The go-ahead on the Hinkley nuclear project is a huge boost for the UK construction industry, though there remains one potential roadblock
This week’s decision by the European Commission giving the go-ahead for the financial deal behind the £16bn Hinkley Point C project could be a hugely significant one for the whole of the UK construction industry. But, as ever with this project’s painfully slow progress, it was also a case of one step forward, one step back.
But first thing’s first: the deal itself, announced by the European Commission on Wednesday, seems a sensible one, edging back the terms of the agreement made last year between the UK government and EDF back in favour of the British taxpayer. The decision forces EDF to pay more for the government guarantee behind its borrowing to finance construction - to the tune of £1bn - and asks the French utility company to give more money back to the UK if construction costs come in lower than estimated.
In addition EDF will be forced to pay money back to the UK taxpayer if profits from the sale of energy are higher than anticipated after the 35-year financing deal ends.
Importantly, however, these significant improvements in the terms of the approval are not thought to be of the scale that will frighten EDF away from going ahead with construction. Instead, they pave the way for it to spend the next few months nailing down the final details of its deals with the Treasury and with Chinese nuclear firms to finance construction.
Positively, what the Commission’s decision means is that EU regulators will not object, in principle, to this kind of government support for construction of energy generation infrastructure, as long as that support is proportionate. Vitally, it also shows that the Commission will not seek to interfere in the choice of energy generation mix taken by EU member countries.
So about that step back - Austria’s promised legal challenge has the potential to delay the project by up to four years, if EDF decides it can’t go ahead while the challenge is in play.
This project, over 10 years in the making already, is now agonisingly close to going ahead. The extent to which the repeated delays to Hinkley (it was originally due to be completed in 2017; the latest estimate is 2023) mark a policy failure by the UK government is now a moot point: the UK, and Europe more widely, need this project to go ahead, and be a success.
Because, as the former senior adviser to the energy secretary Tim Stone, said this week, regulatory clearance potentially paves the way for a raft of other deals to come after.
In the nuclear sector alone there are 10 other EU member states looking to build power stations, all of which have to confront the same funding issues the UK has dealt with.
As painful as it is as a UK taxpayer to see EDF guaranteed a price for energy of £92.50 per MW/h, around double the price of wholesale electricity today, the UK also needs this deal to be a commercial success for EDF. Because without a decent payback, you can bet there’ll be no other firms following on after with projects of a similar size.
The industry needs to hope EDF takes a bullish view of its chances against the Austrian challenge and decides to invest. Then it can leave the UK construction industry to do what it does best - get on and build the damn thing.
Joey Gardiner, deputy editor