Britain on Monday paved the way for its first nuclear plant in a generation, to be built by state-owned foreign firms, underlining the government's controversial commitment to atomic power.

The coalition government signed a 16-billion pounds ($26-billion, 18.9-billion-euro) deal with French energy giant EDF to build two reactors at Hinkley Point C, southwestern England, to meet Britain's future energy needs.

Also involved in the contract are French group Areva -- the world's leading nuclear power company -- and Chinese nuclear firms CGN and CNNC.

Energy Secretary Ed Davey said the deal, subject to European Union approval, was necessary as Britain faced a "looming energy crisis" in the next decade owing to years of under-investment.

Britain has placed nuclear power at the heart of its low-carbon energy policy, in stark contrast to Europe's biggest economy Germany, which vowed to phase it out in the wake of Japan's 2011 Fukushima disaster.

The British deal could meanwhile potentially push domestic energy prices up even higher according to experts, and risks stoking a political row over soaring living costs in Britain.

The project is aimed at providing Britain with secure and reliable low-carbon electricity, and will create thousands of jobs, the government said.

"Today we have a deal for the first nuclear power station in a generation to be built in Britain," said Prime Minister David Cameron, who heads a Conservative-Liberal Democrat coalition government.

"This also marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer-term security of supply."

EDF Group will have a 45-50 percent stake, while China General Nuclear (CGN) and China National Nuclear Corporation (CNNC) will together take a 30-40 percent stake. Areva will take a 10-percent holding.

The French presidency hailed the agreement as a "historic investment", after a telephone conversation between Francois Hollande and Cameron.

The accord guarantees an agreed price for the electricity over 35 years at 92.50 per pounds megawatt hour plus inflation -- which is about double the prevailing market rate in Britain.

This price could fall to 89.50 pounds per megawatt hour, if EDF's plans for two nuclear reactors in Sizewell, on England's east coast, win the green light.

Crucially, however, the government will pay the difference if the market price for electricity falls underneath this guaranteed level -- and the money will be funded by levies on domestic energy bills.

Opposition to deal amid nuclear debate

British anti-nuclear campaigners slammed the deal and urged the government to focus on renewable sources like wind and solar power.

"Instead of subsidising nuclear energy production, the government should be investing more in safe, clean and affordable renewable energy," said Kate Hudson, general secretary of the Campaign for Nuclear Disarmament (CND).

Safety has been a huge concern for Japan's nuclear industry since a massive earthquake and tsunami ravaged the country's northeast coast and triggered a meltdown at the Fukushima nuclear power plant in March 2011.

Britain has 16 nuclear reactors which provide about 20 percent of the country's energy needs.

At full capacity, the two new reactors will be able to produce seven percent of Britain's electricity, enough to power five million homes. A new power station plans to be operational by 2023.

In a separate development on Monday, npower, a unit of German power giant RWE, became the third major energy supplier to hike domestic prices in Britain.

In recent weeks, SSE and British Gas also raised their prices ahead of the winter, when energy demand hits a peak.

Ed Miliband, leader of the opposition Labour party, has vowed to freeze domestic energy prices for 20 months if he wins the next general election in 2015.