In order to
persuade the French company EDF to build Britain’s next nuclear power station,
the UK government has agreed to guarantee the price of the electricity generated
will be double today’s prices. Commercial providers require a robust business
case to be able to mobilise the capital required and the government has decided
that it wants additional nuclear capacity. This is, therefore, a logical outcome,
but logical does not mean it is sensible.
First, this
is not UK technology built by UK engineers and funded by UK investors. The
reactor will be built at Hinkley Point on the Somerset coast by a French company
using Chinese money. For something as sensitive as a nuclear reactor it should be
deeply worrying that we rely on France and China. I am not accusing either our
close allies France or our distant rivals China of anything other than purely commercial
motives, but that is the problem. This is safety-critical infrastructure with
long-term liabilities. It has become normal for commercial operators to stick
with a project whilst it is delivering bottom-line returns and walk away when
the numbers no longer look attractive. Whatever guarantees the UK government might
seek, the ability of corporations to fold their operations when they are no
longer commercially viable is unstoppable. EDF and Chinese investors will put
into the project a huge investment and draw out of it a huge return, then, walk
away. At the end of the reactor’s life there will be a liability for many
generations into the future long after we have used the energy, and long after
the French and Chinese have left.
Second, this
long-term guarantee over energy prices should be offered to other low-carbon
energy providers to see what proposals they could come up with. The doubling of
energy prices is exactly the incentive that would send the renewable energy
industry into overdrive. There are problems to address such as intermittency of
supply but these are not show-stoppers, just great challenges for the engineers
to solve. Instead of a special case to ensure we have nuclear power, nuclear
should be fighting its case against other low-carbon solutions.
Third, the government
would be better employed winning the political case for higher energy prices ‒ which
is the realistic way forward ‒ free of government subsidy. Business is a very
capable agent for change but not if its hands are tied to by politicians using
smoke and mirrors to hide the unpopular reality that a low-carbon future is one
of valuable energy where bills are affordable because we become very careful
with what we use. Forward-looking government officials can see that moving
quickly with raising taxes on fossil fuel to drive the price of energy from
these sources to the levels required is sensible economics. This could raise
cash to invest in low-carbon public infrastructure or their political masters
could decide to use this income stream to reduce other taxes to make it politically
more palatable.
Politicians
are paralysed with fear that to tell the truth will cost them votes so we end
up with dangerous delaying tactics such as this special case for nuclear power.
Sometimes we manage to strike a cross-party
consensus on issues of prime national interest; has the time come to do this for
the future of UK energy supplies?
