U.K. Seen Doubling Power Price To Guarantee New Reactor: Energy

The future of the U.K.'s nuclear industry will be decided on one number: the price the government's willing to guarantee Electricite de France SA will get for generating atomic power.

EDF and government officials will negotiate the so-called strike price for new nuclear power plants by the end of the year. To ensure the Paris-based utility makes a final decision on a new reactor in southwest England, the U.K. must set a price between 95 pounds ($148) and 105 pounds a megawatt-hour in 2020, double the level power trades at today, according to Bloomberg New Energy Finance.

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When negotiating with the department of energy, EDF will argue that costs of nuclear have increased significantly given delays at reactor construction sites in France and Finland, as well as post-Fukushima safety precautions, according to Bloomberg New Energy Finance analyst Brian Potskowski.

Increased Capital Costs

Based on increased capital costs and a rate of return of 10 percent to 11 percent, the company will need a guaranteed power price of 95 to 105 pounds, he said. The upper limit on this strike price is 130 pounds, which is the compensation level for offshore wind, he added.

"If the U.K. government really wants new nuclear built, there aren't any other options on the table other than EDF and Centrica," Daniel Grosvenor, head of Deloitte LLP's nuclear team in London, said in a telephone interview. "All the utilities are going to look at this as a robust investment decision. No one is going to take a punt."

"robust" is one of these new corporate buzzwords...


Wind power