A House of Lords report has criticised the government’s handling of the Hinkley Point C nuclear power station for putting low carbon emissions above low cost energy.
“Poorly-designed government interventions” helped hike the price consumers will pay for the facility, says the Lords Economic Affairs Committee in its The Price of Power: Reforming the Electricity Market report.
A leading engineer had told the committee that the project had a 70% chance of being delivered on time.
Energy Technologies Institute chief executive David Clarke told the committee that, from an engineering perspective, the project probably had a better than seven in 10 chance of being delivered on time: “Does that worry me as an engineer? It ought to be better,” he said.
The government has agreed to pay EDF, which will build and operate Hinkley, a fixed price of £92.50 per megawatt-hour of electricity produced over 35 years. This will increase with inflation. The project could eventually cost £30bn, according to public spending watchdog the National Audit Office.
The Committee called for an urgent Plan B in case Hinkley Point C is unable to produce the anticipated power within expected timeframes.
“Poorly-designed government interventions, in pursuit of decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price,” said Committee chairman Lord Hollick.
“Domestic electricity bills in Britain have gone from being second cheapest in Europe in the mid-2000s to the seventh cheapest today. Britain’s high industrial electricity prices have led some energy-intensive industries to relocate abroad. Low-carbon policies are a factor in these high prices.
“Hinkley Point C is a good example of the way policy has become unbalanced and affordability neglected. It does not provide good value for money for consumers and there are substantial risks associated with the project,” he said.
“The government must make sure that the security of the UK’s energy supply is the priority of its energy policy. Affordability must not be neglected and decarbonisation targets should be managed flexibly.”
The report called for an Energy Commission to ensure a good price is delivered for UK consumers. It said government interventions in the market should be scaled back.
“We would like to see the government step back from the market and allow all generating technologies to compete against each other. It should establish an Energy Commission to ensure competitive auctions have independent oversight and are scrutinised carefully,” said Lord Hollick.
“Renewables play and will continue to play a crucial part in energy policy. Costs have been reduced and efficiency has improved. New clean technologies must be supported to be commercially viable. A new National Energy Research Centre would also help the UK to catch other countries up in the race to find cost-effective solutions to the challenges the world faces on energy.”
A Department for Business Energy and Industrial Strategy spokesman said: “Keeping the lights on is non-negotiable. Our top priority is making sure UK families and businesses have secure, affordable energy supplies. Through our ambitious industrial strategy Green Paper, we are investing in energy innovation to bring down costs over the long-term. “Policies, such as the Energy Company Obligation, Warm Home Discount and minimum standards for boilers and energy using appliances, have helped to improve energy efficiency, reducing consumption and driving down bills. Equally, we have a clear expectation that energy companies should treat all their customers fairly – and the government is prepared to act wherever markets are not working for consumers.
“We have made a firm commitment to reducing the UK’s carbons emissions, and over £56bn has been invested in renewables since 2012. Just last month we reiterated our commitment to spend a further £730M per year supporting new renewable projects over the course of this parliament. The purpose of government subsidies is to kick start new clean energy technologies, not to support them indefinitely. When costs have fallen dramatically, we have scaled back support in order to protect household bills.”