Sunday, 23 February 2014

Does Caroline Flint need lessons in arithmetic over nuclear and renewable costs?

In a remarkable piece of double-think Caroline Flint, Labour's energy spokesperson, has declared that nuclear power in the shape of Hinkley C is 'cheaper than other forms of renewable energy'. This assertion flies in the face of the numbers. She rules out the possibility of a Labour Government renegotiating the Hinkley C contract.


For the moment, let us leave a critique of the extremely tendentious re-designation of nuclear power as a 'renewable' source of energy for another time. Let us look at the numbers. The simple mathematics of government incentives for nuclear and other renewables demonstrates that Caroline Flint's logic flies in the face of reality.

Hinkley C has a contract for 35 years, with loan guarantees for the bulk of the investment, at a strike price of £92.50. This price will be increased in line with the the CPI measure of inflation so that by the time Hinkley C starts generating (they say in 2023) the strike price will be well over £100 per MWh. Meanwhile onshore wind is actually being given a lower strike price than this from 2016 (£90 per MWh) with only a 15 year year contract and no loan guarantees. If Hinkley C didn't receive the loan guarantees, the required strike price for nuclear would be guargantuan, and if wind power got the loan guarantees and a longer contract during which the strike price is payable for units of electricity generated then the amount of money required for the wind power would be a lot less than £90 per MWh. And in reality the cost of offshore wind would be competitive with nuclear as well if these other support measures are taken into account.

Then there is solar power, which will receive £100 per MWh from 2018, and this will be less than Hinkley C, especially when the longer contract and loan guarantee support for Hinkley C (which solar doesn't get) are taken into account. Indeed the Solar Trade Association asked for £91 per MWh from 2018 for large solar arrays on account of continued falling prices. Continued falling prices, note, not continued upward prices as in the case of nuclear power!

See See

UK welfare state gives poor little more purchasing power than the US welfare program

I don't know about you, but I grew up under a belief that the British welfare state protected its population from the worst excesses of poverty, especially hunger, much better than the less caring US state. But the figures now suggest that this just ain't so true anymore. Moreover as hunger stalks major sections of the US population this scourge increasingly penetrates more and more sections of British society. Essentially this means that the poor in the UK will, in terms of per capita welfare spending, only have around 14 per cent less purchasing power than a poor person in the USA. This calculation excludes spending on pensions.

But things are threatening to become a whole lot worse in the UK for the poor. The Conservatives are pledging to roll back welfare budgets by further massive amounts. See George Osborne's 'pledges' on

This means the UK is surging towards a race to the bottom on protecting the poor from starvation with the USA. And things are pretty bad there already. According to Wikmipedia : 'Research from the United States Department of Agriculture found that 14.9% of American households were food insecure during 2011 'By 2011, a survey found that among 20 economies recognized as advanced by the International Monetary Fund and for which comparative rankings for food security were available, the U.S. was joint worst'

Meanwhile, the better off in the UK (and the USA) don't want to pay higher taxes. Do they prefer people to starve?

You arrive at the comparison between US and UK spending if you compare US and UK per capita welfare spending (minus pensions) and convert the British figure into a measure of its actual purchasing power using OECD Purchasing Power Parity data. See links to data tables below. Population figures used to derive per capita figures were based on 2011 estimates of population.

2014 UK spending on welfare items: family and children, unemployment, housing and social exclusion, £81.5 billion, in $PPP equivalent, $117.5, divided by 63.2 million population gives $1860 per person

2014 US spending on welfare items: family and children, unemployment, housing and social exclusion, $497.4 billion, divided by 312 million gives $1594 per person

For an insight into some facts that popular prejudices about welfare spending obscures, see an article in the Guardian:

Tuesday, 18 February 2014

Will Miliband's price freeze backfire?

Politicians feel driven to ride populist tigers, but the simplistic solutions that such adventures often involve lead nowhere at best - or worse. The same may be the case with Labour's apparently bold energy policy to freeze energy prices and reform the electricity market. Now I don't want to impugn on Ed Miliband's motives here - indeed his motives whilst Secretary of State for Climate Change (2008-2010) were as close as it gets for Government (not that close!) to the policies preferred in this blog. He pushed through the proposals for the small feed-in tariff, and contrary to what usually happens, rejected a lot of the blandishments of the Big Six who wanted to limit the scheme as much as possible. He also tried to reform the market rules to increase competition to help energy consumers. But, as has tended to happen to most if not all of the efforts to change the electricity markets since privatisation, the Big Six have always managed to use changes, or secure compromises, in the legislative proposals to buttress their position.

Now independent consultants (who work in the independent sector) are warning that Ed Miliband's proposed prize freeze, as popular as it may be, will do no good in practice, and may backfire especially for the independent suppliers that presumably this drive is supposed to benefit in the name of increasing competition. Put simply, the Big Six are in a better position to manage the situation. See

Labour's proposals to separate the energy supply and energy generation markets are good in theory. In theory this could help to give an incentive to electricity suppliers to help balance renewable energy suppliers by offering incentives to consumers to consume when there is a lot of wind and solar power and consume less fossil fuels at other times. Those incentives do not exist in a market where the suppliers, as at present, are run by the generators and so will want to supply more energy from their power stations rather than encourage consumers to consume less at certain times. But in practice, as in the past, when it comes to shaping the new rules, the Big Six will quite probably squeeze through 'concessions' to allow them to carry on promoting power station production in preference to balancing, or energy efficiency for that matter.

Indeed, Labour's proposals seem to reduce most things to what passes as populism for the elites - promoting neoliberal soundbites about how it is that lack of competition is the problem. But pure competition is an elusive property guarded jealously by economists and their squiggles in a fantasy world, and in the real world 'competition' is something that is dominated and defined by existing institutions of myriad sorts. The Big Six who know how their businesses work are able to use and get the rules that favour their interests and their notion of competition will favour them. They will intervene with the civil servants and politicians (who do not, as a rule, know the business very well, especially its arcane complexity) to ensure that any proposals are tempered so as to maintain their interests in one way or another.

So when it comes to solving problems that can be solved (as opposed to making gas supplies cheap, which is almost solely dependent on international factors), Labour's narrative relies on the usual notions of improving 'competition'. Its solution to the problem of independent generators not having more contracts is to make the electricity markets more transparent and 'competitive'. In other words, the end result will be to allow the Big companies to continue to use the rules to their advantage.

A truly simple solution would be for the Government to ensure that independent generators had access to feed-in tariffs, much on the same basis as the small feed-in tariff operates, or some model as has been proposed like the 'Green Power Auction Market' (GPAM) suggested last year. That means taking action that increases the institutional clout of the independents so that they get contracts as of right, not proposing more competition that ends up being hijacked in the interests of the establishment.

So what is the solution? Well of course legislation is important, but as the campaign about small feed-in tariffs in 2007-2008 demonstrated, it is bottom up action by the grass roots to get alternative energy schemes going that will force the politicians to support their interests. So what should we do? Well if you are a councillor, use what powers you can to make developers build to the highest standards according to the 'Code for Sustainable Homes', get your company/organisation to build houses according to the 'Passivhaus' standard, start a community renewable scheme, put a solar panel on your roof etc. The political power of green activists, when they get their act together and ally with nascent or actual existing new energy interests and environmental NGOs such as Friends of the Earth is potentially considerable; in practice rather stronger than the leverage of independent suppliers or generators on their own.

But for the moment we are stuck with populism, whether promises of price freezes to encourage the masses or pleas for more competition to satisfy the elites.

You can read Labour's policy here, which, sadly, offers little hope that the diversion of funds from renewables to nuclear under EMR will be changed.