Government confirms Hinkley Point C new nuclear project will go ahead

Practical Law UK Legal Update w-003-4683 (Approx. 4 pages)

Government confirms Hinkley Point C new nuclear project will go ahead

by Practical Law Environment

Background: new nuclear power station at Hinkley Point C

EDF is proposing to build a twin reactor nuclear power station at Hinkley Point C that would generate 3,200 megawatts (MW) of electricity, enough to meet the electricity needs of nearly 6 million homes. Hinkley Point C will be the first new nuclear power station in a generation and is a key part of the UK government's strategy to deliver base load low carbon electricity generation.

The Department for Business, Energy and Industrial Strategy (BEIS) indicates that the plant is expected to begin electricity generation in 2025. The project relies on financial support under a specific Contract for Difference (CFD) of £92.50 per MW hour for 35 years (more than twice the current price).

In 2015, EDF sold a one third share in the £18 billion project to China General Nuclear Power Corporation (CGN), which is interested in building its own nuclear design at Bradwell.

In July 2016, the new Prime Minister, Theresa May, announced that the UK government was reviewing its final decision to approve the project, following finalisation of all other consents and key decisions.

For more information on:

The Hinkley Point C project, see Practice note, Proposals for new nuclear power stations: Hinkley Point C.
Our nuclear energy materials, see Nuclear energy toolkit.

Government gives go ahead to Hinkley Point C

Approval subject to agreement in principle with EDF

On 15 September 2016, BEIS announced that the UK government has confirmed that, following its review, the Hinkley Point C new nuclear power station project will proceed (see BEIS press release, Government confirms Hinkley Point C project following new agreement in principle with EDF, 15 September 2016).

The government's approval is subject to an agreement in principle with EDF that the government will be able to prevent the sale of EDF’s controlling stake prior to the completion of construction, without the prior notification and agreement of ministers. This agreement will be confirmed in an exchange of letters between the government and EDF. Existing legal powers, and a new legal framework, will mean that the government will be able to intervene in the sale of EDF’s stake once Hinkley is operational.

New legal framework for future foreign investment in nuclear and other critical infrastructure

BEIS also indicates that the government will impose a new legal framework for future foreign investment in the UK's critical infrastructure, which will include nuclear energy and apply after Hinkley.

The Office for Nuclear Regulation (ONR) will be directed to require notice from developers or operators of nuclear sites of any change of ownership or part-ownership. This will allow the government to advise or direct the ONR to take action to protect national security as a result of a change in ownership. It is not yet clear how the mechanism will work and whether the government would be able to prevent a transfer.

The government will reform its approach to the ownership and control of critical infrastructure to ensure that the full implications of foreign ownership are scrutinised for the purposes of national security in a consistent way. This will include a review of the public interest regime in the Enterprise Act 2002 and the introduction of a cross-cutting national security requirement for continuing government approval of the ownership and control of critical infrastructure.

These changes will bring the UK's policy framework for the ownership and control of critical infrastructure into line with other major (OECD) economies.

Comment

BEIS emphasises that the changes mean that, while the UK will remain one of the most open economies in the world, the public can be confident that foreign direct investment works in the UK's best interests. Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, said:

"Having thoroughly reviewed the proposal for Hinkley Point C, we will introduce a series of measures to enhance security and will ensure Hinkley cannot change hands without the Government’s agreement. Consequently, we have decided to proceed with the first new nuclear power station for a generation. Britain needs to upgrade its supplies of energy, and we have always been clear that nuclear is an important part of ensuring our future low-carbon energy security."

Josh Hardie, CBI Deputy Director-General, said:

"The final green light for Hinkley Point is good news for the UK’s energy future as well as supporting jobs and growth across the South West and the country.

Investors are hungry for further signs from the Government that the UK is open for business. Pressing ahead with major infrastructure decisions – such as giving clarity to around the next Contracts for Difference auction and the post-2020 Levy Control Framework, and expanding runway capacity in the South East – would give a real boost to their confidence in the UK in the long-run.”

(See CBI press release, Hinkley Point to play important role supporting a diverse, low-carbon & secure energy supply, 15 September 2016.)

The project has taken years of planning and prevarication to reach this point, including uncertainty whether EDF would pass its final investment decision, which it did in July 2016. It is expected to lead to 25,000 jobs.

Sources

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Resource ID w-003-4683

Published on 15-Sep-2016

Resource Type Legal update: archive

Jurisdiction

United Kingdom