An artist's impression of the Hinkley C nuclear power plant. Image: EDF Energy media library.
NAO investigates Hinkley C nuclear subsidies
Terry Macalister / The Guardian
17th October 2014
Hinkley C's subsidy package may have won European Commission approval - but now it faces a National Audit Office 'value for money' investigation, following a demand from a powerful Parliamentary committee.
This money would be better spent on clean technologies and energy saving measures, which don't leave a legacy of radioactive waste, and benefit the UK economy while reducing carbon emissions.
The National Audit Office has begun an investigation into the controversial subsidy regime for the planned new Hinkley Point C nuclear plant in Somerset, a week after Brussels approved taxpayer support for the project.
The financial watchdog, which scrutinises public spending on behalf of parliament, said it would be checking whether the guaranteed prices of £92.50 a megawatt hour - double the current cost of electricity - represented 'value for money'.
The NAO move, which follows pressure from a House of Commons committee, puts pressure on the government but has pleased green groups which believe nuclear is getting preferential treatment over windfarms.
NAO: 'We wish to identify lessons learned'
"Our work will cover the Department of Energy and Climate Change's commercial approach to securing this deal and the proposed terms of the contract, to report to parliament on value for money and the resulting risks which the Department must manage", said the NAO in a formal statement.
"We will also wish to identify lessons learned to inform decisions on future 'contracts for difference'", it added - referring to the new funding mechanism for Hinkley and other low-carbon energy projects.
Last week the European Commission approved the subsidy scheme, citing government concessions on the project's funding structure.
The parliamentary Environmental Audit Committee (EAC) had called this week for the NAO to hold a full inquiry into the government's deal.
Joan Walley, the committee's chair, said the "process and outcome" of the deal, as well as whether it represents value for money, should be investigated by the UK authorities now that it has been approved by Brussels.
DECC: 'This is all perfectly ordinary'
A DECC spokesperson said: "This month the Commission agreed that Hinkley represents a good deal for both bill-payers and investors.
"It's perfectly ordinary for the NAO to look into large investment contracts and we will be working with them as we move closer to finalising the contract. We will not go ahead with any contract unless it is good value for money."
John Sauven, the executive director of Greenpeace UK, welcomed the NAO decision, saying: "The stitch-up concocted in Brussels will see two generations of UK consumers locked into paying billions of pounds to a mainly state-owned corporation in France in order to bankroll an outdated and risky source of energy.
"This is an extraordinarily bad use of public funds and ministers will have a tough time trying to justify it. This money would be better spent on clean technologies and energy saving measures, which don't leave a legacy of radioactive waste, and benefit the UK economy while reducing carbon emissions."
A legal challenge is being prepared
The decision by the NAO comes just days after Ecotricity and other renewable energy firms said they were considering a legal challenge against the Hinkley financing package.
Ecotricity, a wind farm operator and energy retailer, and Solarcentury, a solar power business, said the European Commission was wrong to conclude the Hinkley C aid would not be detrimental to other low-carbon power producers.
Hinkley C - a twin 1.6GW reactor nuclear power plant planned for Hinkley Point in Somerset - has been set a funding scheme paid for by consumers that will last for 35 years, much longer than any previous schemes enjoyed by renewables companies.
But EDF, which will build and Hinkley Point C, has defended the funding. It said: "Last week's approval from the European commission demonstrates that agreements between the government and EDF are fair and balanced for consumers and investors alike."
Terry Macalister is energy editor of the Guardian. He has been employed at the paper and website for 12 years and previously worked for the Independent and other national titles.
This article was originally published by The Guardian. It is republished by kind permission via the Guardian Environment Network.
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