DURING her first two months in office, Theresa May has made a point of breaking with the policies and personalities associated with her predecessor, David Cameron. When in July she announced a pause in the approval process for Hinkley Point C, a proposed nuclear power station due to be part-financed by China, it looked as if another U-turn might be ahead. But on September 15th she gave the project the go-ahead, albeit with new conditions attached. The decision is a triumph of political considerations over economic ones.
Mrs May’s concerns about Hinkley are thought to have centred on the involvement of foreign powers, particularly China, in a gigantic and potentially hazardous project. Électricité de France (EDF), a French state-owned firm, is building the plant and the Chinese are investing £6 billion ($7.9 billion) in it, about one-third of its projected cost. To allay fears over security, the British government will take a share in all future nuclear projects, the details of which have yet to be made clear. It has promised a change in its approach to “the ownership and control of critical infrastructure”, to ensure that the implications of foreign ownership are fully scrutinised. Officials have also secured an agreement with EDF that it cannot pull out of the project before completion without Britain’s consent.
By allowing the project to go ahead Mrs May has avoided poisoning the relationship with France, whose co-operation in Brexit talks will be essential, as well as that with China, which is seen as a big source of future investment. The Hinkley announcement does not mention China’s hopes to design and build a reactor at Bradwell in Essex, nor the possibility of Chinese involvement in the Sizewell nuclear plant in Suffolk. But China General Nuclear Power, the state-owned company planning to invest in Hinkley, said it was “now able to move forward and deliver much-needed nuclear capacity at Hinkley Point, Sizewell and Bradwell”.
British manufacturers will be happy, as 60% of the cost of Hinkley must be spent in Britain. Union leaders are smiling, too; at its peak the project will employ over 5,000 people, in addition to the construction jobs it will create.
But to Hinkley sceptics, all this misses the point. Regardless of security, the government has locked itself into a bad deal, they say. The electricity that will come out of Hinkley is guaranteed by the British taxpayer at about £92.50 per megawatt hour, over twice the current wholesale price. (In 2012 experts predicted that the cost of non-nuclear fuels such as natural gas would be more than double what it is today.) As the cost of renewable forms of energy, such as wind and solar, tumbles, and new technologies such as battery storage become viable, the cost of Hinkley’s power will look even steeper. Furthermore, the reactor design at Hinkley is untested. Similar EDF projects in France and Finland have faced years of delays.
By giving Hinkley the go-ahead, Mrs May has solved a short-term political problem but created a long-term economic one. Fortunately for her, it will be a successor who must take it on.