Professor Martin Freer, Director of the Birmingham Energy Institute at the University of Birmingham, comments on the final approval of Hinkley Point C, highlighting the positive stimulus it will provide the UK economy.
The journey to the realisation of Hinkley Point has regularly, and unceasingly, raised and dashed the hopes of supporters and opponents alike. Only in recent history there have been obstacles such as the European Commission’s examination of violation of the principles of state aid, failure to reach agreement between the French and Chinese partners, EDF and CGN, questions over if the EDF board would still back the project; would there be endorsement of the French unions? Were there issues with the manufacturing of the pressure vessel?
It seemed finally, for the supporters, on 28 July 2016, EDF had arrived at the Final Investment Decision. The marquee at Hinkley Point was erected, CGN and ministers were coming, and on Friday 29 July, contracts were to be signed.
For a few hours, those of us who had been supporters of the project, breathed a sigh of relief; finally the country was getting on with one of the most important infrastructure projects of our time which would have profound, and we believe, truly positive impact on the energy security of the UK. Then, hard on the heels of Brexit, the resignation of David Cameron and the succession of Theresa May, priorities shifted, everything was back on the table and Hinkley Point C (HPC) was again in doubt, until the Government finally decided to go ahead with the project.
It was a little disappointing that, as Ministers reviewed the project, the media was full of reports that the UK does not need HPC, that we can do it all with renewables, ratcheting up the pressure on the government to can the project. The evident truth is that, both for reasons of climate change, carbon reductions and energy security there is no reasonable alternative to nuclear energy.
The contribution that is required is going to be at a scale which exceeds the installed capacity that the UK presently has, 20%, possibly closer to 40%, at a time when much of the current nuclear fleet will be decommissioned. It is vitally important that the UK does not take its foot off the accelerator if there is a hope in hell of reaching the climate change targets which requires decarbonised electricity.
It is true that HPC is going to be expensive, over the years the price tag has steadily risen to the present £18b. The strike price of £92.5/MWh, some argue, is expensive, but probably not given the price of offshore wind projects currently average over £130/MWh. The Committee on Climate Change argue that in the future the price of nuclear could reach as low as £65-70/MWh, which with a proper carbon price would make it one of the cheapest sources of electricity. The high cost of HPC is in part linked to it being the first of a kind. If one builds a succession of plants, even if they are different designs the cost will come down.
However, to get there you have to build the first of a kind.
If the Government had unpicked the agreement with CGN and EDF, which has taken years to hammer out, and the consortium collapsed there would have been trouble ahead. The scale of investment required for HPC and potentially the other nuclear power projects that come on the back of it at Suffolk, Anglesey, Cumbria require long term certainty.
Governments over several cycles had managed to create the impression to international companies that ‘you can trust us’, that when we make a decision to invest in nuclear energy this has all party and long term support; the Contracts for Difference is an articulation of that. Unpicking an agreement does not provide investor confidence.
The scale of projects linked to nuclear and high speed rail will see tens of billions of pounds go into the UK economy at a time when many predictions are that on the back of Brexit there will be a recession. The scale of investment will see tens of thousands of new jobs, demand for British steel at a time when the steel industry needs it, a reason to continue to invest in the UK economy at a stage when many companies are questioning their future headquartering in the UK when it was once seen as a gateway to Europe. For nuclear power plant builders the UK remains a shop window where there is one of the toughest regulatory environments, giving the technology the UK Kitemark. For those that want to see the UK achieve low carbon, secure electricity, and those who care about UK prosperity and growth, the review of the HPC project was a rather high stakes and landmark decision.