24 July 2012

UK Parliament Slams Government Proposed Energy Bill

On Monday 23 July 2012, the UK Parliament’s Energy and Climate Change Committee released its report on the Government proposed Energy Bill. The report is highly critical of the process and possible outcome of the negotiations around the setting of the ‘strike price’ for nuclear new build. The strike price is the price the nuclear operator would be guaranteed to get under long-term contracts for power from its planned reactors. The Times and other press are reporting that EDF, currently the only remaining potential investor, are seeking a “strike price” of £165 per megawatt hour for the planned EPRs at Hinkley Point C in Somerset, England. Currently, year-ahead wholesale electricity is selling at around £50/MWh. Other analysts, notably Peter Atherton of Citibank, have publicly projected a strike price of between £150 and £200/MWh. However, with much of the negotiations around the strike price likely to be withheld from disclosure under commercial confidentiality, the committee is “concerned that the proposed process for setting the nuclear strike price lacks sufficient transparency”. While on the issues of the strike price the committee concludes : “We do not believe that a nuclear strike price higher than that given to offshore wind would represent good value for money to the consumer. The Secretary of State should not agree to contracts of this nature.” The anticipated cost of first generation of deeper offshore wind is likely to be in the order of £150/MWh.