Monday, 2 December 2013

Chinese demand right to build UK power plants as price for Hinkley C

The still tentative nature of the Hinkley C 'deal' is being emphasised by reports that the Chinese government are demanding a cast-iron commitment from the UK Government to let them build Chinese owned power plant in the UK. If the UK Government agree, this will be yet another step down the slippery slope towards paying a higher and higher price for the sake of keeping face on its badly thought-out new nuclear build programme.


What could be next? We already know from answers to Parliamentary Questions that the Government have not ruled out altering the strike price, which means that future prices could be increased as costs overrun. We know that the Government will be hooked up to payout on its agreement to give loan guarantees if the plant does not start generating on time and loan repayments fall due with no income stream to pay them.

However we are unlikely to know for sure how much the plant will cost and how much the Government will be paying for many years yet. Indeed the whole project could be delayed for a long time by haggling at the European Commission. Their permission is required for state aid if the Hinkley deal is to go ahead, and that permission could be a long time coming. The EU law says that the UK Government can only formally demand a response after 18 months, after which the Commission is duty-bound to give a ruling within a further two months. In fact the 18 months falls dues around 3 weeks or so before the 2015 General Election. This means that it may well be up to the next Government to take a final decision over Hinkley C. Negotiations at the EU may bring demands for a revision of the deal, something that the UK Government will resist since it is likely to unravel if the terms are made tougher for the developers.

The leadership of the Government, guided I am told through the cabinet office, is determined, despite doubts in the Treasury, to force through the nuclear deal in order to satisfy critics of the Government's credibility on its energy policies. But in reality nuclear power does nothing to stop blackouts. This is because putting more nuclear online simply leads to the same amount of planned gas generating capacity being cancelled. Also it makes balancing the grid with a large proportion of renewable energy more difficult since nuclear power has to be kept running as much of the time as possible. Nuclear power saves carbon emissions, but so do renewables of course, support for which is set to start tapering off from 2017 under the Government plans.

It does seem implausible that the Government would carry on funding a sizable renewable energy programme at the same time as a nuclear one. Otherwise, with three twin reactors planned for 2030, electricity prices will rise by over 10 per cent with both a renewables and a nuclear programme, or just 7 per cent with just new nuclear being funded (with the nuclear prices rises lasting some 35 years, much longer than the incentives for renewables).

So the Government's price for its nuclear programme will include hefty price rises for an increasing size of the UK electricity market being owned by the Chinese Government.

No comments:

Post a Comment