The UK’s new nuclear power station at Hinkley Point has come under fire according to the National Audit Office. Concerns are being raised that British consumers are effectively being locked into a risky and expensive project.
The contract was originally agreed with EDF last September, and the National Audit Office believes that the new atomic reactors would provide uncertain strategic and economic benefits. Add this to the fact that Prime Minister Theresa May has taken a decision to quit an EU nuclear treaty, and we could see taxpayer compensation for EDF, or a more generous deal in favour of the company. Either way, it could end up costing consumers more than expected in the long term.
Could costs have been saved?
One major criticism of the project is that there was no real effort from the last two governments to look into alternative financing options for the power station. The most glaring of which was the suggestion that the government failed to look into taking an upfront stake in the £18bn project.
Instead, all the risk lies with EDF and its Chinese construction partners. With risk comes worries of delays and other obstacles, however the National Audit Office believes that if the government had taken even a 50% equity stake in the construction of Hinkley Point, it could have almost halved the guaranteed power price.
At present, EDF is guaranteed a price of £92.50 per megawatt hour in the 35-year contract, whilst a 50% stake from the government could have meant a price of £48.50 per megawatt hour.
What will this mean for businesses?
At present, these findings won’t mean much for businesses – the subsidy for EDF will be paid through energy bills which will translate to around £10-15 of the average household bill by 2030. Consumers won’t pay a penny until Hinkley is built and operational, so any business effect likely to be felt is still a while off.
However, the project stands as a good example of why businesses and decision makers should explore all options available – your current projects and costs may not be the most cost-effective or value-for-money solutions in the long term.