The UK Government is insisting that it will not pay for any cost overruns suffered by the Hinkley C project, which is due (on the latest word) to start construction in 2016. Quite how that squares with the £10 billion worth of loan guarantees to be offered by the UK Government is not clear. However, if the British Government will not pay for the cost overruns then who will? The Chinese nuclear companies involved in the deal? That sounds odd given that Chinese companies, whilst they are state owned, are incentivised to make money. There managers will not do well if they make large losses. Of course western state owned companies can continue making loss after loss, as typified by British and French nuclear operations, and expect to be continuously bailed out by the state.
So, is the French state effectively going to underwrite the whole project through a merged EDF-AREVA? Certainly British electricity consumers will be paying out large sums over a very long period for any electricity generated by the project (for 35 years after generation starts), sums that will increase with inflation. I wish people would not keep quoting the agreed 2012 figure of £92.50 per MWh. It is now over £94 per MWh. Meanwhile of course the Government has stopped the scheme that pays for wind power to be paid just £80 per MWh for just 15 years (and no loan guarantees).
But it seems that EDF-AREVA could end up carrying the can for cost overruns on top of the £25 billion price tag already estimated. This could do serious financial damage to EDF. Ultimately the French electricity consumer would end up paying a high price to install a failed nuclear power design in the UK. Does the French public understand this? They ought to be acquainted with what they are taking on.
Andy Blowers, having read this post, sent me the following comment:
'More importantly, on whom will the debts fall? Given the financial provisions on pricing and on decommissioning, clean up and repository costs, part of the burden will be levied on future generations. The intergenerational equity aspect of new nuclear policy gets scant attention. Presumably something will turn up.'