Ministers expected to ratify deal.
Firm commitment to build Britain’s first new nuclear power station is expected this month with key obstacles over planning and financing finally set to be overcome.
In the next few weeks, energy secretary Ed Davey is expected to grant planning permission for construction of the Hinkley Point C nuclear power station in Somerset. This will remove the last remaining regulatory barrier to construction of the plant by project promoter EdF.
“At this point the project is shovel ready and is set up for successful delivery,” EdF director of strategy and corporate affairs Paul Spence told NCE.
The Planning Inspectorate has privately made its recommendation about whether to grant a development consent order (DCO) for construction of Hinkley C. Davey now has until 19 March to agree or disagree with that recommendation.
EdF has overcome planning objections from three local authorities - Somerset County Council, West Somerset Council and Sedgemoor District Council - by agreeing to fund £16M of transport upgrades to mitigate impacts of construction traffic on local infrastructure. It has also agreed to fund pprenticeships in nuclear disciplines for local school levers (NCE 13 September 2012).
As a result, industry observers believe the project will get the green light, leaving finance as the final obstacle.
EdF needs the government to agree a contracts for difference strike price - a long term contract between energy suppliers and the government which includes a guaranteed minimum price for electricity generated by Hinkley C.
“We need confidence in the revenues,” said Spence. “Government holds the key.”
NCE understands this process is largely complete and that EdF expects the deal to be approved by the end of the month. Once it is agreed, EdF can move to “commercial close”. EdF chief financial officer Simone Rossi has previously said the firm hopes to reach this point by the end of the first quarter of 2013.
NCE reported last month that government inertia was stalling plans to sign the agreement as the final details were already agreed. A price of between £95 and £99 per MWh has been reported but not confirmed. NCE understands the length of the contract has still to be decided (NCE 14 February).
“When revenues are agreed we can then go out as quickly as possible to shareholders and investors and finalise investment,” said Spence.
Originally energy firm Centrica was co-funding development of Hinkley Point C with EdF on a 20/80 basis. But the firm pulled out last month.
Now EdF is looking for investors to help co-fund the project although it still wants to retain a controlling stake in the project.
Sovereign wealth funds as well as co-developer of EdF’s project in Taishan, China, energy firm China Guangdong Nuclear Power Group, have all been cited as possible co-funders.
Spence added that there could be a role for use of the UK Guarantees scheme, which can be used to underwrite private finance for major infrastructure projects.
“We are aware of the scheme and are examining the applicability and the scope of the scheme,” he said.
“We welcome any effort to encourage infrastructure and lower its costs for UK consumers.”
EdF hopes to begin construction of Hinkley Point C this year.
“When we have reached agreement on the strike price we can say more about the timetable and cost [of the project],” said Spence.
The company has already signed a £100M earthworks contract with a Bam Nuttall/Kier joint venture and has named a Bouygues/Laing O’Rourke joint venture as preferred bidder for its £2bn main civils works (NCE 21 June 2012). The Office of Nuclear Regulation approved the reactor to be used at Hinkley Point C - nuclear reactor firm Areva’s European Pressurised Reactor - last December.
Back up plan needed
The government needs a “back-up plan” to meet climate change targets if new nuclear power stations are not built on time, MPs said this week.
The call comes in the Commons Energy and Climate Change Committee report “Building New Nuclear: The Challenges Ahead” published last week. “If new nuclear power stations are not built on time, our legally-binding climate change targets will be extremely challenging and much more expensive to meet,” said committee chairman Tim Yeo.