The financial picture for the Hinkley Point C nuclear power plant build in Somerset, England, became a bit clearer Monday, after British Finance Minister George Osborne said the government would provide a financial guarantee of $3.1 billion for construction of the power plant that is expected to generate 7 percent of the country's electricity.
The $38 billion project is estimated to create 25,000 construction jobs and to be the foundation for a low-carbon energy mix for Britain.
Osbourne, who made the announcement while on a five-day trip to China, called nuclear energy “cost competitive,” when compared with other low-carbon power sources. In addition, he called the project a step in the right direction for Britain and China. He said the two countries already enjoyed a “golden relationship.”
A British trade union Prospect applauded the government's help with the financing. EDF Chief Executive Officer Vincent de Rivaz said the announcement demonstrated the UK government's commitment to the project.
A financial guarantee means the government does not provide funds for the project, but guarantees to a financial institution that a construction loan would be covered. In effect, the government co-signs a loan of in this case up to $3.1 billion.
The government has already approved a $27.3 billion subsidy for the builder EDF Energy, which will come in the form of price guarantees for the electricity produced by Hinkley Point C. EDF Energy (EDF), however, has yet to make a final decision on whether or not the project is financially feasible. China General Nuclear and China National Nuclear are expected to weigh in as minority partners in the project in exchange for taking a larger share in at least one future project.
The subsidized financing plan for Hinkley Point C has been met with criticism. Although approved by the European Commission, Austria has sued the commission over its position, calling the subsidy illegal under European Union law.
The subsidy amounts to a guaranteed price of $151.25/MWh.