Hitachi yesterday decided to suspend work at Wylfa in Anglesey, being carried out by its subsidiary Horizon Nuclear Power.
Hitachi has been in negotiations with the UK government for months to find a commercially viable structure for the project but none has yet been found.
Business and energy secretary Greg Clark told the House of Commons that while negotiations were ongoing, the details were commercially sensitive. But he could now reveal that the government had offered to take a one-third equity stake in the project, alongside investment from Hitachi, the government of Japan and other partners. The UK government was also prepared to take on all of the required debt financing to complete construction.
The potential sticking point for Hitachi, however, may have been the contract for difference strike price on offer – this is effectively the price at which the UK government guarantees to purchase electricity generated once the new power station is fired up. On the Hinkley Point C project the French developer EDF has been guaranteed £92.50 per megawatt hour (at 2012 prices).
But with the changing economics of energy generation, particularly the lowering cost of offshore wind energy, Hinkley Point is now considered over-priced. Hitachi and Horizon were offered no more than £75 per megawatt hour, the secretary of state said.
“I believe the package of support that we were prepared to consider was the limit of what could be justified in this instance,” Greg Clark said. “I was not prepared to ask the taxpayer to take on a larger share of the equity, as that would have meant taxpayers taking on the majority of construction risk and the government becoming the largest shareholder with responsibility for the delivery of a nuclear project. I also could not justify a strike price above £75 per megawatt hour for this financing structure, given the declining costs of alternative technologies and the financial support and risk sharing already on offer from the government which was not available for Hinkley Point C.”
He also said that new methods for funding the construction of nuclear power stations had to be found and a new approach to financing new nuclear will be set out as part of a planned energy white paper this summer.
“If new nuclear is to be successful in a more competitive energy market – which I very much believe it can be – it is clear that we need to consider a new approach to financing future projects, including those at Sizewell and Bradwell. As I initially set out in June, we are therefore reviewing the viability of a regulated asset base model and assessing whether it can offer value for money for consumers and taxpayers. I can confirm to the House that we intend to publish our assessment of this method by the summer at the latest.”