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Britain, French utility agree to build UK nuclear plant

Facility would be first in EU since Japan calamity

LONDON — The British government and EDF Group, the France-controlled utility, revealed Monday that they had reached a long-elusive agreement to build the first nuclear power station in Britain in a generation, at Hinkley Point in southwest England.

It is the first such deal in the European Union since the nuclear disaster at Fukushima, Japan, two years ago prompted a major reconsideration of nuclear power.

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Germany decided after the Fukushima disaster to shut down all the country’s nuclear power plants by 2022 and to make up for the output gap with renewable energy, but the effort is proving to be costlier than expected for taxpayers.

The overall costs of the British reactor would be about $26 billion in 2012 terms, with consumers and taxpayers covering most of the bill.

EDF will be guaranteed a price of between $145 and $148 per megawatt hour for 35 years, depending on whether it later goes ahead with another plant that might reduce costs.

The British government will guarantee 65 percent of the upfront cost of the Hinkley Point C reactors. EDF said it expects to make a return on investment of about 10 percent.

Two Chinese companies, China General Nuclear Corp. and China National Nuclear Corp., will take a stake of 30 to 40 percent in Hinkley Point.

Britain aims to cut greenhouse gas emissions in half by the mid-2020s in large part by renewing the country’s older nuclear plants.

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According to EDF, which is working with the two Chinese companies on nuclear power stations in China, the companies will be “strategic and industrial partners” in the project and will be given the “opportunity to gain experience in the UK and will support their long-term objective of becoming leading developers in the UK.”

Areva, the French nuclear designer and builder, will take a 10 percent stake and will do key work on the project, including the nuclear steam supply system and instrumentation. EDF said discussions were underway with other parties that could take up to 15 percent of the equity. EDF says it probably will wind up with a stake of 45 to 50 percent.

EDF says the deal faces hurdles. A final contract with full investment decisions needs to be signed. In addition, EDF says, the European Commission needs to decide whether the terms of the contract violate European rules on state aid.

The Hinkley Point project represents an attempt by the British government to bolster the domestic energy industry.

The government wants several other plants to be built to replace Britain’s aging nuclear stations, including at least one other plant operated by EDF. One goal is that building several plants will create economies of scale and the opportunity to learn, lowering costs. In the past, Britain has built plants piecemeal, raising the costs.

Officials said up to 57 percent of the work on the plant may go to British companies and that 25,000 jobs could be created at the peak of the construction phase and 900 permanent jobs during the plant’s expected 60 years of operation.

The roughly $145 per megawatt hour is about double the cost of wholesale electricity currently charged by generators, and the amount is expected to spark debate over British taxpayers subsidizing nuclear power.

Household energy prices are in the spotlight after big power companies including British Gas recently announced price increases. On Sunday, the archbishop of Canterbury, Justin Welby, called on the companies to justify the increases, citing the hardship for consumers. Last month, the Labour Party leader, Ed Miliband, called for a freeze on energy prices.

The negotiations over the Hinkley Point plant have been long and difficult. Originally, EDF, which already operates 15 nuclear plants in Britain, had intended to be in partnership with Centrica, the owner of British Gas. But Centrica withdrew from discussions, saying the economic case for a partnership was not strong enough.

Although Germany wants to shut all of its nuclear plants by 2022 and shift almost entirely to wind and solar power by 2050, Britain is betting big on nuclear power. Though it is also pushing into production of shale oil and gas, Britain aims to cut greenhouse gas emissions in half by the mid-2020s in large part by renewing the older nuclear power plants.

China’s interest in the British nuclear industry signals a break from a mostly domestic focus.

If and when the new plant, Hinkley Point C, comes fully online, it will supply about 7 percent of Britain’s electricity demand.

That would be enough power for 6 million homes, with the added benefit of no carbon emissions.

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