Monday, 17 September 2012

British nuclear supporters issue surrender notice

Supporters of British nuclear power have effectively surrendered in their efforts to secure a new programme of building nuclear power stations. Sir William McAlpine, a member of the McAlpine family which founded the major construction company of that name, has written to the British Chancellor, George Osborne, to ask that Government proposals to subsidise nuclear power should, in effect, be abandoned. He has written as the Chair of the 'Supporters of Nuclear Energy' (SONE) group, which provides much of the lobbying inspiration for nuclear power in the UK. This is also a very significant move since the McAlpine group are among the companies who are most likely to benefit from contracts given to build new nuclear power stations.

The Daily Telegraph says that:
'Sir Williams tells the Chancellor that neither the consumer nor businesses “should have to pay through the nose” for a subsidy system “which seems to have very little justification.” '

This is in reference to what is reported to be EDF's demands for a high 'strike price' that would be well above £100 per MWh (as reported previously in this blog). It seems SONE are advocating direct financing the construction of the nuclear power stations by Government. Direct financial support from Government, involving also, as this logically means, the 'underwriting of construction costs' is not going to happen outside of re-nationalisation of at least a part of the electricity industry. This is very, very, unlikely. Hence nuclear industry supporters are, in effect, running up the white flag in the struggle to get a new fleet of nuclear power stations built. This looks like an attempt to organise a dignified withdrawal in the face of overwhelming odds. However, really, the effect is surrender under cover of an attempt to save face.

The fact is that the Government set up a price competition between nuclear, various forms of renewable energy, and carbon capture and storage,  for who could offer the lower strike price at which each unit of 'low carbon' electricity production would be sold. Nuclear power has lost this battle, as discussed in earlier blogs. Its supporters have reverted to advocating the only historical precedent for building nuclear power stations - namely that somebody (other than private investors) has to guarantee to pay the construction costs. That is why SONE wants their power stations to be directly funded by the Government. But this is politically, and in very practical business terms, impossible in the UK and the EU's increasingly liberalised energy markets.

It would certainly look bizarre if the Government's plans to reduce subsidies for wind and solar pv were implemented at the same time as a much higher strike price for nuclear power - very bizarre in view of the fact that nuclear power is much, much, less popular as reported in opinion polls compared to the renewable fuels. Government plans to reduce subsidies for both onshore wind and solar pv farms by 2013-2015 to around £95 per MWh  have already been announced, with the likelihood that under the Government's plans for its own version of feed-in tariffs onshore wind will not be given more than around £80 per MWh from 2017. Even offshore wind's costs for 15-20 year contracts have, according to Government aspirations, to be brought down to £100 per MWh by 2020. So what political hope is there for EDF to be given a lot more than £100 per MWh for a contract of 25 or 30 or even 50 years in length? None whatsoever!

It is not surprising that SONE have now recognised political reality.

However, the effective demise of the British nuclear construction programme will probably not be recognised by the Government itself in its public relations output. This is partly because it wants to help keep a few consultants in their jobs for a bit longer. However, this refusal to admit the collapse of the nuclear programme  is also because the Government would have to admit that either it has to massively increase investment in renewable energy and energy efficiency or abandon any remaining chance of getting at all close to the UK's carbon reduction plan.

For its part, EDF has something of an interest in continuing to maintain that its nuclear plans are still viable. One interest is that if there is little chance of new nuclear power stations, then this questions the Government's commitments to a floor price for carbon. In fact this floor price does very little to encourage new low carbon capacity (because there is no guarantee that the price will continue for long enough) but it does give a lot of money to EDF's subsidiary, British Energy, who own Britain's old nuclear power stations - and the Government has announced that these power stations are likely to have their operational lives extended. The other gainer from the carbon floor price is the Government itself. Perversely, the more gas is used to generate electricity, and the less renewable energy is generated, then the more the Treasury receives in tax revenue under the Government's carbon floor price scheme. The Treasury, of course, is these days enthusiastically promoting natural gas power stations to the extent that it is giving large tax breaks to oil and gas companies to encourage more rapid depletion of British gasfields and is backing proposals to give 'capacity credit' subsidies to gas power station operators in the Government's Energy Bill.

Oh yes, the Government's Energy Bill.....this is coming to Parliament soon. Watch this space.

See the press report on :