UK Nuclear Deal Struck


Last Monday it was announced that EDF (Electricite de France) along with Areva, the China General Nuclear Power Holding Co. (CGN) and China National Nuclear Corporation would build the UKs first nuclear plant since 1995.

After a year of negotiations between EDF and the UK government, the likes of EON, RWE and Centrica all pulling out, the 16billion pound deal was finally struck. Hints of who the final investors would be were confirmed by George Osborne’s visit to China days before the deal was announced.

The debate now is regarding the ‘strike price’ for the plant. As the government has not allowed any subsidies, it has to guarantee a price to pay. £92.5 per megawatt hour was agreed and set to be reviewed three times over the next 35 ears. With whole sale prices around £45/MW, we have to see how nuclear compares to other low carbon technologies.

Offshore Wind generation receives around £155/MWh, onshore around £100/MWh and solar around £125/MWh. Therefore in comparison, nuclear is significantly cheaper. These technologies require vast subsidies in order make a return on investment, all of which is paid for by the consumers with rising non commodity costs.

Below is an example chart that shows how the strike price works and what the Contract for Difference is. The UK Treasury will pay the difference between the market rate and the ‘strike price’, how this is paid, us the consumers. However if the market goes above the ‘strike price’, the power plant would have to pay the Treasury the difference.

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