Plans for Britain’s first new-build nuclear reactor for 20 years received a boost after UK chancellor George Osborne offered a $3.1bn (£2bn) guarantee to private sector funders that their money would be repaid if the project ran into difficulties.
The chancellor made the announcement during a five-day tour of China to discuss future co-operation between the two countries’ nuclear industries, among other things.
Instead of locking two generations of UK consumers into paying billions to foreign state-owned firms, Osborne should invest in the flexible, smart, and truly clean energy system that can power a 21st Century Britain without leaving a pile of radioactive waste as legacy– Doug Parr, Greenpeace’s chief scientist
"Nuclear power is cost competitive with other low carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas," Osborne said. "So I am delighted to announce this guarantee for Hinkley Point today and to be in China to discuss their investments in Britain’s nuclear industry."
The Treasury said that the deal "opened the door to unprecedented collaboration in the UK and China on the construction of new nuclear power stations".
In particular, the government is hoping that the Chinese will develop some of the UK’s new generation of nuclear power stations.
This was agreed in principle during Prime Minister Li Keqiang’s visit to the UK last June, but now Amber Rudd, the UK energy secretary, has told The Financial Times that she hoped Beijing would develop a nuclear plant at a site in Bradwell in Essex.
Restarting Hinkley C
The move may help to advance talks between French energy company EDF and two Chinese nuclear contractors, China General Nuclear and China National Nuclear Corporation, over the construction of the $37bn Hinkley C plant in Somerset, which will follow the European Pressurised Reactor (EPR) design.
Negotiations have stalled over the terms of the deal. The Chinese firms are to take a 30-40% stake in the new plant.
The UK’s $3.1bn guarantee is expected to rise in future. The European Commission has allowed the government to offer up to $24bn in guarantees under the EU’s state aid rules.
The guarantee is to be offered by Infrastructure UK, which will receive in return an annual payment of 2.95% of the value of the loan.
Vincent de Rivaz, the chief executive of EDF Energy, said: "The chancellor’s approval of the infrastructure guarantee is a clear sign of the government’s commitment to Hinkley Point C."It is further progress towards a final investment decision on a project which will provide reliable, affordable low carbon electricity for decades."
The decision to protect commercial lenders is significant given that the only two other nuclear projects to be built with the EPR design, Olkiluoto 3 in Finland and Flamanville in France, have encountered substantial problems on site.
Doug Parr, Greenpeace’s chief scientist, described the guarantee as "signing up the country for the ultimate rip-off deal".
He told the BBC: "Instead of locking two generations of UK consumers into paying billions to foreign state-owned firms, Osborne should invest in the flexible, smart, and truly clean energy system that can power a 21st Century Britain without leaving a pile of radioactive waste as legacy."