energy

Hinkley Point nuclear plant to run £2.9bn over budget

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The cost of building the UK’s first new nuclear power plant in a generation has risen by up to £2.9bn to more than £22bn, and is running the risk of further delays.

EDF Energy said the construction bill for Hinkley Point C in Somerset has climbed by between £1.9bn to £2.9bn from the company’s last estimates, while the cost of renewable energy has plummeted. As a consequence, the total cost has risen from £19.5bn to between £21.5bn and £22.5bn.

The nuclear developer blamed “challenging ground conditions” which made earthworks at the site more expensive than it expected.

EDF Energy’s strategy director, Paul Spence, told BBC Radio 4 that he “can’t be sure today” that there won’t be further cost increases for the project which is supposed to start supplying 7% of the UK’s electricity by 2025.

In a letter to staff, EDF Energy’s chief executive, Simone Rossi, said Hinkley’s cost overruns will “not add a penny” to energy bills, or raise costs for the taxpayer.

The project has a government contract which guarantees a set price of £92.50 for every megawatt hour of electricity produced and was “designed with the risks of a first of a kind project in mind”, he said.

However, the rising costs have raised questions over new plans to fund a follow-up nuclear project at Sizewell C using a financing model which would put taxpayers on the hook for rising costs.

Ministers hope that a regulated asset base, or RAB model, will make the projects cheaper by shifting the risk of rising costs from the developer to the taxpayer.

The cost overrun has also reignited debate over whether the government should pursue an expensive new nuclear renaissance while the cost of renewable energy becomes cheaper. The cost of supporting new offshore wind farms from the mid-2020s fell to record lows of around £40 per megawatt hour of electricity last week in an auction for government contracts, less than half the cost of Hinkley Point C.

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