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EDF chief: ‘Folly to try and cheat’ on nuclear strike price

23 Oct 2012 16:38:20 | edem

EDF's chief executive insisted that his company is engaged in a virtuous process in negotiating with the UK government on a strike price subsidy for the country's first nuclear power generation project since the 1990s.

Speaking at an Energy and Climate Change Committee parliamentary hearing in London on Tuesday, Vincent de Rivaz was repeatedly called on by MPs to clarify EDF's motives in bargaining on a strike price for its Hinkley Point C project.

Acknowledging de Rivaz's comment that the agreed-on strike price will be a function of the project's cost, MPs suggested that there was a "perverse incentive" for EDF to request a higher strike price to cover the increased cost of the scheme.

But De Rivaz denied that EDF was engaged in any subversive behaviour. "It would be a folly to try and cheat - there would be an immediate backlash," he said. "We are not seeking a deal which isn't sustainable."

Energy secretary Ed Davey confirmed earlier this month that the Department of Energy and Climate Change is negotiating separately with EDF over a strike price for Hinkley Point C to enable the company to make a final investment decision before the end of the year (see EDEM 18 October 2012).

EDF will get certainty over its strike price several months ahead of the general release of strike prices next spring.

De Rivaz refused to respond to repeated questioning by MPs on whether the cost estimate at Hinkley Point C had since blown out by as much as 40%.

De Rivaz said it was not possible to reveal the estimated cost of Hinkley Point C before a strike price was set and a contract for difference (CfD) entered into. He added that estimates still were being gathered from various entities contracting with EDF on the project. "We are not in a position where we're ready to say what the cost might be now. We need the strike price to run the model," he insisted.

Uncertainty

De Rivaz acknowledged that there was uncertainty surrounding strike prices, the contract duration and indexation arrangements, but he said that, fundamentally, EDF supported the CfD regime and saw it as the best way to spur investment in low-carbon technologies.

"I think the world is watching Britain - in the world we are in, CfDs are the optimal solution to get funding for projects," he said.

However, other experts who also spoke at the hearing argued that EDF, with the most advanced of the new nuclear projects on the drawing board, has an unfair bargaining position with the government.

"At the moment, EDF has the government over a barrel, and I think they're enjoying it," Greenpeace energy and climate campaigner Richard George said. "DECC is so committed to delivering this programme that they'll sign up to almost anything with EDF - but I don't think this is going to give us 16GW of reactors."

One academic, visiting fellow at Kings College London Nick Butler, said DECC needed to avoid overpaying for new nuclear. "A strike price of £100/MWh would be absolutely at the top end," he told the Committee.

SSE chief executive Ian Marchant said in June that he was concerned by the lack of transparency over the setting of strike prices, including negotiations between power utilities and the government.

One member of parliament cautioned that if EDF receives too high a strike price, nuclear projects would look expensive relative to offshore wind, where costs are expected to fall below £100/MWh in coming years.

In a previous committee hearing, engineering experts said it was more important to focus on delivering the government's stated target of 16GW of new nuclear build by 2025 than for EDF to complete Hinkley Point C by 2019 (see EDEM 11 September 2012). KB

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