The Government has announced key details of its plan to build a new nuclear plant at Hinkley Point C, the first since Sizewell B was commissioned in the mid-1990s.

The big numbers really are awesome. £16 billion per plant – and probably more – a guaranteed index-linked price of £92.50/MWh (assuming Sizewell C does not materialise) and c£90 billion of accruing revenues based on a monster 35-year contract.

The new completion date now stretches right out to 2023: a few years ago, EdF had been proposing a 2016 date. Seven years have elapsed before even a sod has been dug at the site.

The Hinkley Point C project will be led by the highly-indebted EDF, 84%-owned by the French Government, whilst minority stakes will be taken by two leading Chinese companies. 

For EDF, the Government’s recent announcement has been the culmination of many years of work: the Hinkley Point C deal should give it real momentum to grow its nuclear operations beyond France.

But its EU ambitions will be curbed by the commercial fall-out from the Fukushima disaster, which caused the German Government to announce the planned closure of all its nuclear plants by 2022. 

For the Chinese companies, involvement in Hinkley Point C should provide very long-term benefits, especially on the technical front: a scenario that raises real concerns about technology transfer. 

The financial returns are very difficult to assess, despite the huge subsidies being provided through the proposed Contracts for Difference (CfDs). Inevitably, assuming the project reaches the commissioning stage, it will face many challenges along the way – seamless it will not be.

Indeed, it has been a real struggle to get this far, especially since privatisation did no favours to nuclear new-build.

Ironically, the world’s first industrial-scale nuclear plant at Calder Hall was commissioned in 1956. Yet, less than 60 years later, the UK is obliged to offer subsidies of unparalleled value to persuade effectively state-owned foreign companies to finance Hinkley Point C.

Many obstacles still remain before construction can begin in earnest, with politics looming large, especially if there is a change of government in 2015. As with the controversial HS2 project, expect the Labour Party to pursue an opportunistic policy on nuclear energy: deep-seated doubts will thus remain.

Given the vast subsidies, the European Union will need to be squared – no formality given the anti-nuclear stance now at the heart of Europe.

Funds must also be raised, with other lenders – possibly from Asia or the Middle East – coming in to complement EDF and the two Chinese investors.  

Assuredly, too, Hinkley Point C will also have to confront what former UK Premier, Harold Macmillan, termed “events, dear boy, events”.

After all, within the last decade, the Fukushima nuclear complex has imploded, Angela Merkel has executed a massive U-turn on German nuclear and British Energy has effectively gone bust.

Similar scenarios can easily be envisaged before 2023 which could over-ride –or at least seriously de-rail – the Government’s historic nuclear new-build policy.

Nigel Hawkins ([email protected]) is a director of Nigel Hawkins Associates which undertakes investment and policy research