New Hinkley Point C Nuclear Power Plant - Electricity Costs Over 15 Cents per Kilowatt Hour at Launch

Münster - The construction of the new British nuclear power plant Hinkley Point C has already been delayed by several years and will also be significantly more expensive than planned. But it is not just the construction costs themselves that are rising by many billions of euros above the planned costs; the electricity costs from the new nuclear power plant will also be significantly higher than the 15 cents/kWh mark right from the start, and the trend is still rising.

The reason for the cost increases for nuclear power is the Contract for Difference (CfD) agreement between the British government and the French nuclear power plant manufacturer EDF, which is the builder and operator of the nuclear power plant with a total output of around 3,280 MW. Due to the linking of the state-guaranteed electricity price compensation for nuclear power to the British inflation rate, it is already foreseeable that prices will only go in one direction in future - upwards.

Hinkley Point C nuclear power plant: price of nuclear power rises and rises, additional costs paid by British electricity customers

The Contract for Difference (CfD) agreement in this case is based on a state-guaranteed price for nuclear power being paid to EDF, which is linked to the inflation rate. Assuming that negative inflation rates are unlikely, the price of nuclear power generally only goes in one direction, upwards. According to the British CfD register, the initial strike price is £89.50/MWh, i.e. 10.3 cent/kWh for nuclear power. Due to the price increases in the UK, the state-guaranteed nuclear power remuneration from Hinkley Point C has already reached at least £128.09 /MWh, which is currently 14.8 cent/kWh (CfD Register, as of 1 September 2023), according to the International Economic Forum for Renewable Energies (IWR) in Münster.

"The cost of the electricity generated from the new British nuclear power plant Hinkley Point C will be well above 15 cent/kWh at the planned start and thus far above the market electricity price," said IWR CEO Dr Norbert Allnoch in Münster.

This price development results from the fact that nuclear power plant unit C 1 (1,640 MW) will not be connected to the grid until 1 June 2027 at the earliest, while unit C2 (1,640 MW) is scheduled to follow on 1 June 2028. Assuming a British annual inflation rate of 3 per cent and no further construction delays until 2027, the price for the nuclear power generated from Hinkley Point C would already rise to 16.7 cent/kWh by the nuclear power plant start date.

CfD model: expensive nuclear power for British electricity consumers

The higher the British inflation rate and the lower the actual electricity market price is, the more expensive the annually increasing guaranteed price for nuclear power will be for British electricity customers. If, for example, the wholesale electricity price in 2027 is around 8 cent/kWh - as the futures markets currently indicate - British electricity customers will have to pay the difference between this market price on the electricity exchange and the guaranteed price for nuclear power valid at that time. This would make British nuclear power from Hinkley Point C around twice as expensive as the market price in 2027. EDF would only have to return the difference to electricity customers in the event that market electricity prices are higher than the British guaranteed price for nuclear power.

Hinkley Point C: Chinese CGN unlikely to contribute to cost overruns

In addition to the electricity costs, the construction costs for the Hinkley Point C nuclear project are also threatening to get out of hand. EDF's Chinese partner, the China General Nuclear Power Group (CGN), has so far borne 33.5 per cent of the originally estimated costs of £18 billion, with the French energy supplier EDF being solely responsible for the remaining costs.

Now CGN has apparently stopped making payments after paying its contractual share, meaning that EDF will have to secure financing for the additional costs elsewhere. According to the latest estimates, the costs amount to almost 33 billion pounds. The British government is apparently unwilling to step in, meaning that the heavily indebted energy supplier EDF will have to look for new investors to finance the construction of the reactor.

Source: IWR Online, 27 Dec 2023