 18 billion-pound ($24 billion) nuclear power project.
On her biggest foreign trip since taking over as U.K. prime minister in July, May will meet Chinese President Xi Jinping along with other leaders of the Group of 20 nations in Hangzhou, south of Shanghai. China has signaled alarm about the holdup at the Hinkley Point power plant, for which its largest nuclear operator would provide a third of the financing.
May’s quandary is how to weigh security concerns about a Chinese company owning part of an industry crucial to the U.K. against the government’s struggles to draw the investment needed to ensure electricity keeps flowing. Complicating that is growing unease about the cost of the project, and rival generators are arguing they can provide a cheaper and cleaner alternative.
“What she shouldn’t say is: The U.K. is worried about China using this project to take down the grid,” said Derek Scissors, resident scholar following China at the American Enterprise Institute in Washington. “What she should say: The decision will be made purely on British national interest, and Chinese government complaints about unfair treatment ring hollow in the face of its long-standing bias in favor of its own firms.”
China is attempting to export its nuclear expertise and sees the U.K. as a showcase for its technology. It has said pulling the plug on Hinkley would damage its relationship with Britain and potentially threaten other investments, a warning that resonates after U.K. voters backed Brexit in June.
After the decision, China signaled its confidence in British business by opening a direct flight from Tianjin to London on Hainan Airlines and announcing 220 million pounds in housing projects in Sheffield backed by Sichuan Guodong Construction Group, according to Liu Xiaoming, China’s ambassador in London.
“No country can develop by itself behind closed doors,” Liu wrote in a column in the China Daily on Thursday. “I hope that Britain will continue to be pragmatic and stay open to Chinese businesses.”
Hinkley Point, in southwest England, would be developed by Electricite de France SA. It ran aground hours after the company gave a final go-ahead for investing in the project, setting aside opposition from its own board members and labor unions. Business and Energy Secretary Greg Clark cited the need to “consider carefully all the component parts of this project.”
State-owned China General Nuclear Power Corp. will follow up its finance for Hinkley Point with a minority stake in a second nuclear plant at Sizewell and then a majority holding in another at Bradwell. Both projects in eastern England may deploy Chinese reactors.
A year ago, the U.K. was warned by a longtime adviser, Nick Timothy, that China’s involvement could allow the government in Beijing to “shut down Britain’s energy production at will” in the event of a conflict. The Chinese company was charged in federal court by U.S. authorities last month with conspiring to steal nuclear secrets.
CGN has said it “always sticks to the principle of following laws,” and Chinese officials have bristled at the idea Hinkley Point could be used as a threat.
May “has upset the Chinese and the French,” said Steve Thomas, professor of energy policy at the University of Greenwich, London. “She could have dealt with this in a better way by saying she would review all major public spending, not just Hinkley. If she blocks Bradwell, she will kill Hinkley because the Chinese won’t like that. They want the prestige of having Chinese technology in Britain.”
May’s office has said it will decide on Hinkley by the end of this month, probably too late for her to make an announcement in Hangzhou. “We’re looking closely at this contract,” May’s spokesman, Greg Swift, told reporters in London on Tuesday. “Anglo-Chinese relations are very important to us, and they will be going forward.”
There’s plenty in the Hinkley deal for May to examine beyond China’s involvement. Projects in Finland and France using the same Areva SA reactors as planned at Hinkley have been plagued by delays and cost overruns. EDF unions oppose the project, and the utility’s former chief financial officer, Thomas Piquemal, resigned because of concerns the company’s balance sheet was too stretched to handle construction.
Added to that is the possibility that Hinkley may present a lousy deal to consumers, who will subsidize the power it produces.
The government agreed in 2013 to pay EDF 92.50 pounds ($121) a megawatt-hour for electricity from Hinkley, more than double the prevailing market price. The National Audit Office estimated in July that consumer-funded top-ups over the project’s 35-year lifetime would total almost 30 billion pounds, five times original estimates. And offshore wind developers such as Dong Energy A/S and biomass producer Drax Group Plc say the government should look again at alternatives to nuclear, which are falling rapidly in price.
On the flip side, Britain has pledged to close down coal-fired plants by 2025 to help reduce greenhouse gas emissions, and most of its aging existing fleet of nuclear power stations is due to shut by the end of the next decade. That’s left ministers trying to plug a future supply gap with predictable, low-carbon energy supplies to complement intermittent renewables. Hinkley would meet 7 percent of Britain’s power needs.
“China would certainly hope for a promise that the project will go ahead,” said Lin Boqiang, director of Xiamen University’s energy economics research center and an adviser to China’s National Energy Administration. “At the very least, the Chinese side would like to receive a positive message from May.”
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