The invasion of Hinkley Point: French and Chinese set to land with nuclear arsenal

posted on 24/10/2013 13:17:14 by Dan O'Sullivan

Experts are debating whether or not the deal will have a positive impact on energy bills.

Bright future?: The first of a new generation of nuclear power plants is set to be built at Hinkley Point in Somerset

Energy is a touchy subject in Britain, and for decades now the topic has been the source of a tense political struggle.  

Whereas back in the eighties the fight was contested on the grounds of privatisation, these days everything from renewable technology and green taxes to bills and profits are being thrust under the spotlight.      

It's a minefield that's tough to negotiate, but the latest developments are potentially atomic in comparison to what has come before.

Relinquishing control

The government recently announced it had struck a deal for EDF Energy to build the first in a new generation of nuclear power plants at Somerset's Hinkley Point - and France's state-owned supplier has been promised it will receive a fixed price for the gas and electricity it produces.

With critics claiming that the agreement effectively amounts to a subsidy, the fear is that Britons will be putting their money in the hands of the French government in order to support the nuclear programme. With Chinese corporations also involved, another concern is that foreign powers will soon be setting energy prices for Britain's consumers.

In itself this is nothing new - the UK imports plenty from abroad, and companies based overseas already sell gas and electricity in the British market.

The issue lies in the fact that energy is an essential commodity, and it's one of the few areas where government intervention is sometimes considered essential

However, the issue lies in the fact that energy is an essential commodity, and it's one of the few areas where government intervention is sometimes considered essential. But despite this perceived need to protect people from the power of the Big Six, it now seems the authorities are increasingly willing to relinquish their ability to influence the industry.  

Let's talk bills

The biggest worry centres on the fact that EDF has been guaranteed £92.50 for every megawatt hour of energy Hinkley Point produces. This figure is almost twice the current wholesale cost of electricity, and if this is not reached when the plant becomes operational then the rest will be made up in the form of a levy on energy bills.

Effectively, this means the scheme could increase the amount the population pays for its energy, meaning that prices are pushed up as a result of the government's deal.

Yet while this is a very real threat, there's a flipside to the coin that has to be considered - specifically that the project also has the potential to keep prices down.

How could energy prices go down?

This is the trump card that the government is hoping to use as a means to effectively sell the Hinkley Point plant to consumers, who may enjoy various rebates if the building is completed on time and in line with its £16 billion budget.

The idea is that a new generation of nuclear plants removes the need to carry out costly maintenance and improvement work on certain areas of the UK's existing infrastructure. By avoiding these expenses, suppliers should be able to pass on the savings to their customers, and by 2030 the expectation is that people will be £77 a year better off than they would be without nuclear energy. It's not much, but it's a start.

Trouble on the horizon

Still, past form suggests things won't go to plan. EDF is currently building a nuclear power station in north-west France, with cost overruns and delays proving a significant problem.

Another thing to take into account are the long-term prices that the supplier has been guaranteed - 35 years is a long period of time to fix prices in an energy industry that was only privatised 29 years ago. Indeed, given the length of the fix and the volatility of private markets, it seems impossible to completely guarantee the success of another generation of nuclear power stations.

With other suppliers also asking the government for clarity on the impact the EDF deal will have on their own customers' bills, it appears there are genuine concerns that the country's energy industry may have just taken a step towards even greater uncertainty. 

Image credit: Nicolas Raymond

Dan O'Sullivan

Dan O’Sullivan is Make It Cheaper's Web Content Manager, which means much of his time is dedicated to ensuring we have plenty of online material to help business owners understand the energy, insurance and telecoms industries. With years of experience working alongside SMEs, Dan is committed to making life as easy as possible for smaller firms. You can email Dan at

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