Hinkley Point and cost and security issues

Undated handout artists impression issued by EDF of the how the new Hinkley Point C station will look, as the chief financial officer of EDF Energy has resigned ahead of the French energy giant's plans to build the first new nuclear power plant in the UK in decades. PRESS ASSOCIATION Photo. Issue date: Monday March 7, 2016. Thomas Piquemal reportedly quit because of concerns that a final decision on investment for a new reactor at Hinkley Point will be made too soon, potentially threatening EDF's financial position. See PA story CITY EDF. Photo credit should read: EDF Energy/PA Wire NOTE TO EDITORS: This handout photo may only be used in for editorial reporting purposes for the contemporaneous illustration of events, things or the people in the image or facts mentioned in the caption. Reuse of the picture may require further permission from the copyright holder.©PA

Artist impression of the proposed Hinkley Point C station

For anyone who thought Britain leaving the EU would mean pivoting closer to China, Theresa May, the new prime minister, has at least a partial answer — not so fast. Her government’s decision to delay approval for the Hinkley Point nuclear power plant this week has implications for Anglo-Chinese relations that reach far beyond the project itself.

Already 10 years in the making, the plan was conceived to kick-start a nuclear “renaissance” as old coal-fired plants become obsolete. When the China National Nuclear Corporation (CNNC) and China Guangdong Nuclear Power agreed to take a 33.5 per cent stake, Hinkley assumed additional importance. It was the initiative that cemented the “golden era” of relations proclaimed by the UK and China when Xi Jinping, the Chinese president, visited London last year. This was a central plank in one of the main foreign initiatives of David Cameron’s premiership. It too now appears to be under review as policy is reset at a furious pace by his unelected successor.

For all the diplomatic and political ramifications, there have long been economic reasons to question the Hinkley project and whether it marries Britain’s energy needs with ambitious emission reduction targets in the most cost-effective way. Even EDF, the French utility leading the project, is split over the risks it entails.

In addition, Downing Street fears that Chinese investment in such a sensitive sector could lay Britain open to future energy blackmail. Historic unease among some Conservatives at the degree to which the UK has turned a blind eye to human issues in China in the quest for commercial opportunity may too have played a part.

Delays to the project will be a complicating factor at a time when Anglo-French relations are already under strain. For Paris it is imperative to prove that new technology to be built at Hinkley by EDF is viable after endless problems with reactors under construction in Finland and France. Export orders are also vital for the French nuclear industry at a time when Japan and Germany have both ended their nuclear programmes.

For China, the project is no less strategic. If the deal does fall by the wayside, it will be a blow to Beijing’s ambitions. Ditching it would reveal the “golden era” as hyperbole and potentially set back not only UK-China diplomatic ties but also jeopardise other Chinese deals. The blow would be felt in terms of national pride as well as on the bottom line of the CNNC. Securing the Hinkley deal was seen in China as recognition of the country’s burgeoning technological prowess and as a springboard for CNNC to secure similar projects around the world.

Any cancellation would also be seen in China as a slap to Mr Xi himself. CNNC is key to the military-industrial complex that forms part of his power base. His strategy of winning diplomatic friends around the world by building them large infrastructure projects would be affected.

However, none of these strategic considerations makes the project necessarily a good deal for British taxpayers. When first mooted, Hinkley seemed an attractive proposition. Not only would the electricity produced, at £24 per megawatt hour, be competitive with other power sources. It would also help Britain meet ever tougher emissions targets without too heavy a burden on the public purse. A decade on, the price built into the deal is nearly four times as high. The costs of natural gas, solar and wind power have all been falling. British competitiveness is at stake. For this reason alone, it is prudent to press pause and take another hard look.

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