The government is pressing ahead, in the face of growing difficulties, with its effort to build new nuclear power stations in Britain. So far, it has failed to come clean about what this will actually cost British businesses and householders. Among the several ways in which it is attempting to subsidise new nuclear power stations is the contract for difference (CfD) mechanism proposed in the Energy Bill.

Steve Thomas, an academic at Greenwich University, has come up with a handy little formula for calculating what it will cost just for this instrument to get EDF to invest in Hinkley and Sizewell.

C (capacity in gigawatts) x 1000 (converts gigawatts to megawatts) x S (difference between wholesale price and strike price in CfD) x 8760 (hours in a year) x 0.8 (plant availability).

For Hinkley and Sizewell, using the necessary strike price calculated by Peter Atherton of Citi (£166/MWh), compared to a current wholesale price of £51/MWh, and assuming the CfD is for 30 years and the plant runs for 80% of the time the formula then gives:

6.4*1000*30*115*8760*0.8 = £155 billion.

To be very clear, the total cost to British businesses and householders of a CfD for 30 years that will be necessary to induce EDF to order Hinkley and Sizewell will be £155 billion. This calculation assumes that the reactors will be built on time and to budget, a feat which has so far eluded Areva, EDF’s reactor supplier. If they are not, it will rise.

That is an addition to electricity prices of at least £5.2 billion/year.