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Thursday 17 August 2017
17 August 2017 - NEWS UPDATE
Business

£10bn investment guarantee for Hinkley nuclear plant

The plan to build a new nuclear power station at Hinkley Point moved forward today when the Government offered £10bn of guarantees to investors.

Hinkley-PointC

The Hinkley C project

The push on nuclear came as part of a major announcement on £100bn in public funding for capital projects such as road, rail and energy infrastructure that the government hopes will stimulate the ailing economy.

The deal, announced by chief secretary to the Treasury Danny Alexander means the Treasury will pre-qualify EDF's Hinkley Point C project for a UK Government Infrastructure Guarantee.

It is subject to negotiation with the energy giant EDF and brings a deal on the guaranteed prices between the French company and government closer to fruition after months of deadlock.

Government sources said the public funding to support the £14bn Hinkley Point project did not represent a subsidy to nuclear power since the guarantees would be offered at a commercial rate.

A spokesman said: "A contract will only be offered it is value for money, fair and affordable, in line with Government policy on new public subsidy for nuclear and is consistent with State Aid."

The Treasury chief secretary also announced the prices for renewable generation including onshore and offshore wind, tidal, wave, biomass and solar saying the reforms could unlock up to £110 billion energy infrastructure investment and support up to 250,000 jobs by 2020.

He said the prices were broadly similar to those the UK government pays under the existing Renewables Obligation and would bring forward 8-16 gigawatts of offshore wind capacity.

Mr Alexander also announced a Capacity Market would be set up next year to bring on gas and other flexible electricity supply to meet future demand and reduce risks to security of supply from winter 2018. Renewable Strike Prices will be introduced to help renewables contribute more than 30% of total power by 2020.

With around a fifth of Great Britain's ageing power plants  due to close over the coming decade, and further closures in the 2020s, the UK need huge investment in the energy infrastructure.

Secretary of State Edward Davey said: "No other sector is equal in scale to the British power market, in terms of the opportunity that it offers to investors, and the scale of the infrastructure challenge.

"Developers and investors have been crying out for more details, sooner, and that is what we are giving them today.

"The Capacity Market will incentivise investment in new gas plant and other flexible capacity to maintain an adequate supply margin – the safety blanket over and above expected demand – for 2018 onwards.

"Ofgem and National Grid will consult on possible steps they could take to ensure that mothballed power plant or demand response is available if needed in the middle of the decade. This will mean the public can continue to enjoy a reliable supply of electricity.

"The Strike Prices for renewable technologies announced today aim to make the UK market one of the most attractive for developers of wind, wave, tidal, solar and other renewables technologies, whilst minimising the costs to consumers.

"This will help boost home-grown sources of clean secure energy, and enable us to decarbonise the power sector, with renewables contributing more than 30% to our mix by the end of this decade.

"Our reforms will keep the lights on and emissions down, and will save consumers money on their bills. The result – low-carbon, affordable and reliable power for the long-term."

REA Chief Executive Gaynor Hartnell said she was disappointed that dedicated biomass and the waste to energy technologies were omitted from the draft strike price list.

She added: "Biomass has been a mainstay of renewable energy policy since the mid-1990s and over the last few months biomass projects have been encouraged to apply for CfDs. It would be inconceivable and nonsensical for Government to turn its back on this technology."

On today's announcements she said: "The UK has the most demanding target of all Member States and much progress has been made from a low starting point.

"While we may narrowly miss the interim target, prospects for getting on track to meet 15% in 2020 seem remote. The effect of a steep drop in lending decisions taken in 2008 will manifest itself, there will inevitably be a hiatus with the closure of the Renewables Obligation and the Government seems to have gone lukewarm on renewables.

"The earlier than anticipated publication of strike prices is welcome but more work needs to be done to build investor confidence."

Commenting on the Government energy announcements Friends of the Earth Head of Campaigns Andrew Pendleton said: "Today's deluge of announcements can't wash away the fact that the Government is failing to deliver the clean energy transformation we need for our economy and environment.

"Instead George Osborne is betting the farm on fracking - over-hyping its potential and lavishing it with tax breaks, whilst slashing environmental regulations."

"Meanwhile, the Government is breaking the terms of its Coalition Agreement by offering yet another public subsidy for over-priced nuclear power."

Katja Hall, CBI Chief Policy Director, said: "A balanced energy mix is the best way of securing a low-carbon and affordable supply in the future – today shows progress towards that."

Dr Tim Fox, Head of Energy and Environment at the Institution of Mechanical Engineers, said "Today's raft of announcements on energy infrastructure initiatives including nuclear, renewables and shale gas are long overdue and will go someway towards creating investor confidence.

"Danny Alexander revealed a potential "multi-billion pound guarantee" for a new nuclear power reactor at Hinkley Point, which is a welcome initiative and something the Institution called for in our Nuclear New Build report over three years ago.

"Setting a strike price in the contract for nuclear power is however a critical step yet to be taken if we are to meet this country's future low-carbon power needs. While we welcome today's announcement of proposed strike prices for renewable energy sources – which will be put out for consultation - it is worrying that no strike price has yet been set for nuclear."

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