Sunday Times, 2014-03-16
THE business minister Michael Fallon has infuriated renewable energy executives after “inviting” them to lobby Brussels on behalf of the government’s deal to underwrite nuclear power with billions of pounds in subsidies.
Whitehall last year struck an agreement with France’s EDF Energy to bankroll Britain’s first atomic power station in 20 years at Hinkley Point in Somerset.
Hinkley’s £16bn price tag would make it the most expensive power plant in the world. Analysts reckon that EDF, 84% owned by the French state, will collect at least £90bn from the project.
Under the terms of the government’s deal, power generated from the plant will be bought at prices roughly twice the current rate and then rise in line with inflation for 35 years. Households will pay for it through inflated energy bills.The European Commission has launched a formal probe into the agreement. In January it said it had "doubts" over whether it complied with rules on state aid.
This month Fallon took the extraordinary step of drafting in the renewables industry, which is reeling from a series of subsidy cuts to technologies such as biomass and offshore wind. He gathered a group of top executives at a meeting in Westminster to urge them to make supportive submissions to the Brussels consultation. He also sent a letter, seen by The Sunday Times, highlighting the national importance of Hinkley. Fallon adds that it is "dependent on a positive state aid decision from the European Commission", imploring executives to "support our case" by writing to Brussels.
One industry source said: "The renewables industry is somewhere between bemused and appalled that Michael Fallon has asked them to lobby for Hinkley Point's [subsidy]. He is living in cloud-cuckoo-land."
Hinkley will take a decade to build but meet 7% of national demand. The government is terrified that Eurocrats could block the centrepiece of its energy policy.
In January the Commission raised serious concerns over Hinkley. Britain may have overestimated the cost of capital, it said, adding that the plant would be "profitable under all price scenarios considered and in the absence of a subsidy".
Peter Atherton, an analyst at the broker Liberum, said: "The UK government is taking a huge bet that fossil fuel prices will be extremely high in the future. If that bet proves to be wrong then this contract will look economically insane when Hinkley commissions."
The Department of Energy said: "The government remains confident that we have a robust legal case for the Hinkley Point C investment contract and that it is consistent with state aid rules."