9 Oct (NucNet): The nuclear industry has welcomed yesterday’s approval by the European Commission of the proposed investment contract for the Hinkley Point C nuclear power station, saying the UK model might now be used by other member states.
The EC said yesterday that revised UK plans to subsidise the construction and operation by EDF Energy of two 1,600 megawatt EPR units at Hinkley Point were “in line with EU state aid rules”.
The Brussels-based nuclear industry association Foratom welcomed the decision and said the EU’s single electricity market fails to provide a sufficient market signal to investors in favour of low-carbon energy alternatives to coal and gas. In its decision the EC acknowledges that in the case of nuclear investment this represents “a market failure”.
“The ‘contracts for difference’ (CfD) investment model that underpins the Hinkley Point C deal provides an effective market mechanism that addresses this failure,” Foratom said.
Foratom said a number of other member states have been watching the Hinkley Point C case closely with regards to their own nuclear generation ambition. For instance, the four ‘Visegrad’ countries – the Czech Republic, Poland, Hungary and Slovakia – have shown a willingness to consider the CfD model.
The CfD investment model shows that there are different investment options available when it comes to financing new build, Foratom said.
Foratom said the CfD model is not specific to nuclear energy. The UK government has made it clear that the CfD model will help secure a mix of low-carbon generation, including renewables and carbon capture and sequestration.
The UK’s Nuclear Industry Association said yesterday’s decision “gives certainty” to other European countries looking at the UK system of CfDs as a mechanism to secure their own supply.
NuGen, which is planning to build three Westinghouse AP1000 reactors at its Moorside site in Cumbria, said the UK faces the dual challenges of securing future energy supplies and achieving reductions in C02 emissions in line with international legislation, and new nuclear has “a vital role” to play in achieving these aims.
Westinghouse said it recognised the precedent not just for the UK, but for all other EU nuclear projects. It said nuclear energy would be able to compete “on a level playing field” with other low-carbon energy technologies with high upfront capital costs in the EU.
The UK’s energy and climate change secretary Ed Davey said there is “much work still to do” before a final contract can be signed for Hinkley Point C, but yesterday’s announcement is a boost to the government’s efforts to ensure the UK has secure, affordable low carbon electricity in the 2020s.
The Department of Energy and Climate Change said the government and EDF Energy are continuing to work together to finalise the Hinkley Point C project, including the full terms of the CfD and the financing arrangements for the project, which includes support from the ‘UK Guarantee’. UK Guarantees are designed to facilitate the development of infrastructure that would otherwise find it difficult to obtain finance due to the current state of capital markets.
EDF Energy said remaining steps towards the construction of Hinkley Point C require the conclusion of agreements with strategic and financial partners. Subject to a final investment decision, the first unit is expected to enter commercial operation in 2023.
