Senior UK officials defend £20bn Hinkley Point nuclear project

Britain’s energy security and carbon-reduction goals would have been put at risk if UK prime minister Theresa May had halted the £20bn Hinkley Point nuclear power project, senior government officials have said.

Senior civil servants involved in the 2013 deal with EDF, the French state-owned energy group, to build Britain’s first new nuclear plant since the 1990s said on Monday that they still believed the project represented good value for money, despite mounting criticisms over its high cost to consumers.

They told a parliamentary committee that the 3,200 megawatts of generating capacity expected from Hinkley Point by 2025 — satisfying about 7 per cent of UK demand — would be critical to keeping Britain’s lights on while reducing carbon emissions.

Mrs May ordered a review of the Hinkley Point project shortly after becoming prime minister last year, but eventually gave the scheme the go-ahead last September.

However, her decision has come under increasing scrutiny because of delays and cost overruns at projects involving similar French nuclear reactors in other countries. At the same time, the cost of alternative sources of low-carbon energy has fallen.

The latest UK contracts for new offshore wind capacity were awarded last month with a guaranteed price of £57.50 per megawatt hour, for 15 years — well below the £92.50/MWh for 35 years promised to EDF for electricity from Hinkley.

But Alex Chisholm, permanent secretary at the Department for Business, Energy and Industrial Strategy, said on Monday that it was not an “apples for apples” comparison, because nuclear power is more reliable than intermittent wind turbines.

Mr Chisholm and other civil servants had been called to give evidence to the Commons public accounts committee following criticism from the National Audit Office, which called Hinkley a “risky and expensive” project and said ministers had failed to consider cheaper ways of financing the plant.

Stephen Lovegrove, the former permanent secretary at the energy department who oversaw negotiations with EDF, said it was a “very good deal within the policy constraints of the time”.

Mr Lovegrove recalled that David Cameron’s coalition government had ruled out investing taxpayers’ money in Hinkley because of its focus on reducing public debt and opposition from the Liberal Democrats. This resulted in a deal under which EDF and CGN, the Chinese state-owned nuclear company, agreed to shoulder the entire cost of building Hinkley.

The NAO said in June that the government should have considered sharing construction risks with EDF and CGN, because it could have lowered the cost of capital and ultimately the price of electricity for consumers.

John Kingman, a former senior Treasury official, said other financing options were looked at, but none offered an overwhelmingly better deal.

Mr Lovegrove said cost overruns at other nuclear projects reinforced the argument for shielding taxpayers from construction risks.

“The biggest risk here is for the taxpayer and billpayer to be exposed to cost overruns,” he said. “That was why we constructed the deal in this way.”

Critics have argued that Mrs May should have sought to renegotiate the deal with EDF as it became clear that the cost of alternative energy sources was falling.

Mr Lovegrove, now permanent secretary at the Ministry of Defence, rejected such criticisms on Monday. He said EDF and CGN would be unlikely to accept new terms given that rising construction costs had already reduced their projected returns on investment to between 8.2 and 8.5 per cent, at the lower end of industry standards.

“The idea that the deal would not have collapsed if we had sought to renegotiate is, I think, fanciful,” said Mr Lovegrove.

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