A deadlock over subsidies between EDF and the government could mean that plans to build the country’s first nuclear power plant in a generation stall.
The energy supplier has announced it is reining in spending on the £14 billion project for new reactors at Hinkley Point in Somerset and will not change its position until there is “greater clarity” around its ongoing negotiations with the government on the matter.
According to EDF, this could have a direct impact on both recruitment for the project and the position of the existing workforce, as 150 jobs could be lost.
The overall plan for the project is for EDF to receive a long-term contract that will guarantee a price for the electricity it generates from the new power plant, which the Department of Energy and Climate Change says will be subsidised through levies on the energy bills of all UK consumers.
Negotiations were originally set to end in December, but the Treasury has adopted a tough stance and the deal is now in danger of collapsing unless terms are reached by the end of this month.
Speaking to the Daily Telegraph, Tim Yeo, chairman of the Energy Select Committee, said the talks are now at “crisis point” and the entire project is in danger of falling through unless one side is willing to compromise.
He added: “There is a limit to the amount of time you can spend discussing the same issue. [EDF feel that] if they are not going to agree now, why would they be any different in three months’ time? All they are doing is, perhaps, throwing good money after bad.”
A failure to push through with the plans would be “a terrible setback”, he argued, not only for the nuclear industry but for British energy policy in general, as it would mean the country would have no new nuclear power plants for at least another ten years.
In a report, the Energy Select Committee said that failing to construct the new reactors would also make it far more costly for Britain to meet its climate change targets.
Another consequence would be a greater reliance on natural gas imports to compensate for the deficit, the committee says.
“Crossing one’s fingers is not an adequate or responsible approach when the UK’s legally binding climate change commitments and energy security are at stake. For a department whose principal priorities are to ensure energy security and carbon reductions, the DECC appears to be overly reliant on aspiration and hope,” the report said.
The DECC needs to ensure that long-term price guarantees for new nuclear power stations deliver “value for money” to consumers, the MPs state.
“Locking consumers into paying prices for nuclear power that are unacceptably higher than prices paid to renewables or carbon capture and storage projects would be wrong,” they argue.
The committee has also suggested focusing on new types of nuclear technology, such as utilising the uranium substitute thorium or building smaller reactors with power output of around 350MW, which will be less costly, boost energy security and could also lead to the possibility of local stakeholding in atomic power plants.
The government says it is focused on bringing forward the investment in new nuclear, but wants to ensure it gets the best deal for the consumer.
An inability to agree on terms with EDF could scupper all of these plans, however, and the energy supplier warned that the coalition needs to act fast and agree on a contract.
The company added: “Agreeing this contract is the key to attracting investors and to unlock funding for this project, which will give the UK the secure, low carbon energy it needs for the future.
“The government can act now to deliver nuclear in time to avoid the need for a back-up plan.”
The talks are ongoing, though concern among the industry and business community is that a failure to reach an agreement could have implications for other major UK infrastructure projects, even outside the energy sector.
A decision on the Hinkley Point development is due by March 19th.