QuickTake Q&A: Britain and France’s $24 Billion Nuclear Gambleby and
Just how big is the price tag on the U.K.’s first nuclear-power plant in 20 years, which finally got the green light on Thursday? Some wonder if it will 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).
1. Why is it so expensive?
The plant is huge -- with output equivalent to about three large coal-fired stations -- and nuclear reactors 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?
It looks like it. When EDF’s board voted to approve the project on July 28, Theresa May’s government called time out and said they wanted to review the plan. The new prime minister appeared concerned about the cost of the project and the security implications of China’s involvement. Now, they’ve decided to go ahead on the same commercial terms as previously planned.
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, it shows the country can still attract foreign investment post-Brexit and cements key economic and political relationships with France and China.
5. What’s next?
Building Hinkley Point is unlikely to be trouble free. EDF’s first EPR project at Flamanville in northern France is running years late and billions over budget. While U.K. consumers will pay for the project over three decades once it’s up and running, until then the financial risk lies with the French company. EDF says the benefit of experience means the colossal plant can start delivering power on time and on budget in 2025.