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« Another uranium development company heads to London | Main | Doug Casey on “Brexit” »

The problem with Britain’s (planned) nuclear-power station 

FOR several years the British government has drummed its fingers waiting for EDF, a French state-run utility, to give the all-clear for an £18 billion ($24 billion) investment to build Hinkley Point C, a nuclear-power station in south-west England. The stakes couldn’t be higher. The plant would be Britain’s biggest infrastructure project, and arguably the most expensive power station in history. It could create over 25,000 jobs. It aims to supply 7% of Britain’s electricity needs. And it is a strong symbol of Britain’s industrial partnership with both France and China. So when EDF’s board on July 28th at last made the decision to go ahead, the champagne in Somerset was immediately put on ice. Why, then, did the new government of Theresa May jam on the brakes? And does this mean HPC, as it is known, is doomed?

Probably not, though it should be. Mrs May’s objections are chiefly because a third of the project is underwritten by a Chinese state-owned firm that also hopes to build its own nuclear power plant in Bradwell, Essex. This arouses security concerns. Debt-laden EDF would be unable to build HPC without such financial support. But if push came to shove with China, the May government could part-finance the deal itself. The bigger problem (though not, it seems, for Mrs May) is the economics of the deal. A subsidy was agreed in 2013 at a whopping strike price of £92.5 per megawatt hour, when Britain’s power demand, and wholesale electricity prices, were expected to be on a steadily rising trajectory. Since then, they have been anything but. The National Audit Office, a spending watchdog, says that at today’s wholesale prices the subsidy for EDF would be almost £30 billion over 35 years. That is almost five times more than was implied when the deal was signed.

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