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Government to offer long-term commitment to nuclear

The government is set to provide long-term backing for new nuclear projects, with reports it will offer 40-year contracts to secure investors in the flagging sector.

The Guardian has reported that ministers want to offer contracts for at least 30 and up to 40 years for new nuclear generators in a bid to ensure its proposed contracts for difference are agreed at a price below £100 per megawatt hour.

This would be a longer contract that was first envisioned, but at lower prices for electricity generated, with negotiations between EDF Energy and the Department of Energy and Climate Change seen as crucial in setting a precedent for a wave of new nuclear reactors.

Contracts for Difference rates are due to be finalised this year, but will not be available to generators until 2014, so the government has entered into talks with developers including EDF who are considering investment in the UK energy sector. EDF has yet to make a final investment decision on the multi-billion Hinkley Point C project and said in its results last week that it would be Q1 of this year at the earliest.

CN exclusively revealed this month that the Treasury has opened its doors to a bid for a UK Guarantee from EDF Energy, who have admitted they are exploring the option.

However any bid for a guarantee will not take place until after an agreement is in place for a strike price under the CfD mechanism designed to protect investment from major energy firms like EDF in speculative developments.

The new nuclear sector has been rocked by the withdrawal of Centrica, from its proposed stake in new nuclear projects with EDF at Hinkley Point C and Sizewell, and RWE and E. On from the joint venture Horizon, which was later bought by Hitachi.

DECC told the Guardian in a statement: “No commitment has been made on commercial terms or a strike price. Ongoing discussions are focused on finding a fair, affordable deal, which represents value for money for consumers. Any agreement reached will be laid before parliament, and will include details of the strike price.”

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