UK government’s nuclear deal ‘likely to run into legal difficulties’

Lawyers at Cambridge University have warned that the government’s agreement with EDF to build new nuclear in the UK could be destined for legal challenges.

A workshop run at the university and attended by legal experts, economists and policy experts concluded that the probability of legal difficulties with the current contract were high.

The report from the workshop notes that potential legal disputes will predominantly span from “the proposed contract being too favourable to EDF”. The authors of the report, Simon Deakin and David Howarth , recommend that it is actually in both parties' interest to renegotiate the deal.

From EDF’s perspective, the report warns that the company might not be able to protect its investment, which could result in EDF holding “very large stranded assets”. From the government’s perspective, the report recommends that DECC reconsider the length of the contracts. It notes: “In the course of very long term contracts, not only technological, economic and political conditions are likely to change but also the very legal environment on which the contracts depend.” The report adds that the nature of the current deal with EDF restricts the ability of future parliaments to influence policy.

The European Commission (EC) is currently reviewing the UK government’s plans to subsidise the construction of a new nuclear plant at Hinkley Point in Somerset.

The EC has said that it “doubts” that the nuclear project suffers from a genuine market failure and so is investigating the use of state aid to support it. The report notes that: “The EC is worried that the government’s claim that new nuclear power is necessary ‘to keep the lights on’ makes no sense since the new stations will not be ready until 2023 whereas problems with continuity of supply will come to a head before 2020, and that the amount of support is way beyond the cost to society of even the most costly power outages that might happen in that time. In addition, the government’s own estimates are that nuclear power would become commercially viable by 2027 anyway, so that the only benefit being secured is a four year acceleration of nuclear deployment.”

The solar industry has expressed frustration at the proposed deal with EDF, claiming that the UK solar industry will be able to beat nuclear on its headline strike price by 2018, well before the planned completion of Hinkley in 2023.