Hinkley Point - better financing model needed if costs and delays not to be repeated - IPPR
Response to news that the UK government has approved construction of the new Hinkley Point C nuclear power station in Somerset
Jimmy Aldridge, IPPR’s Associate Director for Energy, Transport and Climate, said:
“Now Hinkley Point C has been given the green light it is time to rethink how we do energy investment.
"To meet our energy needs as old power stations are decommissioned, the UK needs to construct the equivalent of 30 Hinkley’s worth of low-carbon generation over the next 15 years.
"Most of that should be in decentralised wind, solar and energy storage. But if the government wants more nuclear then the cost and delays of Hinkley cannot be repeated.
"A different financing model is required similar to that taken by other significant infrastructure projects such as Crossrail and the London 2012 Olympics. Direct public investment in future nuclear projects would save up to £5.5 billion and would reassure bill payers that the UK had its own stake in this country’s critical infrastructure – and not simply that of overseas governments.”
Notes to Editors:
1. IPPR released a report in summer 2015, which recommended that the building of nuclear power stations could be financed through existing capital budgets in place of other infrastructure schemes, or it could be paid for through additional borrowing for infrastructure investment:
- We calculate public ownership of nuclear plants during construction could save consumers between £1.2 billion and £1.8 billion from 2015 to 2035;
- If public ownership was continued during the operational phase but private companies ran each nuclear plant, this could produce additional savings for the consumer of £2.5 billion and £3.7 billion over the same period;
- This could lead to a total saving of leading to a total saving of between £3.7 billion and £5.5 billion during the period;
- Long-term borrowing for low-carbon energy projects would enable the costs of addressing climate change to be spread across the generations who will benefit from the investment, rather than making current bill payers liable for all of the necessary upfront investment.
The IPPR analysis provides a powerful case for the British Government to take a greater stake in any future new nuclear projects. The size of potential savings demonstrates that the government is better placed to bear certain risks associated with new nuclear projects than private firms.
The British Government has already adopted the approach IPPR are recommending for other significant infrastructure projects such as Crossrail and the London Underground, as well as the facilities for the London 2012 Olympic and Paralympic Games so there is a clear precedent for adopting this alternative finance approach. It is also a funding model that has been used in other countries, which have built new nuclear stations.
See: J Aldridge & J Garman, ‘When the levy breaks: Energy bills, green levies and a fairer low-carbon transition’, IPPR, 17 June 2015, [http://www.ippr.org/publications/when-the-levy-breaks-energy-bills-green-levies-and-a-fairer-low-carbon-transition].
2. IPPR aims to influence policy in the present and reinvent progressive politics in the future, and is dedicated to the better country that Britain can be through progressive policy and politics. With nearly 60 staff across four offices throughout the UK, IPPR is Britain’s only national think tank with a truly national presence.
Our independent research is wide ranging, it covers the economy, work, skills, transport, democracy, the environment, education, energy, migration and healthcare among many other areas.