The government has announced a £2 billion ($US3.1 billion) loan guarantee for the construction of the delayed Hinkley Point C nuclear power plant in Somerset.
Britain’s Chancellor George Osborne announced the deal on Monday, during a 5-day tour of China.
The Telegraph reports that the guarantee means any banks or financial institutions that lend money to developers involved in the project will get up to £2 billion back from the taxpayer if the developers go bust.
Without this guarantee, developers could have struggled to get funding for the project, which will cost an estimated £24.5 billion ($US38.1 billion) according to the BBC.
The government could end up backing way more than just the £2 billion announced today. Osborne says in a statement from the Treasury that the figure could rise “should EDF meet certain conditions and subject to fuller government approvals.”
In October last year, the EU cleared the government to guarantee up to £16 billion ($US24.8 billion) in loans for the project, under EU rules on state aid.
France’s EDF energy is leading the construction of Hinkley Point C, while Chinese state nuclear companies are meant to provide substantial investment, hence the timing of the announcement.
Hinkley Point C is set to be the first new nuclear power plant built in Britain since 1995. Plans for the new reactor there were first announced back in 2010.
But today’s guarantee doesn’t necessarily bring the project any closer.
EDF said earlier this month that construction of the plant, which was due to start generating energy by 2023, has been delayed, the latest is a string of setbacks to the projects timeline. Earlier this year it also put off a decision about whether to invest in the project.
The government is hugely keen to push through Hinkley Point and other new nuclear plants across the UK, as part of plans to wean the UK off dependence on foreign energy supplies and meet a growing shortfall from coal and nuclear plants reaching the end of their life cycles over the next decade.
Once completed, Hinkley Point C should produce enough energy to power 6 million homes, meeting around 7% of the country’s energy needs.
George Osborne said in a statement today:
Nuclear power is cost competitive with other low carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas.
So I am delighted to announce this guarantee for Hinkley Point today and to be in China to discuss their investments in Britain’s nuclear industry.
It is another move forward for the golden relationship between Britain and China — the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.
Aside from hesitation among potential funders, Hinkley Point C has plenty of opponents too who’d love to see the project derailed.
The Independent reports that anti-nuclear Austria is planning a legal challenge of the EU state aid decision, while a German law firm is representing an alliance of energy suppliers and traders is also fighting the decision.
The UN has criticised Britain for failing to consult with neighbouring countries on the project and green activists in the UK are also opposing the project.
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