The government is set for a cash windfall if the construction of new nuclear plant Hinkley Point C comes in under budget.
Energy secretary Amber Rudd said at least half of all savings made by EDF Energy during the £18bn construction phase would be paid into the government’s coffers, if the total cost of the project comes in under budget.
According to Ms Rudd, the government and EDF have agreed that, if the project comes in under budget, 50 per cent of all savings under £1bn and 75 per cent of all savings over £1bn will be paid to the government.
Speaking at an energy and climate change select committee meeting in Westminster yesterday, Ms Rudd added that “the construction risk is with the project promoter and that is EDF”.
The government has already confirmed it has committed a £2bn guarantee to help fund the Somerset nuclear project, which is expected to complete in 2025.
The announcement from Ms Rudd comes one month after China General Nuclear Corporation agreed a strategic investment agreement with EDF to take a stake in Hinkley.
As part of the deal, CGNC has taken a 33.5 per cent stake in the project, as well as agreeing terms in principle for future nuclear new-build projects at Sizewell and Bradwell.
Questioned by MPs on the consequences if the Chinese investors withdrew their support for Hinkley, Ms Rudd said it would be up to EDF to find a new investor.
“If the Chinese pulled out, I would expect the French promoters of the project, EDF, to find a new investor,” she said.
“This is an EDF-run project, it is for them to source the investment – EDF carry all the risk.”
The energy secretary assured the UK supply chain that EDF would stick to its pledge of ensuring 70 per cent of all of suppliers working at Hinkley would be UK-based.
“We will have regular checks on this, it is in the contract,” she said.
“It is part of EDF’s commitment and we will make sure that they deliver on all the terms.”
The energy secretary also indicated that future nuclear new-build projects could be put under similar supply chain agreements.
“We have made very clear to all other promoters of new nuclear that using UK supply is an essential part going forward,” she said.
The committee meeting came two days after a letter from Ms Rudd was leaked to the Ecologist, which claimed the energy secretary had “misled” parliament by promising that the UK was “on course” to deliver its renewable energy targets.
The article reported that Ms Rudd had admitted to members of her department that the UK was in fact falling short of its target to source 15 per cent of the country’s energy including transport, power and heating by 23 per cent.
This, according to the Ecologist, came despite telling parliament in June that the government was on course to meet its targets.
Ms Rudd admitted to the committee meeting that the UK was behind targets when it came to the country’s whole renewable energy landscape, but said that when she was quoted in parliament in June, she was referring to electricity targets specifically.
She said: “The UK has a 2020 target of 15 per cent of its energy from renewable sources; the figure of 30 per cent is the figure we expect to have from electricity by 2020.
“I am concerned about the work being done on transport and heat to make the additional targets.
“We have made our interim target but it is going to be challenging to make the rest of the target, but I remain committed to make this target.
“This is a cross-governmental target not just for my department and that is why I will be working with transport and putting together policies to address the shortfall we currently have in order to achieve the 2020 target.”