The Government has gained agreement with EDF Energy – and its two Chinese partners – to build the new Hinkley Point nuclear plant in Somerset.
Ministers have agreed with EDF, after more than two years of negotiations, that the French company will be guaranteed a “strike price” of £92.50 per megawatt hour of power produced by the Somerset plant for 35 years. In addition to this, a flexible price has been established that could see a lower strike price for energy from Hinkley of £89.50 if the EDF consortium pushes ahead with plans to build another nuclear plant at Sizewell in Suffolk.
The reduction reflects the fact that advanced costs for a “first of a kind” nuclear power station are high, but reduce with each successive new plant as economies of scale kick in. The strike price covers not only the costs of building Hinkley Point C, but all decommissioning and nuclear waste management costs. The agreed strike price should allow EDF to make a 10% rate of return on the project.
£92.50 per megawatt hour is twice the current wholesale market rate for electricity, but this rate is less than the draft strike prices for onshore wind, biomass, Anaerobic Digestion, hydro, Large PV and, of course, offshore wind that are due to be finalised before the end of this year.
The nuclear strike price is expected to be reviewed 7.5 years, 15 years and 25 years after the commercial operations date of the first reactor as well at the end of the contract term.
Hinkley Point C will be the first new nuclear power station to be built since Sizewell B, which started generating electricity in 1995. Hinkley Point won’t start generating electricity until 2023.
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