There’s been a lot of talk about how offshore wind has ‘increased’ its costs since the last Government contract auction – but that’s not a patch on nuclear power a la Hinkley C, courtesy of EDF. Capital costs for the project have increased in real (not just inflation) terms by around 50 percent since 2012, and there’s probably a lot worse to come.
The figure of £92.50 per MWh is often mentioned as the price of the contract for Hinkley C, and that is the contract price in 2012 prices. In today’s money using the Government’s preferred CPI calculator that is £124 per MWh – higher even than the currently gas-inflated wholesale power price.
But it is worse, much much worse than that, because Hinkley C’s real, not just inflation-adjusted price, has increased. In 2012 the capital cost was estimated at £16 billion by EDF. Now the capital cost in 2012 prices has risen to around £33 billion in 2023 money or around £24 billion in 2012 money.
That means that if Hinkley C’s contract was set up today at the revised capital cost then the equivalent contract price would be about £138 per MWh in 2012 prices and around £180 per MWh in today’s prices. That is of course if the contract was assessed on the same contract length – 35 years, and on a similar rate of return. The rate of return certainly would not be less since interest rates are a lot higher than they were in 2012.
The estimates published by EDF do not include interest rate charges. They are called ‘overnight’ costs, which in itself is highly ironic since the last thing nuclear power stations are noted for is being built overnight. Their construction takes many years, racking up immense interest charges on the way. If this was a private company they surely would have gone bust by now. The only way that EDF could get themselves into this position is because everybody knows that the French Government will inevitably bail them out.
Of course, as far as Hinkley C costs go, the only way is up. Heaven knows how high they will go! And the Government is going to make electricity consumers pay for the next EDF nuclear disaster at Sizewell C!
So let’s reflect a bit on the apparent horror experienced by the UK Treasury that they might have to offer more than £44 per MWh (at 2012 prices) for offshore wind contracts.
by David Toke NOTE: this post has been republished from David Toke’s blog on substack. To subscribe to Dave Toke’s Green Energy Blog. To see his latest posts and to subscribe to his blog, go to https://davidtoke.substack.com/
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