Hinkley: Comment from our Chairman
Anyone who believes that nuclear power has a vital role in promoting energy security and helping meet Europe’s carbon emission reduction targets will be dismayed by news of further delays at Hinkley Point. Although fears that it will be the middle of the next decade before electricity is generated in Britain by a new nuclear power station have been growing for some time EDF’s inability to set a new target date for completion of this project is extremely discouraging.
Entrenched opponents of all forms of nuclear power are preparing to dance on Hinkley’s grave and may try to use this new setback for what was intended to be Britain’s first new nuclear plant for over two decades as a reason to question nuclear’s future more generally. So while wishing EDF and its probable Chinese partners every success in addressing the unresolved technical and financial challenges now may be a good moment to step back and consider the wider implications of what has happened.
When the plans for Hinkley were originally conceived expectations about the energy market were very different from what they are now. In the early part of this century global economic growth, including regular double digit annual expansion in China and other Asian economies pointed towards higher oil and gas prices than now prevail. More recently the fall in the cost of some low carbon renewables, notably solar, has been much sharper than was foreseen ten years ago.
So in addition to having to overcome technical problems and to meet more demanding safety standards than almost any other form of energy nuclear now faces intense pressure on cost grounds from alternative sources of electricity generation.
In my view this points towards two conclusions. Firstly, because the cost of nuclear power is heavily front end loaded with huge initial capital expenditure incurred years before any revenue is generated, though very low running costs thereafter, creative thinking is needed about how to minimise the burden of the upfront capital costs.
In a country like Britain, whose outstanding credit rating enables it to access capital more cheaply than almost any other borrower in the world, it surely makes sense for government to lend the developers money to cover the construction costs and seek repayment from the day the plant starts producing power. By the simple step of taking on the credit risk during the construction period government could permanently reduce consumer prices. All that is needed is a little flexibility in the Treasury theology on this issue.
Secondly it is likely that backing a single technology and developing it at scale may offer better value for money than experimenting with several different ones, including some first of a kind. If it turns out that the best candidates are from outside Europe and have been tried and tested in their home market then let’s accept that and concentrate on negotiating the best possible deals for our supply chain firms.
NNWE is keen to promote a debate about how to handle the challenges which arise in the wake of this delay at Hinkley. We remain convinced that there is a historic opportunity for a revival of nuclear power across the EU. We must ensure that a setback in one project does not prevent this opportunity from being seized.