Consumers will provide £29.7bn of funding for Hinkley Point C, according to a new report published by the National Audit Office (NAO).
The figure, which was published in its report on Nuclear power in the UK, has more than quadrupled from its original £6.1bn estimate in 2013.
“We estimate that the value of future top-up payments under the proposed HPC [Hinkley Point C] CfD [contract for difference] have increased from £6.1bn in October 2013, when the strike price was agreed, to £29.7bn in March 2016,” it said.
According to the report, the dramatic increase in the predicted value of top-up payments has increased due to reductions in projected wholesale prices of electricity.
Since the strike price of £92.50/MWh of electricity produced by Hinkley was agreed at 2012 prices, the Department of Energy & Climate Change (DECC) has revised downwards its projections of future wholesale electricity prices, mainly because of a global reduction in the prices of fossil fuels, the report said. It explained that while CfDs reduced consumers’ risk to market price volatility, they also meant consumers benefited less from wholesale price falls.
The news follows a report published last week by the government’s Infrastructure and Projects Authority (previously the Major Projects Authority) which stated that the total budgeted whole life costs for Hinkley Point C had risen from £14.bn in September 2014 to £37bn in September 2015.
The NAO report concluded that due to the longer CfD of 35 years – as opposed to the usual 15 years for other low carbon technologies – consumers were exposed to greater uncertainty.
“The range of potential wholesale electricity prices 35 years from when generation begins (currently expected to be 2025) is very uncertain – DECC only projects wholesale electricity prices for 20 years,” it stated.
“Additionally, over a longer timeframe there is greater potential for technological changes that reduce the competitiveness of nuclear compared to other power sources.”
The NAO said that it had previously recommended that DECC should ensure there were effective arrangements for actively managing contracts to minimise their costs to consumers. “This is especially the case where the contracts last longer,” it said.
According to the NAO, EDF’s current expectation is that two reactors at Hinkley Point C would begin generating 3.2GW of electricity in 2025, fulfilling around 7% of the UK’s total electricity demand. However, it said that EDF’s final decision on whether to proceed with the power plant was currently delayed and therefore it was still uncertain when EDF would begin constructing the facility.
It added that EDF expects Hinkley to cost £18bn to build over a period of 10 years, excluding financing costs.