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French demand high price for 'rescuing' nuclear industry with two new reactors

By Tim Webb

The Times,  16 July 2012

Families and businesses are being asked to find an extra £2.8 billion a year for the next 25 years by EDF Energy as the price of rescuing Britain’s faltering nuclear power programme.

The Times has learnt that the French state-backed energy giant will not build two new reactors in Somerset without huge subsidies, paid for through fixed levies on the electricity bills of consumers and businesses for decades to come.

The company has begun talks with the Department of Energy and Climate Change about its planned £14 billion Hinkley Point nuclear plant and intends to decide at the end of the year whether to go ahead.

Under the Government’s electricity market reforms, low-carbon generators will earn more than the market rate for electricity to make it economic to build nuclear plants and offshore wind farms.

According to well-placed industry sources, EDF Energy has told officials that it needs about £165 per megawatt hour, almost four times the existing wholesale price of electricity, if it is to go ahead with Hinkley Point.

City analysts said that the additional cost of building these two reactors at such a heavily subsidised rate, rather than, for example, cheaper gas-fired plants, would be £68 billion over 25 years, or an average of about £50 extra a year on every household bill. Businesses would be face an even bigger charge.

John Sauven, the executive director of Greenpeace UK, said: “Anyone who is able to turn on a calculator can now see that the nuclear industry has been misleading us for years. The Government’s energy policy is based on the fiction that nuclear power would be cheap. At these prices, it would be a very costly mistake that would see consumers paying billions of pounds in subsidy for decades to come.”

The Government has warned EDF Energy, and its junior partner Centrica, that nuclear power subsidies must be lower than offshore wind power to ensure public acceptance. The company argues that the total costs of the giant new offshore wind projects planned for the North Sea will be £180 per mw/h, making nuclear slightly cheaper.

Spiralling nuclear costs could force the Government to abandon or reduce its nuclear new-build programme. The Times revealed in June that the cost of the Hinkley Point project had soared by 40 per cent to a mid-range estimate of £14 billion. EDF Energy wants to build at least four reactors in the UK.

A spokesman for EDF Energy denied that it would negotiate with the Government for a £165 per mw/h subsidy, claiming that it was “too early to talk about specifics”. A source close to the company did say, however, that it had begun modelling different scenarios for the level of subsidy required.

One senior City analyst said: “I wouldn’t be surprised they want to keep that number out of the public domain.”

The Government will offer special subsidies to EDF Energy because its package of electricity market reforms will not be ready for several years. Last week, the coalition appointed the accountant KPMG to represent it when formal negotiations begin.

EDF Energy said that the subsidy for nuclear “will represent a fair and balanced deal for customers. It will show the cost competitiveness of nuclear new build. The process will be transparent — and the details published in due course.”