The French owned power company EDF finds itself back at the top of the hit parade as the designer of, potentially, the UK’s largest energy white elephant.
The question arises following the recent visit to China of chancellor George Osborne and energy secretary Amber Rudd on a trade mission.
In 2013 EDF won the contract to build the first of Britain’s new generation of nuclear plants at Hinkley Point on the coast of Somerset in south-west England. It would take 10 years to build starting in 2013.
It would cost £24.5bn which seemed exorbitant since for just slightly more (£26mln) China built the 1.5-mile long Three Gorges Dam across the Yangtze River.
This required the relocation of 1.5mln people but it does produce 22.5 gigawatts of power which is more than seven times what Britain’s new power station will generate.
The project, first mooted in 2010 was controversial from the start, partly because of the usual concerns about nuclear power plants in terms of safety and possible accidents leading to radiation leaks.
But it was also contentious because the cash-strapped EDF had gone to two Chinese companies to help fund the up-front costs of the scheme. China General Nuclear Power Corp and China National Nuclear agreed to pay, in principle, for 40% of the megaproject.
The situation deteriorated over 2013 and 2014 as it became apparent that EDF had been involved in serious cost over-runs with two European Pressurised Reactors (EPR) of the kind planned for Hinkley Point.
Also, the Chinese groups failed to cough up their part of the money for the scheme as it emerged that they wanted more than just their share of the profits. Beijing has been lobbying hard for rights to build a reactor at Bradwell in Essex.
Costs started to mount as EDF said construction would not start until 2016, perhaps later.
The Sunday Times said recently: “There is a real risk that Hinkley will come to be seen as a monumental blunder, the most expensive white elephant in British history.”
As the project appeared to stall the Financial Times, in an editorial, added the UK should think again about Hinkley point.
However when the British ministers were in Beijing towards the end of last month, Amber Rudd said she wanted China to be involved in developing new nuclear British nuclear plants.
She added that Chinese firms were expected to be take the lead in construction of a Beijing-designed nuclear plant in Bradwell.
At the same time George Osborne announced an initial £2bn government guarantee for Hinkley Point in an effort to boost the delayed project.
With EDF thus seemingly back in business at Hinkley Point the hitting out against the huge costs of the project continues.
The disquiet about Hinkley Point is focused not only on the huge cost of the scheme but also the way these costs are to be met.
Hinkley is not only the first of a new generation of nuclear plants in the UK, it is also the first to be covered by a ‘contract for difference’.
Under this deal the government guaranteed that EDF would receive for 35 years from the start of operations, index linked £92.50 a megawatt hour for electricity.
This is more than twice the current market rate. It is, as well, higher than for every renewable source except offshore wind.
It also means that British households would be tied into very high electricity subsidies through their bills until 2060.
In the period since 2010, the price of some renewables has plummeted. The cost of solar panels has fallen by 67%, according to Bloomberg New Energy Finance. The cost of onshore wind power has also fallen.
There is also an argument that if the UK can somehow replicate the shale gas revolution of the US then the UK could have a cleaner, greener, largely gas-based energy sector. Are nuclear plants really necessary?
My own view is that a shale revolution in the UK is by no means certain to happen. There is a case for including non-carbon emitting nuclear plants into the energy mix.
It is just a pity that at a time when the government is cutting subsidies to renewables to ‘protect consumers’, it feels it necessary load customers’ bills down with costs to ensure that plants such as Hinkley Point get built.