QuickTake Q&A: The Nuclear Plant That Has U.K., France on Edge

QuickTake: Nuclear Energy Debate

Just how big is the price tag on the U.K.’s first nuclear-power plant in 20 years? Some wonder if it would be the most expensive object ever built. Hinkley Point C is planned for the county of Somerset in southwest England, near two existing plants, one of which has been decommissioned. The French energy company Electricite de France SA is to build the two new reactors along with China General Nuclear Power Corp. Expected price tag: 18 billion pounds ($23.6 billion). Though EDF has given the project a green light, there are cold feet on both sides of the English Channel. The U.K. government has decided to delay a final decision on ratifying contract terms until the fall.

1. Why is it so expensive?

The plant is huge -- with output equivalent to about three large coal-fired stations -- and nuclear plants are among the most complex of all engineering projects. To make the project viable, the U.K. pledged to pay EDF 92.50 pounds for every megawatt-hour of electricity it produces for 35 years, more than twice the current market price. While that would give the French company an annual rate of return of 9 percent, British consumers could pay $48 billion above the market rate over the lifetime of the project, according to one forecast.

2. What’s the case for a new nuclear plant?

Hinkley Point is expected to satisfy about 7 percent of the U.K.’s power demand, providing enough electricity for about 5 million homes. The former prime minister, David Cameron, backed the plan to create jobs and meet commitments to reduce greenhouse gas emissions. The U.K. is relying on new nuclear plants to plug an electricity production gap as it closes all coal-fired generation by 2025 and older reactors are shut down.

3. Will it get built?

That’s now up in the air. EDF’s board voted to approve the project on July 28. Just hours later, the British government said it was delaying its approval so it could review the terms of the deal. There are signs that Cameron’s successor, Theresa May, might be listening to warnings the project is too expensive and will saddle consumers with billions of pounds of extra costs for a generation. (There’s also been concern about partnering with China on a project with national security implications.) China is pressuring the U.K. to move forward.

4. What’s at stake?

The French government and EDF see the project as essential to the future of France’s giant nuclear industry, which supports tens of thousands of skilled jobs. For Britain, backing away from Hinkley would mean tearing up its entire energy policy. It would end the biggest Franco-British industrial project in a generation, at a time when the U.K. is reconfiguring relationships with its continental neighbors, and could harm Britain’s relationship with China, its second-largest trading partner outside Europe.

5. What’s next?

Hinkley’s fate now rests on the review being undertaken by U.K. Business and Energy Secretary Greg Clark. The government’s promised to make a decision in September. It’s possible they may try to renegotiate the power price underpinning the deal, but the French would probably balk at that. Meanwhile, EDF faces a legal challenge to the board’s decision by unions worried the cost of the plant will endanger jobs in France.

The Reference Shelf

  • A QuickTake explainer on the never-ending debate over nuclear power.
  • A story on U.K. industrial policy after the vote to leave the EU.
  • A Bloomberg New Energy Finance note on outlook for U.K.’s power industry.
  • EDF’s presentation on Hinkley Point.
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