French-owned firm in talks with ministers over long-term subsidy guarantees as Ofgem warns of steep hike in energy prices
Electricity firm EDF has confirmed it wants the UK government to sign 40-year contracts to support building new nuclear reactors in Britain – as the national energy regulator warned prices are likely to rise higher than expected.
The French-owned company is in talks with ministers over “contracts for difference” funding, under which the government guarantees generators will be paid a minimum price for electricity from new nuclear plants: if the market price falls lower than this “strike price” then a surcharge will be added to customers’ bills; if it rises higher there would be a refund.
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Energy experts said longer contracts for new nuclear power would help bring the price guarantee down from early estimates of £140-160 per unit to under £100, and bring down the overall cost because they would reduce risk and make it cheaper for EDF to borrow the estimated £12bn-£16bn building cost.
“At the moment that certainty would appear to be more of a benefit to the owner-operator of a new plant, but clearly the government needs to get things moving on generation new builds,” said Martin Young, head of European utilities research at Nomura. “It would support the government’s low-carbon policy and reduce the volatility in power prices.”
But ministers could also face a headache if energy companies demand similar subsidies to build new gas plants.
Read more at EDF confirms it wants 40-year contracts to build nuclear plants
