See my submission to the House of Commons Environmental Audit Committee (EAC) Inquiry on Energy Subsidies.
Go to: http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/inquiries/parliament-2010/energy-subsidies-in-the-uk/
You will have to press 'view all' to see my submission (David Toke)
The summary of the submission reads:
The Government’s claims that similar support is being made available to all electricity generators under Electricity Market Reform is false since better terms are likely to be offered to nuclear developers compared to developers of renewable energy. In particular the Government is likely to award contracts giving nuclear power developers premium price support (subsidies) for much longer periods compared to contracts to be offered to renewable energy developers. Indeed if the demands posed by EDF are met not only will nuclear power developers be given premium price (subsidy) support for more than twice as long as renewable energy developers, but they will also be paid considerably more in ‘headline’ strike prices than onshore wind and they will also be offered loan guarantees which will not be available to renewable energy developers. A Government offer of loan guarantees, whether initially agreed as ‘partial’ or complete, as suggested by the DECC Select Committee, will lead to a blank cheque for nuclear which will crowd out funds for renewables which are much more cost-competitive in practice.
The Government appears to be gearing up to justify giving preferential treatment to nuclear power compared to renewable by pointing to a distinction between ‘baseload’ and ‘intermittent’ low carbon generators. This distinction is irrelevant and arbitrary for the purposes of giving subsidies, and moreover represents an about turn in the policy compared to that given when EMR was introduced at the end of 2010. Then it was argued that novel technologies like offshore wind could receive higher support, not nuclear power which is not a novel technology. This policy change seems to have no other plausible explanation other than nuclear power turning out to be more expensive in reality than was expected according to hopeful projections by nuclear advocates.
Any policy of giving preferential support to nuclear power compared to renewable sources such as wind power is contrary not only to the principles underlying competitive energy markets but is in flagrant breach of EU state aid rules. The EAC should warn against this and urge that the best disposition of low carbon support to achieve good value for the consumer is towards renewable energy rather than nuclear power.
An 'updated' comment:
Following the Government's Budget Review, the Government is announcing its infrastructure plans.The £300 billion plus infrastructure programme seems to be heavily reliant on energy. The trouble is that not much of it will actually be built given the incentives that I guess will be offered. I am not worried about the lack of nuclear power stations of course - money should be instead spent on renewables and energy efficiency. The problem is that it won't be! So what will be built on the supply side? Well there will be some incentives for shale gas, gas powered fired stations (in the capacity mechanism to be set up after the Energy Bill is adopted), just-about-adequate funding of onshore wind power, but probably there will be few offshore wind power projects going ahead with the incentives to be offered under the 'strike prices' for contracts-for-differnces (CfDs). Some solar power will be implemented because of grass roots enthusiasts. But there will be no nuclear power. There are not enough enthusiasts for that and the nuclear industry is essentially waiting for a state-backed blank cheque to pay whatever construction costs are built up. That is incompatible with liberalised electricity markets. The Conservatives like nuclear power, but when it conflicts with the aims of liberalising markets, liberalisation takes precedence.