The National Audit Office (NAO) has hit out at the Government's deal for the Hinkley Point C scheme as it locks consumers into a "risky and expensive" project.

The £18 billion development will see the first new nuclear power station built in the UK for a generation at Hinkley Point in Somerset. The project is expected to take 10 years to complete.

It is estimated the facility will meet 7% of Great Britain's electricity requirement by the mid 2020s, while the average annual household electricity bill is forecast to rise by around £10 - £15 to support Hinkley Point C up to 2030.

However, in a new report the NAO has raised concerns over the scheme's value-for-money, stating tests by the Department for Business, Energy and Industrial Strategy in 2016 showed the economic case for the project was "marginal and subject to significant uncertainty".

The NAO stated: "Today's report finds that the Department has not sufficiently considered the costs and risks of its deal for consumers. It only considered the impact on bills up to 2030, which does not take account of the fact that consumers are locked into paying for Hinkley Point C long afterwards. It also did not conclude whether the forecast top-up payments are affordable.

-- Advertisement --

"The government's case for the project has weakened since it agreed key commercial terms on the deal in 2013. Delays have pushed back the nuclear power plant's construction, and the expected cost of top-up payments under the Hinkley Point C's contract for difference has increased from £6 billion to £30 billion. But the Department's capacity to take alternative approaches to the deal were limited after it had agreed terms. The government has increasingly emphasised Hinkley Point C's unquantified strategic benefits, but it has little control over these and no plan yet in place to realise them."

The NAO continued by stating the Department aligned its approach to the Hinkley Point C deal with its support for other low-carbon technologies, meaning the private sector "bears the risk that construction costs could overrun".

"The NAO's analysis suggests alternative approaches could have reduced the total project cost," it continued.

"The Department did not assess whether this would have resulted in better value for money for electricity consumers.

"There remains the risk that NNB Generation Company Limited (NNBG) will seek further financial support from the government, notwithstanding the contractual terms of the deal. The reactor design for HPC is unproven and other projects that incorporate it are experiencing difficulties. Furthermore, EDF's financial position has weakened since 2013. The Department plans to develop and maintain alternative ways of ensuring energy security to mitigate the risk of needing to provide additional support for Hinkley Point C."

The NAO added the project's value for money will not be known for decades and will depand on whether the current contractual agreements continue, along with external factors such as future fossil fuel prices, the costs of alternative low-carbon generation, and developments in energy technology and the wider electricity system.

Despite the Department negotiating a deal which means some terms can be adjusted in consumers' favour in the future, Head of the NAO Amyas Morse said Ministers have "committed electricity consumers and taxpayers to a high cost and risky deal in a changing energy marketplace".

"Time will tell whether the deal represents value for money, but we cannot say the Department has maximised the chances that it will be," he said.

(LM/MH)