There is no doubt that we need electricity, we just don’t need the electricity from Hinkley at enormous cost. It’s very unreliable, we are not sure that this type of reactor will actually work. There are much better ways of achieving the security of supply we need at an affordable cost, and in a low carbon way, without going to this sort of trouble. The National Infrastructure Commission pointed out that if we did a serious program of demand response we could get the equivalent of four Hinkleys much faster and much cheaper than we can get Hinkley.
It is going to get worse. The Secretary of State tomorrow will sign an agreement which means that if we discover this really is unsupportable economically over the next few years, we will still have to pay EDF for the value of the contract that we are proposing with them. We are talking 37 billion of subsidy. The cost of construction is 18 billion, but the contract that we will sign tomorrow commits us to signing an agreement for the electricity that will basically require, based on current wholesale prices, about 37 billion.
We can achieve all of the low carbon electricity we need, and we can achieve that at much lower cost. Offshore windmills are now being built in the North Sea at two thirds of the price of wholesale electricity that we are offering EDF. McKinsey did a study just a while back which showed that if we just went ahead with the kinds of improvements in energy efficiency that we are already getting we could avoid six Hinkleys. The National Infrastructure Commission has said that there are things that we can do to manage our generating assets more effectively than we do now, that would save us four Hinkleys. All of these things will happen faster, more reliably and cheaper than going ahead with this, as everybody has said, very risky project.
The idea of baseload (the lowest amount you will always need to supply) is an outdated concept. We have variable demand and variable supply, and the real trick, which we which we can now do much better than we were able to do in the past, is to manage our generating assets so that you can match supply and demand much more effectively. This is why baseload is an outdated concept; it doesn’t take into account technology developments that have taken place in the last few years.