What's a fair nuclear price?

 
EDF sign at a nuclear plant in France

Whenever I ask government officials and ministers why they are taking so long to reach a deal with EDF on building the promised vast new nuclear plant at Hinkley Point in Somerset, they say "40 years" - and turn a whiter shade of pale.

What they mean is that the French energy giant says it needs a commitment of between 35 and 40 years on the price to be paid by consumers for the power generated by Hinkley, before it presses the button on £14bn of expenditure for the two new reactors.

For officials in particular, who in theory could still be employed by taxpayers in 10 years or so, when vast amounts of electricity would start to emanate from the plant, it is a pretty scary idea that they might be committing all of us to pay more for that electricity than is justified - and not just for a few weeks or months, but till 2060.

And what they then point out is that the price originally demanded by EDF of £100 per megawatt hour was 19% higher than another source of low-carbon power - onshore wind turbines - where there is a need to guarantee the tariff for "just" 15 years.

So the gap between the price the government is prepared to offer and what EDF desires has been huge, some 25% initially, and explains why these negotiations have been running many weeks and months longer than both sides hoped and wanted.

Where are we now?

Well the gap has narrowed, but not enough. And there is a risk, although I can't scientifically quantify it, that the whole thing will collapse.

Start Quote

The chancellor doesn't have an ideological problem with nuclear, but he won't do a deal unless the price is right”

End Quote Government official

The prime minister is a bit concerned about the political fallout (no pun intended) if the project were scrapped.

Doubts would be exacerbated about the government's ability and determination to deliver on important job-creating and wealth-creating infrastructure projects. And to be clear, this is about as chunky a bit of new British kit as it is possible to imagine - 25,000 people would work on the construction and the UK would acquire valuable and exportable skills and expertise in new-generation nuclear technology.

Also the credibility of the government long-trumpeted low-carbon energy policy would be undermined, perhaps fatally.

Which is why David Cameron asked Lord Deighton, the Treasury's commercial secretary, and Stephen Lovegrove, the Energy Department's permanent secretary, to sort this mess out.

They talk to EDF, led in the UK by Vincent de Rivaz, on a daily basis.

My reading of the mood of both sides is one of cautious pessimism.

Nuclear reactor dials all pointing to zero Hinkley Point: For now, the dials point to zero

If anything, it seems remarkable to me that de Rivaz has somehow prevented EDF's board from pulling the plug, given that it is spending £1m every day to keep alive the possibility of an adventure whose starting date may seem from Paris to be somewhat elusive.

That said, the calculation being made in the Treasury and Downing Street is that EDF has more to lose from the deal's collapse than the UK does - the company would have to write off more than £1bn it has already spent on the project, and its ambition to become the global player in nuclear development and operation would be damaged, and perhaps terminated.

What may concern supporters of the Hinkley project, and not just EdF, is that ministers - and especially George Osborne - seem to me to be less worried about EDF ultimately walking away than about being seen to pay too high a price for the Hinkley power.

This is how one official put it to me: "The chancellor doesn't have an ideological problem with nuclear, but he won't do a deal unless the price is right".

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

Half a cheer for depression's end

On Friday we will have either the most symbolically important or the most pointless economic event of recent times, when the depression in Britain caused by the banking crisis is finally declared officially over.

Read full article

More on This Story

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +1

    Comment number 470.

    213. treacle_01

    "Other way round. French taxpayers subsidise EDF"

    So you are saying the FRENCH TAXPAYER is is subsidising the power EDF supplies in the UK ... jolly decent of the French to help us out

    Errr? SO EDF doesnt make a huge profit in the UK then as an energy provider?

    I'd have another guess at this is I were you ..... maybe you might get it right this time ;)

  • rate this
    +1

    Comment number 469.

    463.michellegrand
    "Sadly, what you say is not 100% true... Suggesting the banks are State Private Cooperation is one of the just not sos."
    =
    Hmm... I guess you're ignoring:
    After giving banks free money from the BoE, the State forgives private bank losses via bankruptcy laws & massive tax-payer bailouts (£500+ Billion), then it takes ownership in the following:
    84% of RBS
    43% of Lloyds

    *Whoops!

  • rate this
    +4

    Comment number 468.

    The whole idea of Thatcher's privatisation was that the energy company would runs things more efficiently, conduct its own research and development and re-investment funds in itself.

    WHAT HAS GONE WRONG WITH THE PLAN?

  • rate this
    +3

    Comment number 467.

    Britains core utilities like transport and energy supply should never be in the hands of private/foreign companies. All the issues we have with our inflated energy and transport costs are rooted in the idiotic decision to profit from our core industries.

    We have, more than any other major economy, prostituted our assets to the highest bidder. Labour and Tory have put profit before Britons.

  • rate this
    -2

    Comment number 466.

    462. United Dreamer

    I concede IP is a mess at the moment, but do not deny that said industries are still innovating, which is driven by profits.

    As for the US military and NASA, they may very well be at the precipice of the future, but the result of such state funded research is massive debts. Many forget that the US lost its triple A rating on its debts.

    Debt is not sustainable; profit is.

 

Comments 5 of 470

 

Features & Analysis

  • Man holding lipWitch hunt

    The country where a blasphemy charge is a death sentence


  • Espresso cupNews quiz

    Which city serves the strongest cup of coffee?


  • Irvine WelshDeaf ears

    Five famous Scots who can't vote in the Scottish referendum


  • Electric chairReturn of 'the chair'

    Five people talk about their roles in Tennessee's execution debate


Elsewhere on the BBC

  • Canada.Hidden rail trip

    Canada's tiny, two-car shuttle is a train lover's dream with scenic views

Programmes

  • A cargo shipThe Travel Show Watch

    It is not cheap or glamorous - so why are people choosing to travel by cargo ship?

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.