After years of planning and haggling, the deal paves the way for construction to finally start on the £16bn project.
Negotiations between EDF and the government have centred on government guarantees for the minimum price EDF will be able to charge for electricity generated by the new pressurised water reactors.
The ‘strike price’ has now been agreed at £92.50 per MW/hour, which is nearly twice the current wholesale cost of electricity but is fixed for 35 years, rising only in line with inflation. This strike price will be reduced to £89.50/MWh if EDF goes ahead with its plans to build another new nuclear plant at Sizewell C in Suffolk.
EDF said that the agreement was fair for consumers and investors. It means Hinkley Point C will offer stable and predictable prices through a ‘contract for difference’. If wholesale prices rise above the agreed strike price, consumers will not pay extra. If they fall below this price the generator will receive a top-up payment. Customers pay nothing until the power station is operational.
As this effectively represents state aid – of £1bn a year according to calculations by the University College London Energy Institute – the deal will need clearance from the European Commission.
Work is expected to start on main construction next summer, following a final investment decision.
As reported last week, the government has also changed the rules to allow Chinese investors join the project. China National Nuclear Corporation (CNNC) is taking a stake of between 30% and 40% in the project. EDF and CNNC have worked together in China for many years.
EDF Group will have between 45% and 50% and Areva will have 10%. Discussions are taking place with a shortlist of other interested parties who could take up to 15%.
Prime Minister David Cameron said: “This deal means £16bn of investment coming into the country and the creation of 25,000 jobs, which is brilliant news for the southwest and for the country as a whole. This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer term security of supply".
Energy secretary Ed Davey said: “This is an excellent deal for Britain and British consumers. For the first time, a nuclear power station in this country will not have been built with money from the British taxpayer. It will increase energy security and resilience from a safe, reliable, home-grown source of electricity. This deal is competitive with other large-scale clean energy and with gas – and while consumers won’t pay anything up front, they’ll share directly in any gains made from the project coming in under budget and from refinancing or equity sales.”
EDF Group chairman and CEO Henri Proglio said: “The agreement in principle reached today with the British government significantly strengthens the industrial and energy co-operation between France and the United Kingdom. The EPR project at Hinkley Point represents a great opportunity for the French nuclear industry in a context of a renewal of competencies. This project will deliver a boost to the economy and create job opportunities on both sides of the channel and will enable the United Kingdom, a country in which EDF is already the leading producer of electricity, to increase the share of carbon-free energy in its production mix.”
EDF Energy CEO Vincent de Rivaz said: “What we are announcing today is a good, fair and balanced deal for consumers, the UK and EDF. The project will kick start the UK nuclear programme and will help rebuild the nation’s industrial stamina. The progress so far on the project reflects the great skill and determination of a world class team which is ready to get to work and turn Hinkley Point C into a reality. ”