UK nuclear plant to run almost £3 billion over budget

French power group EDF has said the new nuclear plant it is building at Hinkley Point C in south-western England will cost up to £2.9 billion more than previously estimated due to challenging ground conditions at the site.

This raises its estimate for the project, on the Somerset coast, to between £21.5 billion and £22.5 billion. EDF also said the risk of the project being late had risen.

“Cost increases reflect challenging ground conditions which made earthworks more expensive than anticipated, revised action plan targets and extra costs needed to implement the completed functional design, which has been adapted for a first-of-a-kind application in the UK context,” EDF said in a statement.

Because of the way that the project is being funded, taxpayers and customers will not cover the increase in costs. EDF and its partner on the project – China General Nuclear Power Corporation (CGN) – will pay.

However, the companies are being cushioned by the high fixed price for electricity agreed by the UK government in order to make costs predictable for consumers and to provide leeway for the builders.

Last week, prices for new wind power delivered by 2025 were set at prices as low as £40 per megawatt hour. By comparison, power from Hinkley Point C is expected to cost £92.50 per megawatt hour.

The National Audit Office warned two years ago that by agreeing this price, the government had subjected the country to a “risky deal in a changing energy marketplace”.

Also, EDF said that while it was still aiming to finish in 2025, the chance of the plant being delayed to 2026 has risen.

The cost overrun will not hit UK consumers but may affect future nuclear projects. The proposed EDF-built and operated nuclear power station at Sizewell on the Suffolk coast could be financed under a new model where consumers would see costs of construction added to their energy bills as the project went along.

EDF’s  announcement could therefore make it harder for EDF to get support for building Sizewell.

As the price of zero carbon offshore wind continues to plummet, making a forty-year bet on another nuclear station with a funding model that exposes consumers to such overruns would be a big call for any government to make.

Source: HazardEx