The government’s agreement to underwrite the Hinkley Point nuclear power station could turn out to be economically insane and hugely costly to consumers, City analysts have warned.
Analysts at Liberum Capital said the government’s deal with France’s EDF will make Hinkley Point the most expensive power station in the world with the longest construction period in the world.
The government gave the go-ahead last week for EDF to build the Hinkley Point C plant in Somerset. Its two reactors will cost £8bn each and will provide power for about 60 years once it starts operating in 2023.
The energy secretary, Ed Davey, has made a huge bet that fossil fuel prices will rocket by the time Hinkley Point starts operating in 2013, Liberum’s Peter Atherton and Mulu Sun said in a report published on Wednesday.
They said: “The UK government is taking a massive bet that fossil fuel prices will be extremely high in the future. If that bet proves to be wrong then this contract will look economically insane when HPC commissions. We are frankly staggered that the UK government thinks it is appropriate to take such a bet and underwrite the economics of any power station that costs £5m per MW and takes nine years to build.”
Davey controversially agreed a minimum price of £92.50 for every megawatt hour (MWh) of energy Hinkley Point generates – almost twice the current wholesale cost of electricity.