FACTBOX-Britain's guaranteed nuclear power price
LONDON, Oct 21 (Reuters) - The British government signed a deal with France's EDF on Monday that guarantees a minimum price of up to 92.50 pounds ($150) per megawatt hour for electricity produced from a new nuclear power plant.
The strike price forms part of an electricity market reform package expected to enter into law next year.
The government announced in July the draft strike prices agreed for renewable energy technologies such as offshore wind and hydro electric plants, which range from 65 to 305 pounds per megawatt-hour (MWh).
Less mature technologies, such as wind and tidal power, are given higher support than more competitive types of power generation.
WHAT IS A STRIKE PRICE?
The strike price is designed to be the minimum electricity price which low-carbon projects will receive for the power they produce.
It is set by the government for most low-carbon projects, but will be agreed between the government and the individual project developers for nuclear, large scale hydro and tidal barrage schemes.
Each price is based on expectations for future power prices and calculations of the price needed to help certain technologies compete in the wholesale market.
A guaranteed power price means that plant developers can be certain about future returns on their investments, reducing their commercial risks.
HOW DOES A STRIKE PRICE WORK?
The strike price is agreed within a contract for difference (CfD) which foresees that a low-carbon power generator receives a financial top-up when the wholesale price falls below the strike price and repays the so-called CfD counterparty, a government market body, when the price rises above the agreed level.
THE HINKLEY POINT STRIKE PRICE
The government agreed with EDF to set the Hinkley Point strike price at 89.50 pounds per MWh on the condition that the French company goes ahead with its second new nuclear plant at Sizewell in eastern England.
If the Sizewell project does not go ahead, the Hinkley Point strike price will rise to 92.50 pounds.
WHAT IS THE IMPACT ON HOUSEHOLD BILLS?
When the generator repays the central market body for values in excess of the strike price, the body returns the money to electricity suppliers who can in turn decide to return it to their consumers.
On the other hand, when the wholesale price falls below the strike price, the body will repay the generator using money that has been charged on top of consumer bills.
The government said this mechanism will reduce consumer bills in 2030 by around 75 pounds per year compared with a scenario where no new plants are built.
($1 = 0.6178 British pounds)
(Editing by Giles Elgood)