License: All rights reserved. Credit: Dr Doug Parr

Comment: Why is Hinkley a bad deal for the UK consumer?

Doug Parr
Greenpeace UK chief scientist
License: All rights reserved. Credit: Wiki

The world of energy is changing. The world’s largest private bank, UBS, has recently advised its clients that large centralised power stations (like Hinkley) are not the future - solar power, electric cars and cheaper storage batteries are. Meanwhile, tech leaders Google have invested $3.2bn in Nest, a smart home energy company.  

Yet our energy policy in the UK seems stuck in the past, with government’s Electricity Market Reform seemed largely to be based on getting nuclear stations built - with a generous price for 35 years of supply for the proposed new 3.2GW EDF reactor at Hinkley which will  cost £24.5bn to build and open at the earliest in 2023.

Today the European Commission has decided to approve state aid subsidies for two reactors at Hinkley Point, Somerset  - despite the Commission estimating the deal between UK government and NNBGeneco (a subsidiary of EDF) will cost up to £17.6bn in subsidies from the British energy billpayer.

However, according to my calculations the total (undiscounted) subsidy to Hinkley over its lifetime would be much higher at £37bn, with a £14 increase per household per year. 

This is based a 35-year index-linked price  guarantee (‘strike price’) of £92.50 per MWh, which is is almost twice that of the UK wholesale electricity market price of around £50/MWh. This means that the British public funds the difference between the amount EDF will be paid and the market price - which at present seems unlikely to go up much.

Nuclear has been delivering power at the same real cost for over 50 years and it would require a huge level of optimism based on little evidence to suppose that historic flat-lining would be changed now.

Already, the cost benefits of learning from building a number of EPRs (the proposed reactor model for Hinkley) across Europe  seems to have disappeared because the price for Hinkley seems to be as big or bigger than the first plants in Finland and France.  

In contrast renewable energy is on a downward price curve, in the case of solar very rapidly indeed, and subsidy may be justified in bringing a technology to its technological potential.

So, so many subsidies

Also part of the deal is a whole host of protections - implicit subsidies by any other name - that are specific to Hinkley, including:

  • Loan guarantees -  If costs overrun or the plant defaults the government (read billpayers) will cover the repayment of the first £10bn to investors.

  • There will be two re-negotiations of the strike price, 15 and 25 years after the plant starts to generate. At these two re-openers, the strike price might be increased following raises of operating costs, including increases in fuel costs and  maintenance.

  • And, another interesting detail is that the deal includes protection against curtailment (the plant stops running) in case of “the evolution of power systems”, according to the CEO of EDF. What this means is that if the energy mix changes to include more renewables, storage, and demand-side management, the plant will be given preferential grid access or payment for power (presumably at the strike price) that would otherwise have been produced. This curtailment risk cover is also understood to extend to changes in political decision making or changes in law based on environmental and safety reasons.

  • As a large generating unit, having 3.2GW on the Grid potentially going off at short notice requires the rest of the Grid to accommodate it and these costs - £160m a year -  are being shared by everyone including renewable generators, not paid for by the Hinkley development.

In addition to all this - on top of of the Commission’s estimate and outside of state aid considerations - Hinkley will also receive other long-standing protections that are given to all nuclear plants. Firstly, limitations on liability in case of an accident up to £1.06bn - after which bill payers foot the bill (liability costs from Fukushima are around $100bn and rising). And secondly, planned subsidies of as much as £15.72bn for radioactive waste management from new reactors.

All of this adds up to the fact supporting Hinkley is not a cost-effective option for the UK power supply. As Professor Mitchell of Exeter University puts it in relation to the grid arrangements: “There is no justification for nuclear being exempted from paying the additional costs to the system other than to make nuclear look cheaper than it is relative to other sources of electricity.”

Renewables at a disadvantage

The Chief Technology Officer at Siemens has said that renewables developers would ‘give an arm and a leg, at least’ for the kind of terms being offered to nuclear in UK - yet even so, some renewables will be cheaper at a headline level than nuclear by the time Hinkley opens in 2023 at the earliest.

But most of the support for Hinkley is not available to low carbon generators like renewables, or not available at the same rate.

For example onshore wind will have a lower ‘strike price’ than Hinkley from 2017, and will in any case now be subject to competitive bidding processes which would lower the price further, again, unlike the Hinkley project.

Also, Hinkley’s 35-year strike price contract is unprecedented - and will mean someone leaving school now could still be paying for this contract after they retire.

UK and European U-turns on Hinkley

Not only is Hinkley set to become a huge drain on the public purse, and shifting a huge amount of risk onto the public, but neither of the coalition government parties wanted this heavily subsidised plant in the first place - as you can see from the Coalition Agreement at the start of Government (p 17). The Lib Dems opposed nuclear and the Conservative wanted a free market - not subsidies.

And it seems that the Commission has done a similar policy volte-face. The original Commission analysis was scathing about the deal - especially the lack of competitive tendering for the scheme, which may be overcompensating EDF for what it is doing - and energy commissioner Gunther Oettinger has described the concept as ‘Soviet’.

The question of the state aid stamp of approval arises because as part of the EU we should be heading to a single market in power, resulting in lower electricity prices.

The Hinkley deal is therefore troublesome because of the precedent that is sets, shielding EDF from risks that other market operators are subject to, and meaning an EU member state can arbitrarily buy any power it wants to, leading to an end of any meaningful single market.

But this isn’t the end of the Hinkley state aid saga - Austria confirmed it will appeal against the EU Commission decision to allow generous subsidies for Hinkley.

Comments Add new comment

I'm totally flabbergasted and speachless about this absurd Nuke Deal Of The Century.

I don't want to hear anyone anymore about "renewables being oversubsidized". People maintaining that public lie should be put on the scaffold.

 - and the winner is...the French government!

I find it incredible that this kind of wastefulness is still allowed to continue unabated,and just like the way the Bush family in America steamrollered and bought their way to power by vote manipulation and deceit,the same is happening here with voter deceit and manipulation.I hate lies and deceit and taught my children and others to do the same,this cannot be said for lying political class who preach one thing but do something completely opposite,just look at the expenses scandol.

Renewable energy's are proven to be better with a low carbon footprint and little or no wastage, and if you look back to the late 1890's at some of Nicola Tesla's 700 patents you would be astounded to see what they are,in fact some of them have been hidden or removed in order for the public not to be able to see them.

In fact,for starters if he'd been allowed to grow instead of being stifled by J.P Morgan who withdrew his funding when he realised he was not going to make much money from Tesla's wireless energy transformers,this world would have been a totally different place and all without any nuclear power.

Power,corporate greed and money have all but killed off innovation,but hopefully not anymore,as we are not the ignorant rabble that we were in the early 18th and 19th centuries.Times have changed and so must greedy,lying and narcacistic politicians too.

I guess we can categorize works on the basis of their nature. They can be protective, preventive, promotive(to promote something) or transformative. We people on the other hand are free to select a job suitable for us or according to our skills in either of these categories.

I've been surfing online more than 3 hours today, yet I never
found any interesting article like yours. It is pretty worth enough for me.

In my view, if all web owners and bloggers made good content as
you did, the web will be much more useful than ever before.

thank you for the information, and healthy greeting.
<a href="">obat glaukoma</a>

useful information gan, oh do not forget to visit the stall behind ane nih

informasinya bermanfaat sekali gan, wah jangan lupa kunjungi balik lapak ane nih

useful information gan, oh do not forget to visit the stall behind ane nih

informasinya bermanfaat sekali gan, wah jangan lupa kunjungi balik lapak ane nih

interesting article that awaited new

please visit us at the following address may be useful obat tbc alami

Health care costs and health insurance premiums are increasing every
year. Here are some ways to save and still have adequate medical
coverage. health-cuisine

What Is MLA Format for Internet Sources? Definition - MLA format for
Internet sources is a result of the technological advancement of our
world. Gone are the days when only books, periodicals, and journals are
in authority in the academic world. websourcing

Online degrees in education are very suitable for adults who are not
able to attend colleges of traditional setup. Online Degrees in
education allows professionals to upgrade skills to make career move. rumieducation

kunjungi website nya gan :) <a href="" target="_blank">obat jelly gamat gold g terbaik paling ampuh</a>  <a href="" target="_blank">jelly gamat gold g</a>    <a href="" target="_blank">diet alami tanpa efek samping</a>

Hello there, just became aware of your blog through
Google, and found that it is really informative. I'm gonna
watch out for brussels. I will appreciate if you continue this in future.
Lots of people will be benefited from your writing.

healthy greetings, news help all thank you very much. visit us obat kista coklat or

terimakasih admin atas informasinya

ace maxs obat stroke paling ampuh dan efektif sembuhkan penyakit stroke

 One of the best part for travel is that you choose to leave an
individual's old society behind together with enter an innovative world.
Truly, it is certainly thrilling that will explore the spot you haven't
done before. travellers bay

Having nicely as well as working out are not adequate right now, because you should be stress-free and stay best to not just on your own yet other people at the same time. This will likely lead to optimistic considering, which in turn in the long run works in to the complete diet and weight loss schedule that you're looking for.
<a href="">waterswing</a>


Thanks for your information. Don't foget to visit my blog

<a href="">obat kista tradisional</a>.

obat kista tradisional:

thank you for information

Your mother ended up being right when said to always take in breakfast every day. Ingesting a proper breakfast every day which contains fresh fruits, veggies and whole grains is the best way to allow your metabolism know that it is going to discover food nowadays. Whenever you avoid eating breakfast your system switches into a new malnourishment such as function.

Anytime basketball was initially discovered, any hoop was initially
actually a good basket, as a result the identity basketball. As time
started, the common backboard has become bigger, even though rules
adjusted, the total was put in.

Beautiful essay, got the pleasure of reading. Thank you for helpful tips and simply good info.  we provide the most potent medicine slimming capsules if you interest please click here> <a href="">slimming capsule</a> and we also provide : <a href="">slimming capsule herbal</a> , <a href="">obat penebalan dinding rahim</a>, <a href="">obat untuk menggemukan badan</a>, <a href="">obat peningkat hormon testosteron</a> , <a href="">obat penyumbatan saluran tuba</a>, <a href="">cara mengecilkan perut</a>
your interest in buying drugs from us, please click on the link only. Thank you very much :)

Beautiful essay, got the pleasure of reading. Thank you for helpful tips and simply good info. we provide the most potent medicine slimming capsules if you interest please click here> slimming capsule and we also provide : slimming capsule herbal , obat penebalan dinding rahim, obat untuk menggemukan badan, obat peningkat hormon testosteron , obat penyumbatan saluran tuba, cara mengecilkan perut
your interest in buying drugs from us, please click on the link only. Thank you very much :)

verry much !

obat rematik tradisional

Should there be another persuasive post you can share next time, I’ll be surely waiting for it.

Thanks for the post and great tips..even I also think that hard work is the most important aspect of getting success.

Infonya good sir, I Wait for the new Info

Your use of formatting when making your points makes your observations very clear and easy to understand. Thank you! I hope that the custom comes alive after this..thumbs up for your work.

I've investigated in a long time. Thankful to you for continually giving stunning stuff along these lines

Thanks for compiling such nicest information in your blogs. Articles are very informative and hope again I’ll find more like that.

waiting for next article
Thank you for sharing the information very useful. It is very pleasant to read this article from your website.

The new model data show that, while global average temperature is expected to increase at a less rapid pace than indicated.


Post new comment

The content of this field is kept private and will not be shown publicly.