Hinkley Point C Approved: The Reaction
In August we wrote a blog post commenting on how the delay of Hinkley Power Station could affect your business. Just over a month later, and the controversial 3,200MWe nuclear plant was given the go-ahead.
But now the looming spectre of Brexit may have called a halt to the whole thing, with the chairman of the Commons energy and climate change committee warning The Times that:
"Until last week... EDF was investing in another EU memebr state. Now that is no longer the case."
So, where does this leave this leave the Hinkley power station project?
Hinkley Point C Approval
The official government announcement issued on the 15th September 2016 stated:
“Following a comprehensive review of the Hinkley Point C project, and a revised agreement with EDF, the Government has decided to proceed with the first new nuclear power station for a generation.”
The project has already been delayed once, at the eleventh hour by Theresa May mere days after she succeeded David Cameron as Prime Minister, a decision which was met with great speculation over why this occurred. The official line was that May wanted to fully review the project plans herself before giving it the green light, while others wondered if it was a distrust of the Chinese government which gave May cold feet.
It now seems that both speculations were true. It is understandable that May genuinely did just want to take the time to understand the project fully before committing to the £18bn project but it is also telling that Beijing delayed confirmation that their £6bn investment was still on offer. The suggestion of security concerns was deemed by Chinese officials as a huge snub, therefore weakening the Anglo-Chinese relationship.
In the Department for Business, Energy & Industrial Strategy’s (BEIS) official statement, Secretary of State, Greg Clark confronted concerns over security stating that:
“Having thoroughly reviewed the proposal for Hinkley Point C, we will introduce a series of measures to enhance security and will ensure Hinkley cannot change hands without the Government’s agreement. Consequently, we have decided to proceed with the first new nuclear power station for a generation.”
The proposed regulatory framework will ensure that any foreign ownership of large-scale projects will be subject to scrutiny. In the case of Hinkley Point C, the new legal requirements will allow the UK Government to intervene should EDF decide to sell its stake.
Moving into the future, this framework will continue to ensure that all significant shares of British nuclear new build projects cannot be sold without the Government’s full knowledge and consent therefore protecting national security.
Defence of the realm aside, Clark then carried on to defend the reasoning behind granting Hinkley approval noting that:
“Britain needs to upgrade its supplies of energy, and we have always been clear that nuclear is an important part of ensuring our future low-carbon energy security.”
In the government's latest green paper which outlines plans for a new industrial strategy, the objective to deliver affordable energy and clean growth is one of the 10 pillars which have been opened up to consultation. Issued in response to May's confirmation of a "hard Brexit" stance, the government is now doing all it can to ensure the UK can survive independent of the EU single market.
However, despite fears of EDF pulling out, the energy provider has confirmed that "it's commitment to the Hinkley Point project...continues", for now.
The Hinkley Petition
While energy security is a primary concern for those in government, green campaigners and political commentators alike have hurled criticism at the Hinkley Point C approval, branding it as a huge financial and environmental mistake, a mistake we can't afford in the current economic climate.
Critics have deemed it a ‘White Elephant’; ignoring viable renewable alternatives, wasting taxpayers’ money and potentially resulting in energy price increases. A petition has already been set up to encourage investment in alternative green power sources instead of Hinkley.
The petition claims that the nuclear project would “hand the keys to Britain’s future economic security to the Chinese and French Governments, while blocking investment and grid access for faster and cheaper renewable energy alternatives.”
Furthermore, switching to wind, solar, tidal lagoon and biomass power would apparently create “many more jobs than Hinkley C”.
The Hinkley petition currently has over 116500 signatures meaning that the Government is now required to respond. 100,000 signatures are required for the petition to be considered for debate in Parliament.
A report from the Energy and Climate Change Intelligence Unit has even gone so far as to claim that the UK could meet its energy and climate change targets without Hinkley Point C, and it would actually work out cheaper.
However, while the report concluded that Hinkley approval was not “essential” it did not criticise the project.
“If Mrs May decides to go ahead with Hinkley, all well and good – if she decides not to, or if the project stumbles at a later stage, we have alternatives.”
The Future of Hinkley Power Station
In light of Brexit, a different plan of action may have to be sought out, especially if relations with France suffer as a result of EU negotiations.
Having said that, the response from UK industry bodies and business groups has been rather positive which bodes will for Hinkley if alternative investment has to be found.
The GMB, a general trade union with over 638,000 members, issued a statement as soon as the approval of Hinkley was announced claiming that they were “delighted that the first of the badly needed fleet of new nuclear power stations is going ahead”, encouraging the building of Bradwell in Essex and Sizewell in Suffolk to follow suit.
The Confederation of British Industry (CBI) also voiced its support claiming that: “New nuclear energy will play an important role in supporting a diverse, low-carbon and secure energy supply, so it’s now time to push on with this key project.”
In terms of benefits to the economy, it’s predicted that Hinkley will hugely benefit the South West, resulting in local companies receiving £50bn worth of new contracts over the next two decades. 25,000 jobs, 1,000 apprenticeships and a £100m injection into the region’s economy is also predicted.
However, Richard Black, Director of the Energy and Climate Intelligence Unit (ECIU) has warned that we should not get too excited, commenting that hurdles remain before the project can go ahead.
“Despite this being called a ‘final decision’ to build Hinkley C, other hurdles, including technical and legal challenges, may well lie ahead for the project.”
Black cited French trade unions and potential Presidential candidates as main obstacles to progress, noting that: “EDF’s finances are not the healthiest, and the French nuclear regulator is examining flaws in steel used for a similar reactor being built in France.”
The French plant in question is called Flamanville and is widely viewed as the forerunner to Hinkley. This over-budget and behind schedule €10.5bn reactor isn’t the best example of nuclear success, so the pessimistic response is somewhat understandable.
What will this mean for your business’s energy bills?
In terms of energy prices, there is much uncertainty. Some claim that prices will rise if Hinkley goes ahead due to the £92.50 per megawatt hour payment the UK government has guaranteed to EDF as part of a Contract for Difference agreement lasting for 35 years once the plant is generating.
This means that whatever the difference is between strike price and the wholesale price, it will be paid for through bills paid by the end consumer. This is a policy already in place for other clean technologies such as offshore wind, but many have questioned whether the price is too high, including the shadow energy minister, Barry Gardiner, who argues it should have been renegotiated before approval was granted.
Claire Jakobsson, head of climate and environment policy at EEF has also urged caution. While in favour of the approval she does state that “it remains to be seen whether this deal is able to offer value for money”.
In some ways, this will be a short term issue, compared to the longer term problem of the UK’s energy security and carbon reduction targets.
The eight power stations which currently generate 20% of the UK’s power are set to close by 2030 meaning that the Government needs to take action to ensure that future generations are well supplied with energy if we are to keep the lights on.
Hinkley, once completed, is expected to generate 7% of the UK’s energy requirements which will go some way to filling the gap, but this will need to be combined with other low-carbon initiatives if we are to meet our green targets while also satisfying demand.
Commenting on the news, Managing Director of Love Energy Savings, Phil Foster, had this to say:
“The future of the UK’s energy supply has been uncertain for some time. With ever more ambitious carbon reduction targets being proposed and international relations in a questionable state, it is vital the Government come up with a domestic, workable clean energy strategy to ensure supply meets demand.
“While it is great that bodies such as the ECIU claim that our carbon reduction targets are achievable without nuclear, it is the need to supply growing demand which may mean nuclear is vital for our future energy security.”
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