Develop nuclear plan B in case ‘risky’ Hinkley C fails, warns NAO


The UK needs a plan B if new reactors at Hinkley Point C fail to arrive on time, or at all, the National Audit Office has advised.

The NAO’s latest scrutiny of the deal suggests it could be riskier and more expensive than necessary for consumers and taxpayers.

It said the business case for the new 3.2GW plant had weakened since government struck a bilateral deal with EDF and that the overriding objective of delivering new nuclear off balance sheet may ultimately leave consumers counting higher costs over the life of the project.

The NAO highlighted more immediate construction risks, including EDF’s deteriorating financial position and the unproven reactor design.

Government should devise alternative plans to ensure security of supply should investors seek to renegotiate the terms, advised the NAO.

Post-construction, careful management of the terms of the contract for difference (CfD) will be required to deliver maximum value to consumers, states the report.

The NAO concludes:

“It is a widely shared view that the UK needs some new nuclear power to ensure the lowest-cost route to decarbonisation. But the Department’s deal for HPC has locked consumers into a risky and expensive project with uncertain strategic and economic benefits. While committing the developer to bearing the construction risks means taxpayers and consumers are protected from costs overrunning, consumers could end up paying more for HPC’s electricity than if the government had shared these risks. Past experience shows that ultimately these risks could shift back to taxpayers or consumers. If the project runs into trouble, the government may need to fund alternatives to ensure secure supply, or come under pressure to renegotiate its deal. The Department did not sufficiently appraise alternative ways to structure the deal.”

See the report here.

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