Government urged to re-evaluate the case for nuclear power

The government should re-evaluate the strategic case for supporting nuclear power before giving the green light to the rest of its new fleet of atomic stations, a heavyweight parliamentary committee has urged.

In its new report on the Hinkley Point C project, published this morning (22 November), the public accounts committee (PAC) recommends that the BEIS (business, energy and industrial strategy) department should publish this re-evaluated case before deals for any further nuclear stations are agreed.

The committee says that the department pressed on with its plans for Hinkley, which involved locking electricity consumers into higher bills with subsidies for the project’s backers, despite a weakening in the financial case for nuclear power.

And it claims the government did not attempt to renegotiate the deal after agreeing provisional terms for the station in 2013, because it was concerned that the project’s investors would not accept a lower return on the project and the deal would collapse.

The PAC says the government should have tried harder to establish whether these backers, EDF and Chinese government-owned CGN, would have accepted a lower figure than the £92.50/ MwH strike price, which guarantees the minimum the plant will be paid to generate electricity.

It says that the strategic case for nuclear, which only covers the period until 2030, has not been reviewed since 2008 since when both the costs of fossil fuels and renewable options have fallen.

The PAC report estimates that the project will add £10 to 15 to the average electricity bill, which will “disproportionately” hit lower income households, based on the department’s forecast that consumers will pay £30 billion in top-up payments over the contract’s 35-year lifespan.

It recommends that the BEIS department should tell the committee by March next year how it will ensure an ‘independent and transparent assessment of the impacts on consumers’ of the project.

And the PAC recommends that BEIS and the Treasury should show decision makers the cost and risk implications of different possible financing structures, such as putting up more public money upfront.

And it says BEIS should publish its “Plan B” for achieving the UK’s energy security if Hinkley is not finished before the middle of this decade, which should then be updated every year in light of progress on the project.

The PAC report also says, as part of developing its industrial strategy, the department should publish a plan for maximising the benefits of delivering Hinkley Point C.

It says the department has not mapped the extent UK workers and companies will benefit from Hinkley Point C and the wider follow-on new nuclear programme, and has “no plan in place to show how it will maximise the wider benefits of the project”.

Commenting on the report, PAC chair Meg Hillier said: “Bill-payers have been dealt a bad hand by the government in its approach to this project.  Its blinkered determination to agree the Hinkley deal, regardless of changing circumstances, means that for years to come energy consumers will face costs running to many times the original estimate.

“The government made some grave strategic errors here and must now explain what it will do to ensure these are not repeated. But more than that, it must deliver the supposed wider benefits of this project – benefits government has talked up progressively as the case for Hinkley Point C has weakened, but which it has no plan to secure.

“There is clearly scope to link the nuclear programme to the wider strategy of driving economic opportunities and growth.

“Government credibility in this area will inevitably be questioned when – by its own admission – it doesn’t know what UK workers and business will gain from this project, and appears to have no coherent idea of what to do about it.”