Hinkley approved with ‘security’ safeguards

Theresa May has approved the £18bn Hinkley Point nuclear power station in south-west England, Europe’s biggest energy project, but the go-ahead for the controversial Franco-Chinese scheme came with new conditions on foreign investment in UK infrastructure.

The prime minister’s blessing for Hinkley following a surprise last-minute review removed the final obstacle to construction of Britain’s first new nuclear plant for a generation after almost a decade of planning, political disputes and delays.

The project, expected to meet about 7 per cent of domestic electricity demand, will be led by French utility EDF, one-third financed by state-owned Chinese nuclear groups. They have an option to construct a further plant at Bradwell in eastern England that would involve the first Chinese reactor built in the developed world.

In her biggest decision since she came to office after the UK vote in June to leave the EU, Mrs May acceded to arguments that Hinkley was essential to renewing the UK’s ageing energy infrastructure and cutting carbon emissions. In doing so she avoided the diplomatic rift with France and China that would have followed the cancellation of a project in which both countries have big financial and strategic interests.

The Hinkley deal is seen as crucial to the future of the French nuclear industry — and its tens of thousands of jobs — and to China’s ambitions to build a global presence in the sector.

However, Mrs May’s approval in defiance of critics, who said the project was too expensive and based on unproven technology, was subject to measures giving ministers more power to defend the national interest in the ownership of “critical infrastructure”.

Under a revised agreement, EDF would be barred from selling its stake in the plant during construction and the government would take a “golden share” in future nuclear schemes.

This latter measure appeared aimed at addressing Mrs May’s security concerns over plans by China General Nuclear Corporation, EDF’s main Chinese partner, to take the lead in construction of further reactors at Bradwell in eastern England, using Chinese technology.

Downing Street said: “There will be reforms to the government’s approach to the ownership and control of critical infrastructure to ensure that the full implications of foreign ownership are scrutinised for the purposes of national security.”

A review of the 2002 Enterprise Act would look at whether investments in critical infrastructure such as power plants should be referred to the government for approval. The measures reinforced early impressions of Mrs May’s administration as more interventionist in industrial policy and warier of Chinese investment than that of her predecessor, David Cameron.

But the government is also under pressure after the Brexit vote to show that the UK remains “open for business”.

Allies of George Osborne, the former chancellor, who championed Chinese investment in UK nuclear power, said Mrs May’s talk of golden shares and national security tests did little to alter the fundamentals of the Hinkley deal. Rupert Harrison, Mr Osborne’s closest aide at the Treasury, tweeted: “Right decision, no significant changes.”

One Whitehall official who worked on the original deal with EDF and CGN said: “They have ended up on Hinkley exactly where we were before: this whole thing is designed to get them off the hook. The Chinese can still build a reactor at Bradwell.”

CGN said it was pleased with the decision as it was now “able to move forward and deliver” nuclear capacity at Hinkley Point, as well as at Bradwell.

Jean-Bernard Lévy, chief executive of EDF, said the decision marked “the relaunch of nuclear in Europe” after its retreat in Germany and elsewhere since the disaster at the Fukushima Daiichi plant in Japan in 2011. The French government praised the decision as “a major milestone in Franco-British industrial and energy co-operation”.

Announcing the go-ahead, Greg Clark, secretary of state for business, energy and industrial strategy, said nuclear power was “an important part of ensuring our future low-carbon energy security”.

There was no change to the financial terms of the deal with EDF, under which the French utility will receive £92.50 per megawatt hour of electricity produced by Hinkley Point, rising with inflation, for 35 years. Critics have argued that the guaranteed price is too high at a time when wholesale electricity rates are less than half that figure.

They have also questioned the likelihood of the 3.2GW plant being finished on time in 2025, given the multiyear delays to similar projects involving EDF’s European Pressurised Reactors in France and Finland.

EDF says it has learnt lessons from its construction problems elsewhere and that the cost of electricity from Hinkley Point is competitive with other forms of low-carbon energy such as wind power.

The future of Hinkley was called into doubt in July when Mrs May ordered a review of the project just two weeks after taking office. As well as scrutinising China’s role, she wanted time to address concerns over the cost and technology.

Reaction in the UK to the decision was mixed. Unions and business groups were generally welcoming of a project that EDF has promised will involve 64 per cent of its spending with British companies.

Another foreign investor planning to build nuclear power plants in the UK said it was “entirely comfortable” with the legal framework proposed on Thursday. Horizon, owned by Hitachi of Japan, said it was right for the government to have control of vital infrastructure and it remained committed to its proposed power station at Wylfa in Anglesey.

Environmental groups were more critical, arguing that government support should be given to renewable power instead. Friends of the Earth said Hinkley Point was “a project from a dying era which will saddle Britons with eye-watering costs for decades, and radioactive waste for millennia”.

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BDC 309 : Oct 2023