The Government, via Energy Minister John Hayes, is considering a major u-turn in nuclear power policy as it considers giving a blank cheque to nuclear constructors. This is what is involved in 'underwriting' the risks faced by nuclear constructors, and it will almost inevitably lead to secrecy and lies about what consumers will pay for building Hinkley C. It means that the Government will guarantee to pay for overruns in construction costs incurred by EDF in building Hinkley C. Such options were specifically ruled out, not only by the Conservative Party immediately prior to the 2010 General Election, but also by Ed Davey (Secretary of State at DECC) himself in May.
A commitment to 'underwrite' nuclear power costs would almost inevitably mean either the Government keeping secret the details of how much it might cost the consumer to pay for pay for Hinkley C, or providing misleading statements that would amount to a lie. In the process nuclear power would be given immensely better incentives than renewable energy projects, who would receive no underwriting of costs and whose (transparent) payments would be wrongly held up as costing more than 'cheap' nuclear. I will explain all of this. First the details of the u-turn.
The Daily Telegraph reports, on October 6th, that: 'The Government is considering ways of underwriting risk in the construction of new UK nuclear plants, the energy minister John Hayes has said.' See
A commitment to 'underwrite' nuclear power costs would almost inevitably mean either the Government keeping secret the details of how much it might cost the consumer to pay for pay for Hinkley C, or providing misleading statements that would amount to a lie. In the process nuclear power would be given immensely better incentives than renewable energy projects, who would receive no underwriting of costs and whose (transparent) payments would be wrongly held up as costing more than 'cheap' nuclear. I will explain all of this. First the details of the u-turn.
The Daily Telegraph reports, on October 6th, that: 'The Government is considering ways of underwriting risk in the construction of new UK nuclear plants, the energy minister John Hayes has said.' See
Underwriting nuclear risks would be in direct contradiction to what the Conservative Party said in their pre-election energy policy statement in March 2010, called 'Rebuilding Security – Conservative Energy Policy in an Uncertain World'. The Conservatives said: ‘we agree with the nuclear industry that taxpayer and consumer subsidies should not and will not be provided – in particular there must be no public underwriting of construction cost overruns’. Note the statement: 'in particular there must be no public underwriting of construction cost overruns'. Whatever the interpretation off the term 'subsidy', there is not much wriggle-room there! Mr Hayes, which part of the phrase 'there will be no public underwriting of construction cost overruns' don't you understand? See the page 18 of the pdf document at: http://www.conservatives.com/News/News_stories/2010/03/Conservatives_propose_radical_overhaul_of_Britains_energy_policy.aspx - if this (now) embarrassing document is still on the web by the time you get to it!
But it gets worse for the Government's record. Ed Davey, in a moment of clarity, declared on May 22nd this year, just as the Energy Bill was published, that: "There will be no blank cheque for nuclear - unless they are price competitive, nuclear projects will not go ahead." See http://www.bbc.co.uk/news/business-18144412. I was on BBC Radio 4 that morning and commented that there would be no new nuclear built unless there was a blank cheque issued for them, and then Ed says, 'no blank cheque' - I thought well, 'no nuclear then'. But what a silly fool I am for believing what the Secretary of State says - or at least not understanding that at the end of the day he would have to do as he is told by Sir William McAlpine, Berhard Ingham and their 'Sir Humphrey' civil service friends in Whitehall.
Of course if nuclear costs are underwritten they are hardly 'competitive' since there is no competition! Jeremy Leggett's Solar Century will not be be told by the Government that however much their projects will cost, the electricity consumers will foot the bill. It is as if the nuclear developers are acting like a nationalised industry, except that they (EDF and whoever else they attract into this honeypot) get to take home the profits at the end of it. If you thought the way railway franchises are issued is bad, take a look at the concept of 'underwriting' nuclear costs. At least the Government do not guarantee to pay the costs of building the trains! Of course the droves of solar power companies who are going bust are not getting their costs underwritten. As things stand at the moment, independent wind power developers will not even be able to get decent power purchase contracts, and they definitely will not get their costs underwritten! Hard luck Fred Olsen Renewables, Ecotricity, Renewable Energy Systems, and so on.
So how would a policy of 'underwriting' nuclear construction costs fit in with with the Energy Bill? Well, it would go something like this. The Government would announce that a special 'investment' instrument would be issued to EDF for Hinkley C, the terms of which are 'commercially confidential'. After some searching questions the Government would most likely come out with some statement that the (commercially confidential) estimates suggest a nuclear 'strike price' of £70 per MWh, conveniently, just under what the Government will pay to onshore windfarms organised by the major electricity suppliers. In fact though it will turn out, years later that, well shucks, you would never have guessed, the estimates were underestimates and that the consumer will just have to shell out over £100 per MWh.
Of course the consumers should count themselves lucky here because if EDF did not have their costs underwritten, and had a level financial playing field with renewables, then the cost would be more like the £165 per MWh, of which we have heard previous mention. That is because they would have to raise money off the markets, just like renewable energy developers. Except that the renewable projects would cost the consumer a lot less than the nuclear projects in £s per MWh. It is called competition, but this means that nuclear will lose out to renewables, and that cannot possibly be allowed. Instead we will have that euphemism 'underwriting' which stands for 'blank cheque'.
But, to get back to the point, when the Government 'underwrites' the cost of nuclear power plant, the Government would end up implying a price to be paid by electricity consumers that would be much lower than the electricity consumers ultimately ended up paying. It is called lying. You think I'm the one fibbing? Well, just look at what has happened in the past....Magnox, Advanced Gas Cooled reactors, Sizewell B.........Lies, lies, lies...........The beauty of it is, by the time the power stations actually get built, the ministers involved are long gone.
But do not worry, the Renewable Energy Foundation (the ones who do not like windfarms) will still be able to criticise the financing of windfarms because the information about this is transparent and truthful, and this is their democratic right. This is a stark contrast with nuclear power of course. Because if the Government told the truth about nuclear power, consumers would never, ever, allow it to be built in the first place.
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