The chancellor George Osborne will sign a deal in China next week allowing a state-owned Chinese company to build nuclear power stations in the UK and have its reactor design approved by British regulators.
Under the deal, the government will give its backing to Chinese General Nuclear Power Group entering EDF Energy’s planned new nuclear plant at Hinkley Point in Somerset as a co-investor.
The memorandum of understanding will also see Britain backing CGN’s plans to build a nuclear reactor in the UK and play a “supporting role” in operating it, according to people familiar with the matter.
That could ring alarm bells with some MPs, unions and regulators, amid concerns about the robustness of China’s nuclear safeguards.
The government will also express its support for China getting its nuclear technology through the UK regulatory approval process, known as the generic design assessment. It is unclear at this stage whether the reactor design will be CGN’s, or that of another Chinese nuclear group. A person close to the talks said UK officials have asked Beijing to select just one company’s technology for a UK rollout.
Chinese involvement is seen as essential if the £14bn Hinkley Point project – a centrepiece of government ambitions for a low-carbon economy – is to go ahead.
The shift to non-fossil-fuel energy such as nuclear is seen as crucial if Britain is to meet its binding targets for cutting carbon emissions and keep the lights on.
However, given the sensitivities surrounding nuclear power, the idea of allowing a Chinese state-backed company to play such a prominent role in the UK’s nuclear new build programme is likely to raise a welter of national security concerns
Ministers have been locked in talks with EDF for months over the “strike price”, the guaranteed price at which EDF will be able to sell the electricity it generates at Hinkley Point. Sources say the two sides are inching close to an agreement based on a figure of about £90-£92 per megawatt hour. That would be almost twice the present wholesale price of electricity.
The deal, to be signed in China, will involve not only CGN but also China National Nuclear Corporation, a rival state-owned nuclear group, according to people familiar with the matter.
Vincent de Rivaz, chief executive of EDF Energy, will be part of a delegation of business leaders accompanying Mr Osborne on his trip to China.
EDF also has plans to build a new nuclear plant at Sizewell in Suffolk. Once it has planning permission to build reactors there, it will be required to release another site it owns, Bradwell in Essex. A person familiar with the matter said EDF could sell the Bradwell site to CGN, for the construction of its own reactor.
Talks about Hinkley Point come amid continuing uncertainty over another nuclear project, NuGen. Westinghouse, the nuclear manufacturer that is owned by Toshiba of Japan, is close to buying a large stake in the NuGen consortium, a joint venture between Spain’s Iberdrola and France’s GDF Suez.
A second person close to the situation said UK officials want a Chinese nuclear group to join Toshiba, in order to ensure it has enough funding to proceed with the construction of a plant. Both CNNC and another Chinese state-owned company, SNPTC, are believed to be potential backers.