New UK PM shocks nuclear lobby, puts proposed £18bn nuclear project on hold

New UK Prime Minister Theresa May has predictably come under pressure after Thursday night’s decision to delay David Cameron’s pet project. She refused to give the green light to the controversial £18bn Hinkley Point nuclear power plant which was first proposed 20 years ago. Mrs May and her cabinet want more time to study the implications. The new PM says she will only give a final answer before the end of the year. The powerful nuclear lobby is outraged and has pulled in favours from pals in the media and trades union. But those with an appreciation for how this industry words will be hoping Mrs May holds firm. Renewable energy and battery storage, the primary alternatives to nuclear, are the latest beneficiaries of Moore’s Law – the process where technology doubles output for the same price roughly every 18 months. This suggests by the time Hinkley Point’s 3.6 gigawatt reactors come on line in 2025, the cost of production will be well above alternatives. There is sure to be lots more huffing and puffing before the final chapter in a 20 year saga is written. But sanity, at last, is starting to prevail. – Alec Hogg

By Kiran Stacey in London and Robert Williams in Paris

The plan to build an £18bn nuclear reactor at Hinkley Point was hit with a last-gasp delay on Thursday night as the government decided to hold a new review hours after EDF, the project’s French developer, gave it the go-ahead.

Greg Clark, the business and energy secretary, announced that ministers would once more review the project almost immediately after the EDF board narrowly voted to approve the scheme. EDF shares were up 8 per cent in early trading on Friday after the company released its first-half results.

Britain's Prime Minister Theresa May attends a news conference at the Prime Minister's Chancellery in Warsaw, Poland July 28, 2016. Agencja Gazeta/Przemek Wierzchowski/via REUTERS
Britain’s Prime Minister Theresa May attends a news conference at the Prime Minister’s Chancellery in Warsaw, Poland July 28, 2016. Agencja Gazeta/Przemek Wierzchowski/via REUTERS

Mr Clark said: “The UK needs a reliable and secure energy supply and the government believes that nuclear energy is an important part of the mix. The government will now consider carefully all the component parts of this project and make its decision in the early autumn.”

Reaction from the Labour party and unions on Friday was scathing.

Barry Gardiner, shadow energy secretary, accused the government of being in “absolute chaos”. He told ITV: “Originally it was supposed to be that the bill-payer would pay £6bn over the lifetime of the project but the national audit office has now said that will be £30bn – so five times what was originally predicated here. The message it sends out to investors is that the British government just doesn’t know what it is doing when it comes to major infrastructure projects.”

Justin Bowden, the GMB union’s national secretary for energy, said: “Theresa May’s decision to review the go-ahead on HPC is bewildering and bonkers. After years of procrastination, what is required is decisive action not dithering and more delay.

“This unnecessary hesitation is putting finance for the project in doubt and 25,000 new jobs at risk immediately after Brexit. It is a gross error of judgment and must be reversed.

“The ramifications of this foolish delay are far wider than putting our energy needs in jeopardy – they will immediately call into question other major infrastructure projects coming down the line like HS2 andHeathrow/Gatwick expansion.”

Successive British governments have supported the scheme but Theresa May, the prime minister, has never given it her personal backing. Mrs May met François Hollande, the French president, last week, and the pair discussed the project.

One person said the scheme was expected to proceed after the review but the fresh delay had been a surprise.

EDF gave the go-ahead for the UK’s first nuclear power plant in 20 years, approving the Hinkley Point scheme at a board meeting on Thursday.

Directors approved the long-delayed project during a meeting in Paris. But opposition from within the company was underlined by the resignation in protest of a board member as the meeting started. The board was more divided than had been expected.

Pending final sign-off by the British government, which has already agreed to underwrite the project with a guaranteed price for the electricity it produces, construction could begin within weeks.

The new power plant is designed to give the UK zero-carbon power for the next 60 years, to kick-start a string of new reactors across the country and to provide work for France’s nuclear power industry.

EDF said Hinkley Point was “a unique asset” that would benefit the nuclear industries of both Britain and France. It said the “first concrete” would be scheduled for mid-2019 with the plant completed by 2025, when it will be able to meet 7 per cent of the UK’s electricity needs with a capacity of 3.8 gigawatts.

But critics say the project could also risk the financial future of EDF, the highly indebted French utility, whose chief financial officer Thomas Piquemal quit in March, warning that its future was being put in danger by Hinkley Point.

The scheme has been subject to multiple delays and budget revisions since first being proposed in the mid-2000s as part of what Tony Blair’s government promised would be a “nuclear renaissance” for the UK.

New reactors are also being planned in north Wales and in Cumbria, while EDF wants to help develop two sites after Hinkley Point – at Sizewell in Suffolk and Bradwell in Essex.

EDF had hoped to take the final investment decision earlier this year but it was postponed amid growing opposition from board members and executives.

That opposition persisted until the end, despite the company’s decision to push ahead with the scheme. As the meeting got under way, Gérard Magnin quit as a state representative on EDF’s board, calling the company’s nuclear strategy “highly risky”.

In the end, the vote was carried by 10 to 7. It was closer than expected, with all six union representatives and one shareholder representative voting against the measure.

Ministers in the UK must now give their final sign-off to the scheme, having already agreed to pay £92.50 – double the current wholesale price – for each megawatt hour of electricity it produces for 35 years.

While Theresa May has not said anything about the scheme since becoming prime minister two weeks ago, her chancellor Philip Hammond said earlier this month: “We must make sure the project goes ahead.”

The French group’s Chinese partners in the project, China General Nuclear Power, said: “We respect the new government’s need to familiarise itself with a project as important to the UK’s future energy security as Hinkley Point C and we stand ready to help the government in this respect.”

(c) 2016 The Financial Times Ltd.

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