Britain’s first new nuclear power station in a generation is to be built under a £16 billion project which will create thousands of new jobs.
The move followed an agreement between the Government and French-owned EDF Energy, which will see Hinkley Point C in Somerset begin operating in 2023.
Ministers, business leaders and unions welcomed the development as a huge boost for the economy, although environmental campaigners warned the new site will distort energy policy by displacing newer, cleaner, technologies that are dropping “dramatically” in price.
Shortly after the go-ahead for Hinkley was announced, energy giant RWE npower heaped fresh pressure on households by hiking electricity and gas prices by 9.3% and 11.1% respectively from December 1.
The 10% average bill increase will affect about 3.1 million customers, the group said, and follows recent price hikes by British Gas and SSE.
Ministers faced criticism over the £92.50 per megawatt hour that will be paid for electricity produced at Hinkley – around double the current market rate.
The so-called "strike price" could fall by £3 if EDF goes ahead with proposals to build two reactors at Sizewell in Suffolk.
The contract is due to run for 35 years, with the electric price increasing annually in line with CPI inflation. At full capacity the two reactors could provide up to 7% of the country’s energy needs.
China General Nuclear Power Group and China National Nuclear Corporation will be investing between 35% and 40% in the scheme, EDF between 45% and 50% and Areva 10%, while discussions are taking place with a shortlist of other interested parties who could take up to 15%.
Preliminary works for the project are already said to be well advanced, and subject to a final investment decision by July next year, the power station is expected to complete commissioning of the first unit in 2023.
EDF said 57% of the project’s construction value could be spent in the UK, while 25,000 jobs will be created in the UK during the construction phase, including 400 apprentices, with 900 jobs when the site is operational.
Energy Secretary Ed Davey insisted he had secured “good value” following more than a year of intense negotiations. The project will cut the UK’s carbon emissions by nine million tonnes a year, and create thousands of jobs.
“We think it would be good value if (the strike price) was a little higher,” the Liberal Democrat Cabinet minister said.
“I was determined to get them below £90 so I could prove to everybody we had got a good deal.
“What has driven a tougher deal is the fact that I made clear we could walk away from the table. We had other nuclear options. We have got an early start on our long-term energy needs.”
Mr Davey stressed that the construction risks were being borne by the companies, and the Government would not be on the hook for any overspends.
However, if costs fell, the taxpayer would share in the savings.
All decommissioning and waste management costs are also included in the deal, he said.
The initial commercial agreement is not legally binding until EU clearance has been secured for the state aid. A final contract is expected to be signed next year.
Prime Minister David Cameron said: “As part of our plan to help Britain succeed, after months of negotiation, today we have a deal for the first nuclear power station in a generation to be built in Britain.
“This deal means £16 billion of investment coming into the country and the creation of 25,000 jobs, which is brilliant news for the South West and for the country as a whole.
“As we compete in the tough global race, this underlines the confidence there is in Britain and makes clear that we are very much open for business.
“This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer term security of supply.”
EDF group chairman and chief executive Henri Proglio said: “The agreement in principle reached today with the British Government significantly strengthens the industrial and energy co-operation between France and the United Kingdom.
“The EPR project at Hinkley Point represents a great opportunity for the French nuclear industry in a context of a renewal of competencies.
“This project will deliver a boost to the economy and create job opportunities on both sides of the Channel and will enable the United Kingdom, a country in which EDF is already the leading producer of electricity, to increase the share of carbon-free energy in its production mix.”
EDF Energy chief executive officer Vincent de Rivaz said: “What we are announcing today is a good, fair and balanced deal for consumers, the UK and EDF.
“The project will kick-start the UK nuclear programme and will help rebuild the nation’s industrial stamina.
“The progress so far on the project reflects the great skill and determination of a world-class team which is ready to get to work and turn Hinkley Point C into a reality.”
Hinkley Point C will be the first new nuclear power station to be built since Sizewell B, which started generating electricity in 1995.
The Government said building a new fleet of nuclear power stations could reduce bills by more than £75 a year in 2030.
Shadow energy secretary Caroline Flint claimed the deal put the Prime Minister in a “ridiculous” position.
She said: “Labour supports the development of new nuclear power stations in Britain as part of a balanced, secure and clean energy mix.
“The potential costs of this agreement make it all the more crucial that we end the rip-offs and have an energy market that people trust.
“Labour will freeze energy bills through to the start of 2017 while we reset the energy market to make it more competitive, transparent and fair for consumers.”
Unite union national officer Kevin Coyne said: “At last the Government has provided the stability and certainty the UK needs to begin to meet the huge energy challenge facing us.
“The go-ahead at Hinkley Point will deliver thousands of skilled jobs in construction, manufacturing and the operation of the power station.
“The deal will hopefully pave the way for more power stations which will in turn generate more skilled jobs.”
Which? executive director Richard Lloyd called for the deal to include a clause which would trigger a refund to consumers if it turns out that the Government has overpaid.
“Rising energy bills are one of the top concerns for cash-strapped consumers, so everyone will want to be assured that the price the Government has agreed for new nuclear power is fair,” he said.
Greenpeace UK executive director John Sauven said: “Hinkley C fails every test - economic, consumer, and environmental.
“It will lock a generation of consumers into higher energy bills via a strike price that’s nearly double the current price of electricity, and it will distort energy policy by displacing newer, cleaner, technologies that are dropping dramatically in price.”
John Longworth, director general of the British Chambers of Commerce, said: “After months of uncertainty, British business will be pleased that negotiations for the UK’s first new nuclear power plant in decades have been successfully concluded.”
John Cridland, director general of the CBI, said: “This is a landmark deal which will help us meet our future energy challenges, while boosting jobs and growth.”
Construction union Ucatt said Hinkley Point will become the best-paid building project the industry has seen, with workers receiving basic pay of £13 an hour.
Clear rules have also been agreed for a bonus scheme, productivity and “milestone” payments, as well as “significant” pension contributions, said the union.
General secretary Steve Murphy said: “This agreement provides excellent employment conditions and industrial relations for workers. Ucatt will be using this agreement as a template for future projects in order to ensure that its provisions become standard throughout the industry.”
Gareth Stace, of the manufacturers’ organisation EEF, said: “It is good news for the security of our energy supply that progress is finally being made on developing extra capacity. However, the focus in the coming weeks must now be on the competitiveness of electricity prices and the need to avoid cost increases that are out of line with our competitors.”
CND general secretary Kate Hudson said: "The 2010 Coalition Agreement explicitly states that there will be 'no public subsidy' for new nuclear power and yet the deal announced today commits taxpayers' money to bailing out an industry which has proven time and time again that it does not offer value for money.
“The plant operators face no economic risk, as nuclear power is given a special advantage over other forms of electricity, most notably renewables. The agreement today also risks breaching EU law on state aid, with the European Commission set to investigate the deal.”
Caroline Lucas, Green MP for Brighton Pavilion, said: “This is a terrible deal for billpayers. At a time when the costs of renewable energy are rapidly falling, it’s reckless for the Government to subsidise the nuclear industry in this way.
“There remain serious safety concerns about nuclear, and no safe, reliable way to deal with the toxic waste it creates. The Public Accounts Committee has already said that we are accumulating hazardous nuclear waste in outdated facilities which will cost tens of billions to clean up.”
The Prime Minister's official spokesman told a daily Westminster media briefing: "Today is a very important announcement around long-term planning for our economy, for energy security and for jobs."
Asked whether the level of the strike price agreed with EDF amounted to a subsidy to the company, the spokesman said: “What we have today is an agreement which means that for the first time in a generation we have a new nuclear power station going ahead in this country.
“One of the reasons why we don’t have a broad enough energy mix right now is because over the previous generation, the Prime Minister’s view is that governments haven’t been able to take the right decisions that unlocked important investment decisions.”
Introducing a broader range of energy sources may lead to lower prices for households and industry by increasing competition within the market, he suggested.
The spokesman said: “As a result of this, I think we may well find that prices are actually lower than they otherwise would be, because we are creating a more stable, more diverse energy supply.”
Mr Cameron, accompanied by the Energy Secretary and senior EDF management, toured the site of the new Hinkley Point C power station.
The Prime Minister then went into the neighbouring Hinkley Point B plant to meet staff, including apprentices.
“It’s a huge privilege and pleasure to be here today and I think this is a really important day for our country – the day when we have agreed to build a new nuclear power station and, I hope, the first of many new nuclear power stations,” Mr Cameron told the workforce gathered in the reactor’s charge hall.
“I think it is important for energy reasons and it is vitally important we invest in nuclear energy and it is going to give another kick-start to our nuclear industry and I think many people will see it is going to provide good, long-term, well-paid, hi-tech jobs for our future.
“But it is also going to provide low-carbon, reliable, safe and secure energy supplies long into the future.
“Hinkley Point C can provide 6% of our country’s energy and, if we want to have clarity, certainty and secure supplies, I am absolutely convinced that nuclear should play a part of that future.
“In terms of energy it is a vital announcement today.
“It is also important for the whole of our country, not just about energy, it’s about thinking big here in Britain – recognising we need a long-term approach to our economy, to our energy, to our technology and to economic success.
“I want us to be a country where we can carry out these big important projects.
“Right now, in London, we have Crossrail, the biggest construction project anywhere in Europe; we had massive success with the Olympics, delivered on time and on budget; we have high-speed rail – another vital project – and nuclear power should be seen in that context.
“It is really important for our country and it shows we can think big and think long-term and that we can do things that will power our economy into the future.
“We can be really excited about what this means locally here in Somerset - potentially 25,000 jobs, including 900 long-term jobs operating the new Hinkley plant.
“I think this news is exciting for reasons of energy, for reasons of our nation and also for everyone here in Somerset.
“Of course lots of people will be taking lots credit for today, I am sure, at the end of a long negotiation but I’d like to pay all the credit to you because it is the workforce here at Hinkley Point B that has demonstrated how well we can run nuclear plants here in this country.
“I know that has helped to convince EDF and the other investors that what a great industry, what a great country and what a great workforce it is to invest in.
“So thank you very much for all you do, keep going with what you do and look forward to Hinkley Point C, which will be working for decades ahead providing our country with affordable, secure and safe energy.
“It’s a real vote of confidence in Somerset and a vote of confidence in all of you in this workforce.”
Green Party politicians in the South West of England said the announcement was a "gamble with British taxpayers' money".
Molly Scott Cato, the party’s lead candidate in the region for next year’s European elections, said: “The Conservative Government’s deal on the Hinkley Point nuclear power station really is a case of heads they win, tails we lose.
“Potential profits will now be offshored to China while the nuclear pollution will stay in the UK.”
Professor Scott Cato, who lives in Gloucestershire and teaches at the University of Roehampton, said the Green Party was now looking to the European Union to block the deal.
“Since the deal involves such a large investment of public money it will be investigated under the EU’s state aid rules,” she said.
“Greens will work to expose the economic and environmental risks inherent in the proposal and we are thankful that EU scrutiny may still avert this socially and environmentally damaging policy dreamed up in Westminster.”
Mr Davey told a news conference in London it was a ``historic'' day.
He said the UK was facing a “looming energy crisis” in the next decade thanks to years of neglect and under-investment.
Much of coal and nuclear-generated energy will stop in the coming years.
“We have known for years this is coming, but no-one was willing to take tough decisions.”
Mr Davey stressed the project included plans to cover the costs of de-commissioning, with the operators required to pay into a fund from day one.
John Longworth, director general of the British Chambers of Commerce (BCC) said: "After months of uncertainty, British business will be pleased that negotiations for the UK's first new nuclear power plant in decades have been successfully concluded. Nuclear power is a critical part of the UK's future energy infrastructure mix, and will help ensure our businesses have access to secure sources of energy in the years ahead."
And Institution of Civil Engineers director general Nick Baveystock said: “Nuclear energy – as part of a diverse energy portfolio – has an important role to play in meeting the UK’s future energy challenges. This deal therefore marks a major step forward in realising its potential and we hope to see Hinkley being the first of a whole fleet of new nuclear stations, allowing costs to be reduced over the course of the programme, limiting the impact on consumer bills.”
But Friends of the Earth’s policy and campaigns director Craig Bennett said: “With rocketing gas prices sending fuel bills soaring and fresh warnings over climate change, investment in low-carbon power is crucial – but nuclear power isn’t the answer.
“The quickest way to end our costly fossil fuel dependency is though energy efficiency and renewable power, not new reactors that will suck up precious investment and take years to complete.”
Nick Molho, head of climate and energy policy at WWF-UK, said: “Now that the Government has agreed a deal to support to EDF’s proposed new plant at Hinkley, it is essential that clear mechanisms are in place to prevent any future cost overruns from having an impact on the funding available to other low-carbon technologies such as renewables.”
Nigel Farage, the leader of the UK Independence Party, said the Government was “betting the house” on massive energy price hikes.
“With new technology coming on stream, this approach looks like a dangerous gamble,” said Mr Farage.
“As the small print says, prices can always go down as well as up. The Government’s decision to commit to £92.50 per megawatt hour may prove to be a great folly, especially if we as a country get serious about fracking and the massive potential of cheap shale gas.”
Professor David Elmes, head of Warwick Business School's global energy MBA programme, welcomed the Hinkley Point C announcement as an important step forward, but said in the long-term nuclear power may not be the cheapest form of energy.
“This is an important step in terms of gaining investment for the UK’s energy future,” Prof Elmes said.
“The strike price is nearly twice the price of what we pay for energy today, which emphasises just how much more energy in the future is going to cost unless we take measures to use it more efficiently.
“Investment in new technologies like new nuclear is expensive and while it does secure sources of significantly low emission energy it comes at a price.
“The Government says 7% of UK energy will come from nuclear, but if we want to keep bills down we will need other forms of energy savings.
“The investment in new infrastructure and jobs that it brings shows that today’s announcement is as much about UK industry as it is about energy policy.
“It is good to be moving forward instead of still debating, but in the future we will need a mix of sources of energy costing different amounts.
“Nuclear has a part to play in that mix, but it may not prove to be the cheapest.”
Business Minister Michael Fallon said that the deal would guarantee cheaper energy than was available from renewable sources.
Mr Fallon told BBC Radio 4’s World at One: “We can see what might happen to wholesale gas prices, and we know that the other ways of meeting our renewables target, ...which I’m keen on, are actually more expensive.
“Offshore wind is actually going to be more expensive to deploy than the price we’ve just agreed for EDF at Hinkley.
“So we can be sure that going ahead with nuclear, replacing the nuclear stations that are coming offline, is actually a cheaper alternative than simply relying on more and more wind turbines.”
The Scottish Government energy minister, Fergus Ewing, criticised what he called a misguided enthusiasm for nuclear power.
The administration at Holyrood is opposed to any new nuclear plants and can effectively use devolved planning powers to stop any being built north of the border.
Consumers will be paying for nuclear generation until after the middle of the century, Mr Ewing said.
“This UK Government’s misguided enthusiasm for nuclear comes at a time when other countries, such as Germany and EDF’s home nation France, are either eliminating or scaling back their dependence on nuclear generation and when we should be putting the support to our renewables energy industry and the jobs it will support across the country,” he said.
“The guarantee of support and subsidy under this contract until after the middle of this century also sits in sharp contrast with the lack of a UK Government commitment to support our offshore renewables sector and its potential beyond 2020.
“The Scottish Government has an ambitious but achievable target to generate the equivalent of 100% of electricity from renewable sources by 2020, alongside generation from thermal sources fitted with carbon capture and storage.
“Nuclear energy cannot be relied on for our energy needs. The output from Scottish nuclear generation fell to historic lows in 2006 and 2007 due to unplanned outages. Although output has increased since then, nuclear generation has not yet recovered to its pre-2006 levels.
“This underlines the susceptibility of nuclear to sudden interruptions, and supports the Scottish Government’s drive towards a balanced energy portfolio, based on cleaner thermal generation and the advantages which our huge renewables potential offers to Scotland.”