Political (and economic) suicide if UK government gives a blank cheque to the nuclear industry
The energy consumer would be funding such a blank cheque, this would effectively mean that nuclear power costs were being nationalized and billions of pounds handed over to a multinational company in an unlimited commitment.
this time the cost comparison with other options seems painfully clear. Nuclear is more expensive than renewables – now – never mind in the future as renewable costs decline.
Will the Government Write a Blank Cheque for Nuclear Construction? http://www.huffingtonpost.co.uk/david-toke/will-government-write-a-blank-cheque-for-nuclear-construction_b_1979027.html?just_reloaded=1 18/10/2012 David Toke Senior Lecturer of Energy Policy at the University of Birmingham The government’s plans for new nuclear power stations are on the rocks, and it would require desperate measures to save them.
Some evidence of the desperation emerged when John Hayes, the recently appointed minister for energy said, in an interview with the Daily Telegraph, that he is ‘mulling over’ the possibility of underwriting plans for building new nuclear power stations. He appeared to be referring to the last remaining ‘live’ proposal by EDF’s for a 3.2 GW nuclear power plant at Hinkley C in Somerset.
Mr Hayes would be well advised not to sip from the poisoned chalice (underwriting) he has been presented by nuclear supporters via the Daily Telegraph. Underwriting means telling EDF, in effect, that the government would foot whatever bill it took to build the power plant. Nobody knows for sure how much that would be given than similar plants still being
built in Finland and France are now terribly over budget and a long time behind schedule. Underwriting would blast a hole through specific Conservative pre-election commitments not to underwrite nuclear power construction, not to mention Ed Davey’s pronouncements about there being ‘no blank cheque’ for nuclear.
Underwriting would make a complete nonsense of any notion of nuclear power being competitive with renewable energy sources such as wind power and solar power which certainly are not in receipt of ‘underwriting’ commitments.
The energy consumer would be funding such a blank cheque, this would effectively mean that nuclear power costs were being nationalized and billions of pounds handed over to a multinational company in an unlimited commitment. Despite the long history of the financial
uncompetitiveness of nuclear power we still see assertions by the
engineering establishment that it is cheap, cheaper than renewables,
and so on. This is always based on the notion that the next design
will be much cheaper than the last one. It never is – on the contrary,
the trend in costs seems to be upwards. Banks refuse to invest in new
nuclear power stations without the loans being underwritten. In
theory, EDF can borrow money off the markets to fund Hinkley C. The
problem is that EDF shareholders would take the risk of falls in
dividends and share prices. Credit ratings agencies will not be amused
if EDF’s debt-to-earnings ratios rise and seem imperiled by highly
uncertain nuclear investments in the liberalized British electricity
Although, in the past, the costs of nuclear power stations have been
sunk in the accounts of nationalized industries and the consumers made
to pay the costs through being beholden to monopoly suppliers, this time the cost comparison with other options seems painfully clear. Nuclear is more expensive than renewables – now – never mind in the future as renewable costs decline. The government, in their
Electricity Market Reform, have set up what is in effect a competition
to deliver low carbon sources at the cheapest ‘strike price’ – that is
a price that the electricity consumer would pay for each unit of ‘low
carbon’ electricity generated. The trouble for nuclear power is that
when it comes to the crunch they need rather higher amounts set as a
strike price than what the government is willing to set to pay for
onshore wind power and even allegedly expensive offshore wind power
and solar power.
Anti-windfarm groups are fond of attacking the subsidies going to
onshore wind, but the price needed to be given to onshore wind
developers will be much, much, less than what would have to be paid to
EDF for new nuclear power. Public support for paying more to nuclear
than renewables for producing a given amount of electricity is likely
be very low indeed. So, nuclear supporters are hoping for a fix that
avoids the spectacle of being declared too expensive. That is where
underwriting comes in. But, politically, (as well as cost-wise for the
consumer) that sinks like a lead balloon, no matter how the brilliant
nuclear PR spinners want to pitch such a proposition. It is not as if
the UK needs any new nuclear power stations to supply electricity, for
which demand has fallen by 8% since 2008. This is regardless of
whether you look at a conventional picture of the fact that gas power
stations can be built much quicker than nuclear ones or, preferably,
at green ones where renewables, smart grids, energy efficiency and
other techniques contribute towards decarbonisation of the economy.
What is my bet on what happens? Well, the government could take the
easier option, which is simply to blame EDF for not coming up with the
goods. In return, EDF could blame the government for not offering them
enough ‘certainty’ on future electricity payments. Regrettably,
meanwhile attention has been drawn away from the lack of support
proposed for renewable energy. The terrible irony of the government’s
proposals is that the renewable energy support mechanisms proposed in
the Energy Bill have been hamstrung by the political drive to give
priority to a nuclear power building programme that may never actually
Dr Toke is the author of a report Fixing Renewables, a new report
published by Friends of the Earth and he is also Senior Lecturer in
Energy Policy at the University of Birmingham. He is also a member of
the Green Party of England and Wales.
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