A national spending watchdog today released a damning report saying the UK government has put consumers and taxpayers at risk in its deal with French and Chinese state-owned companies to build and operate the £18bn Hinkley Point C nuclear power station.
The report by the National Audit Office (NAO) says the deal with France’s EDF and China General Nuclear Power Corporation (CGN) did not sufficiently consider the costs and risks to consumers, who now face top-up payments totalling £30bn, up from earlier estimates of £6bn.
The NAO said the Department for Business, Energy and Industrial Strategy’s narrow assumptions about future fossil fuel prices, renewables costs and follow-on nuclear projects meant the value-for-money case for Hinkley Point C is weak.
"The Department has committed electricity consumers and taxpayers to a high cost and risky deal in a changing energy marketplace," said NAO chief Amyas Morse on the release of the report.
"Time will tell whether the deal represents value for money, but we cannot say the Department has maximised the chances that it will be."
Today’s report finds that the Department has not sufficiently considered the costs and risks of its deal for consumers– NAO
To keep the project off the government’s balance sheet, politicians decided to make EDF and CGN take all the risk of construction, but in return they promised a guaranteed price for the electricity for 35 years – the price agreed is double the current market price.
The final bill to consumers could have been 50% less if the government had agreed to fund half the £18 billion construction cost, the NAO calculated.
"Today’s report finds that the Department has not sufficiently considered the costs and risks of its deal for consumers," the NAO said. "It only considered the impact on bills up to 2030, which does not take account of the fact that consumers are locked into paying for Hinkley Point C long afterwards. It also did not conclude whether the forecast top-up payments are affordable."
The NAO also noted that the reactor design for Hinkley Point C is unproven and other ongoing projects that use it – in Flamanville, France and Olkiluoto, Finland – are having difficulties. Each of these projects is billions over budget and years behind schedule.
"Furthermore," NAO said, "EDF’s financial position has weakened since 2013."
It added: "There remains the risk that NNB Generation Company Limited (NNBG) will seek further financial support from the government, notwithstanding the contractual terms of the deal."
Image: Artist’s render of the planned £18bn Hinkley Point C nuclear power station in Somerset (EDF)