EDF Could Get An Extra £800m, Thanks To A Government Loophole

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[typography font=”Cardo” size=”24″ size_format=”px” color=”#DF7401″]A[/typography]s most of Britain’s power stations are operated by EDF, they could find themselves in line for an extra £800 million, thanks to a loophole found in a government subsidy scheme. The aim of the scheme is for keeping the lights on at times of peak demand.

The energy and climate change secretary, Ed Davey, has outlined his plan to fund power plants to be on standby from 2018, in a bid to combat peak demand and the periodic nature of wind power. The majority of industry experts were under the impression that the “capacity market” scheme – which will mean that the cost will be passed to the consumer – was designed to make sure the many gas-fired power stations that have been threatened with closure would be able to be kept open.

However, the DECC, or the Department of Energy and Climate Change, is now admitting that the scheme will be open to all forms of generation. This includes nuclear, which benefits from having low operating costs and could potentially undercut its competitors in the bid to be operated by the National Grid.

All the nuclear power stations in the UK are owned by EDF, bar one. A power industry consultant from Cornwall Energy has estimated that a successful bid from EDF using all of its 7 existing plants could work out as being worth £223 million in the financial year of 2018-2019 and reach a total of £818 million all together by 2023.

An energy trader, who wished to not be identified, has said that 

This is a massive windfall for EDF. The cost to generate nuclear energy is low, so these plants are profitable, whereas gas-fired generation is marginal.

A spokesman for EDF said

We understand that the capacity auction will be technology neutral and theoretically rules in nuclear power plants. We won’t be giving any steer on what power plants we will be entering into the capacity auction until the pre-qualification period in August.

The company was unwilling to give any further information such as whether or not it would be participating in the capacity auctions. which will take place in December, with the power possibly being made available from 2018.

If the plans go ahead for the building, EDF’s power plant at Hinkley Point C would not be eligible for the capacity market as it would be subject to a different, more generous subsidy scheme that is known as “contracts for difference” or CfD.

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