So these guys are building us a nuclear power station.

A simular thing happened when the railways were privatised. When the franchises went out to tender the only company specifically and legally barred from tendering was British Rail, which happened to be the only company in the UK with any experience in running railways.

Today German and French state railways own large chunks of our railways.

What a lovely state of affairs for a country which was the first in the world to have railways.

Seems there are quite a few misunderstandings on this deal so let’s put a few things to bed:

– The cost (and risk) are being borne by a third party, so the UK receives inward investment and new jobs for no up front cost and also doesn’t act as final guarantor – which means that the £13Bn it would have cost us to build it (more if it over runs) can now be invested in other things or used to avoid the tax raises that would otherwise be required.

– The strike price for electricity produced is twice the cost of current energy (so appears expensive) but half the cost of the strike price given to renewables by Chris Huhne a few years back – renewables typically require less capital and carry less risk (bigger construction projects that are more complex cost a lot more if they go off track) so by that standard this is a good deal i.e. half the payback for a more expensive project that won’t earn anything for 10 years (possibly 15). We also need to take into account the cost of financing the project for 10+ years with no initial return; if there was no profit in the job it wouldn’t get built.

– We have to take into account the time value of money on the strike price per megawatt hour – it will potentially be 15 years before the plant comes on stream, by which point carbon based energy costs will be 3.7 times today’s cost assuming rises of around 10% a year. By that comparator a guarantee of future energy at only twice today’s cost represents a 50% saving per megawatt hour and more than that moving forward over the 30 year service life even with the annual increments that are baked into the contract.

– The French are the contractors with China providing capital but much of the Labour will be British – it doesn’t give the Chinese any additional control of the asset-it’s like the many building and infrastructure projects overseas that are financed with capital from the UK.

The strike price for electricity produced is twice the cost of current energy (so appears expensive)

And let’s hope it stays expensive, because if the price of electricity falls then the taxpayer will have to make up the shortfall to EDF.

If the price of electricity remains high enough the taxpayer won’t have to subsidies EDF.

Either way the only losers are the consumers and the guaranteed winners are EDF.

This is the “free market” in energy and how it drives prices “down” for the consumers.

BTW it’s funny how an energy company can be happy with a 35 year price freeze but a 20 month price freeze is out of the question.

It’s almost as if a price freeze which benefits them is a good idea but a price freeze which benefits the consumer is a terrible idea.

robdixon I don’t think you can compare the strike price announced today for nuclear to the strike prices for renewables, totally different time periods.

The cost (and risk) are being borne by a third party, so the UK receives inward investment and new jobs for no up front cost and also doesn’t act as final guarantor – which means that the £13Bn it would have cost us to build it (more if it over runs) can now be invested in other things or used to avoid the tax raises that would otherwise be required.

another way of spinning it is to point out that a private company will now profit from us all paying higher electricity,to them rather than back to us, for the production of the electricity till the end of this century.
Its investing in it because it knows it will make a profit- which is another way of saying this deals costs us more in the long run than doing it ourselves
Its like getting a 60 year mortgage when you could buy the house outright – it only makes short term sense and will cost you more in the long run

Anyone know the nuclear waste generated per MWh?

Its like getting a 60 year mortgage when you could buy the house outright – it only makes short term sense and will cost you more in the long run

That’s overly simplistic, a nuclear power station is a much bigger capital investment, with complex running requirements there after. Essentially the government is trying to minimise the risk of the project by getting EDF to do it.

People need to understand that nuclear is complementary to renewables, not in direct competition.

and edf are doing it because they will make profit – there is no debate about whether this will cost us more in the long run.

have they established how we pay for the clean up/decomissioning?

And according to the news this morning, double the current rate per KW for the electricity provided has been agreed, which is nice for EDF.

Dunno how the contracts worded, but the way you phrase it sounds like a bargain, if British Gas called me tomorow and asked if I wanted to pay double the current rate in 10 years time and it was constant for the next 60 years I’d bite their hand off!

Anyone know the nuclear waste generated per MWh?

Depends on the design of the plant, but unlike the original Nuclear power (which made material for wepons with power as a by-product), newer reactors can run on much less dangerous fuel, which can then be re-processed and used again and again. So the waste (and decomisioning costs) should be much lower than older plants.

this thread mentions that the price goes up and is not frozen at that price for ever

as for no waste – is that like they promised us it would be clean, lead to free electricity and machinery would give us all more free time – ie I will believe it when it happens not when they claim it

[and edf are doing it because they will make profit – there is no debate about whether this will cost us more in the long run.

have they established how we pay for the clean up/decomissioning?]

funded by developer/ operator

So these guys are building us a nuclear power station

So wait.. because some planning official or contractor in China made a cockup, that means that any other work done by Chinese people will be rubbish? Why would that be? Are you saying there’s something intrinsic to all Chinese people that prevents things being built well?

and edf are doing it because they will make profit – there is no debate about whether this will cost us more in the long run.

Not necessarily true as assuming the contract is written properly then the risk (cost) is shifted onto EDF and their partners. Sure EDF are if all goes well making a profit, but that’s the pay off of de-risking the project. Profit in itself isn’t a bad thing.

Plus by EDF taking it on the government don’t have to stick more people on their books, that are then hard and costly to get rid of later.

Nuclear stations are ace!

But there are some very long term capital expenditures to think about, not the least of which is that it’s unlikely that anyone will build a retirement village on the place once it’s decommissioned – at least not for a few millenia.

Unfortunately, we lost our expertise in building nuclear plants a very long time ago and these things are expensive…so the money needs to come from somewhere. W

[and edf are doing it because they will make profit – there is no debate about whether this will cost us more in the long run.

have they established how we pay for the clean up/decomissioning?]

funded by developer/ operator

Which I guess will be a distinct legal entity which will for some reason go suddenly under just before decommissioning. Leaving us to pick up the tab…

[Which I guess will be a distinct legal entity which will for some reason go suddenly under just before decommissioning. Leaving us to pick up the tab… ] nope…

During plant operation, operators set aside funds progressively into a secure and independent fund.

and edf are doing it because they will make profit – there is no debate about whether this will cost us more in the long run.

Of course! They’ve already factored in a build cost three times higher than originally estimated, and the small print allows for further increases when it inevitably goes over budget.

The money would of course be far better spent on reducing consumption.

Anyone know the nuclear waste generated per MWh?

Depends on the design of the plant, but unlike the original Nuclear power (which made material for wepons with power as a by-product), newer reactors can run on much less dangerous fuel, which can then be re-processed and used again and again. So the waste (and decomisioning costs) should be much lower than older plants.

OK then. How about for Hinkley Point B we take Kg of waste and divide by MWh generated over its lifetime. Any idea where I’d find that info?

It’s another slap in the face for british industry, giving the contract to some tin pot chinese companies. Meanwhile all our green taxes go in to the pockets of the fatcats. Hinckley point is too near sea level anyway what with southern england sinking into the sea.

How many more pensioners have to freeze?

During plant operation, operators set aside funds progressively into a secure and independent fund.

Bit like a pension for the power-station. Let’s hope the French Government are securing any short-fall.

But on the other hand, if you paid some expensive British outfit, taxpayers would complain about inefficient goverment.. at least some would.

Problem with democracy innit.

Given the UK’s beligerent foreign policy of recent years will the UN step in and impose sanctions against us for bulding this reactor as they have with Iran and North Korea?

How many more pensioners have to freeze?

To be fair not many of them actually do. And anyway…. pensioners are the last people to have any right to moan nowadays. Seeing as we’re all going to be paying forever to keep them in Werthers Originals and cream teas in Lake District Tea Rooms, while we all work till we drop, or get recycled into fertiliser when our organs start packing up

OK then. How about for Hinkley Point B we take Kg of waste and divide by MWh generated over its lifetime. Any idea where I’d find that info?

It still isn’t as simple as that.

kg of what?

kg of CO2 emitted in building the plant?
kg of CO2 in manufacturing the fuel?
kg of CO2 in running the plant?
kg of depleted fuel?
kg of low grade waste? Because everything coming off the site will be treated as nuclear waste, whether it’s dangerous or not, which is why you occasionaly get “Nuclear waste accidently dumped in landfill” type headlines. When the reality is a few containers of used paper towels and overshoes.

Hinkley C will be French technology and Chinese money.

Making a profit, subsidising the French taxpayers, a slap in the face of the UK etc….where does all that come from?

I believe that “Uk Inc.” had the chance to play here (Centrica) but concluded that the returns would be unattractive. “If” they are right then presumably a good job that the UK government isn’t taking this on either?

So what is the outcome? A consortium of EDF and others (the ownership is a red herring at best, xenophobia at worst) step up. According to those in the know, on the basis of the new, compromise, strike price they will make a return on investment of @10% on a high risk project. So given that their cost of capital is unlikely to be much below (if not higher) than the return, that is hardly a great deal. On balance probably about break even for a mega project with lots of risk. Hmmmm…..not sure I would accept that risk/return balance????

So (if the shareholding is relevant at all) those very nice French tax payers may “break even” on their investment – how very kind of them. Ils sont tres gentils!!!

But it is absurd to suggest that anyone really knows at this stage.

Now whether nuclear is the right option at all..,.., leave that to a lib dem to answer!!!!

It still isn’t as simple as that.

kg of what?

Just high level waste then for starters. You know, the really nasty stuff.

Making a profit, subsidising the French taxpayers, a slap in the face of the UK etc….where does all that come from?

The facts – though the last one on slapped face is debatable – unless of course you wish to argue EDF/Chinese based govt venture capitalists are not intending to make any money and are doing it as an act of humanitarian aid to help us all out.

Your entire argument seems to be based on the premise they wont make a profit which is clearly not how they nor UK plc. as you like to refer to us, view it.

But it is absurd to suggest that anyone really knows at this stage.

absurd is a tad strong as I would have faith the EDF at least know their market place and how to turn a profit even if we dont trust politicians to know their arse from their elbow. It is fair to say there are risks involved for EDF.

Now whether nuclear is the right option at all..,.., leave that to a lib dem to answer!!!!

Like all issues it seems to depend on who you ask and what day it is 😉

the ownership is a red herring at best, xenophobia at worst

Oh here we go, if someone suggests that it makes no sense for profits and subsidies to go into the coffers of the French and Chinese governments, then you’re some sort of bigot.

What a pathetic way to play the racist card.

Of course they want to make a profit and no harm in that. They key questions not make a profit/not make a profit. It’s the return on investment. I do not understand the nitty-gritty of this, but what is clear is that we are talking about an v complex investment project which had alternative methods of financing and a wide range of potential financial outcome. Yes, nobody really knows what the future of nuclear and other prices will be.

This deal seems offer a relatively marginal return on investment at roughly EDF’s cost of capital. From a UK perspective that seems an ok deal. Again allowing for the shareholder argument (even though I think it’s a red herring) imagine if the UK gov said to us – we are going to invest your money in a high risk, long term project and we expect the return on investment to just cover th cost of capital. Would you reply – mais oui, bien sur!! I doubt it somehow

But lets not forget that profit and profitability are not the same thing!!!

but Ernie, if (and it’s a big if) edf make a profit, it will be taxed at 23% and go straight back to the government. And the subsidies? What subsidy? The whole point of the way the deal is structured is that there’s no money up front, no money during the 10+ years of build and just a guarantee to pay double the current price per mw hour and likely 50% less than the going rate on the open market.

As others have said above, a 10% return on capital given they have to take all the risk is frankly a bonkers deal (a very bad one) for the french government / tax payer…

Like all issues it seems to depend on who you ask and what day it is

With the LibDems it’s not so much who you ask but more what side of an election it is.

“Nuclear power is a tried, tested and failed technology, which is clearly a costly blind alley.”

Chris Huhne – May 2007

“We are on course to make sure that the first new nuclear power station opens on time in 2018”

Chris Huhne – August 2010

You can word it how you liek they expect to make money from us and it will go to French govt owned companies and the Chinese govt

we are going to invest your money in a high risk, long term project and we expect the return on investment to just cover th cost of capital

I am fairly sure the deal explicitly and implicitly states that there will be profit or else the private sector would not be there as they are not humanitarian organisations
We could debate whether they will but clearly they expect to make money!

Fair point ernie even the same person can say different thing on different days within the LIB dems

but Ernie, if (and it’s a big if) edf make a profit

Yes of course. Oh how we are going to laugh at the French and Chinese governments for being stupid and building us a nice big new shiny nuclear power station 🙄

Hold on a sec – weren’t all those price rises in gas & electricity due to gas wholesale prices and the costs of continuing investment?

Looks like the privatised power companies should be starring with Bernard Cribbins on Jackanory.

AdamW – both. The element of “continuing investment” in the retail price we pay actually relates to the ageing national grid (which loses 50% of the energy transmitted across it). The rate (and return ) of investment on that is regulated by government so it isn’t something the retail power companies make a profit on – but it doesn’t relate to production investment which is effectively separated from the retail market. As you correctly say, the rise in energy cost does account for the rest.

if (and it’s a big if) edf make a profit, it will be taxed at 23% and go straight back to the government.

I love this so what you mean is 77% will leave the country – awesome spin- when 100% would stay if it were govt run!

I suspect they are rather good with their tax arrangements as well like many power companies and multinationals

Well Ernie (no need to be rude) but you keep going on about profits going back to French state. So what? If they go back at a rate of return below the cost of capital then they are subsidising us not the other way around.To argue otherwise is either misunderstanding how investment works or being xenophobic. I am sure that you cannot be accused of either.

The deal is structured to reduce/ minimise UK cash flow/expenditure and let someone else take the bulk of the risk/being expertise. Of course someone has to make a return of some sort on the latter but today’s announcement suggest that it is a marginal one.

As I said before, if the uk Gov proposed the same idea, we would be v unlikely to support it.

Well Ernie (no need o be rude) ….. I am sure that you cannot be accused of either.

MMMM you both seem to be equally guilty of pressing each others buttons tbh but he is right that xenophobia is not the main reason that folk are objecting

Of course someone has to make a return of some sort on the latter but today’s announcement suggest that it is a marginal one.

Not for profit organisations – i know radical and out there so they dont have to make a return do they ?

Well Ernie (no need o be rude)

Don’t you ever tire of using that ridiculous tactic ?

And how polite do you think it is of you to accuse me, and anyone else who doesn’t agree with you, of being “xenophobic”

.

you both seem to be equally guilty of pressing each others buttons tbh

Yeah ? How about you point out where I have accused THM of being a xenophobe, or anything else for that matter. Go on.