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| Fig. 1: View of Somerset coast towards Hinkley Point. (Source: Wikimedia Commons) |
Hinkley Point C (HPC) on Britain's Somerset coast, as shown in Fig. 1, is the site of the UK's first new nuclear reactor since 1995 and the world's most expensive power station. [1] The project is led by NNB Generation Company Limited (NNBG), a company with strong ties to the French and Chinese governments. The first concrete was poured at the site in March 2017, and the plant is expected to generate electricity from 2025 to 2085, supplying about 7% of Britain's electricity needs from the mid 2020s. [2] However, the project was proposed nearly four decades ago, and has not been realized until now because of countless controversies. It has come under fire for everything from staggeringly high costs to potentially unreliable technology to the corporate and political agendas behind it.
The British government's reasoning for pursuing HPC centers around the energy "trilemma." Namely, it wants to provide a source of electricity that is secure, affordable, and environmentally friendly. The last consideration is especially important, as the UK aims to reduce carbon emissions by 80% between 1990 and 2050. [2] The government views nuclear energy as a necessary strategies in the race for decarbonisation.
In June 2017, the National Audit Office published a report calling into question the thoroughness of the government's research and planning for HPC. The report stated that while the UK needs some new nuclear power sources, "the [Department for Business, Energy and Industrial Strategy's] deal for HPC has locked consumers into a risky and expensive project with uncertain strategic and economic benefits." [2] Furthermore, the aforementioned Department did not sufficiently investigate alternative ways to structure the Hinkley Point C deal or sufficiently investigate the risks and costs to consumers.
The estimated HPC project costs have risen consistently since the project was first proposed. The most recent estimates from December 2017 put the project at £20.3bn. [1] However, there is still potential for the project to incur further costs, and Her Majesty's Treasury has guaranteed up to £2bn in NNBG-issued bonds to finance the project if needed. [2] More concerningly, British consumers will have to pay approximately £30bn over the course of the 35 year HPC contract, largely due to a controversial payment structure known as the "contract for difference." [2] According to the contract NNBG is guaranteed a fixed price of £92.50 per megawatt hour (MWh). [2] If the wholesale price of electricity is below £92.50 (measured at the 2012 price level), consumers will have to pay the difference as a "top-up" payment, regardless of whether or not their electricity even comes from HPC. [1] This top up represents a significant burden to the consumer, as the current market price is less than half the £92.50 fixed price. Finally, there could be additional costs at the tail end of the project from decommissioning and waste management. The current estimated cost of decommissioning is £7.3bn, and NNBG must save up to £7.3bn of its revenues to meet this cost, but consumers will shoulder the burden if costs run above estimates.
Another major concern of HPC is the messy international involvement of the French and Chinese governments. NNBG is owned 66.5% by Électricité de France (EDF) and 33.5% by China General Nuclear Power Group (CGN), who are its sole two investors. [2] EDF is an energy company 83% owned by the French government, and CGN is a Chinese state-run corporation. The nuclear reactor technology itself is being supplied by Areva, another company held primarily by the French government. [3] The HPC deal financially benefits EDF above all others, though there isn't even unanimous support for the project within the company, and the finance director resigned a couple months before the company finally approved the project. [1] Additional complications arise because HPC must succeed for EDF to remain afloat. Once valued at €150bn in 2008, the company has since sunk to a fifth of that value at €30bn. [1] EDF also has to rebuild its image after its French project at Flamanville ran up three times its original cost, and France itself faces a tough energy situation, as 75% of its electricity comes from nuclear plants, many of which are reaching the end of their lifespans. [1] The project's other backer, CGN, meanwhile, threatens to invade the UK market. HPC is ostensibly the first step in CGN's broader plan to construct multiple nuclear power plants in the UK. [1] Thus, HPC allows foreign competitors to gain entrance and a foothold in the UK market, potentially threatening UK businesses and forcing international dependency
© Anika Mohindra. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] H. Watt, "Hinkley Point: The Dreadful Deal Behind the World's Most Expensive Power Plant," The Guardian, 21 Dec 17.
[2] "Hinkley Point C," UK National Audit Office, 23 Jun 17.
[3] M. Chou, "Hinkley Point C," Physics 241, Stanford University, Winter 2017.
