Wednesday, 31 July 2019

Why Greens need a Progressive Alliance not a Lib-Dem-Green Alliance

As the UK faces the worst political crisis since WW2, with the political and economic dangers of a no-deal Brexit, the last thing pro-EU parties need to do is to actively split the forces trying to combat a no-deal. Yet, I fear, if a Lib-Dem-Green Alliance takes shape which treats Labour as a more or less  equal electoral foe compared to the Conservative and Brexit Parties, it may ensure a Boris Johnson victory. As far as the Green Party is concerned I am very concerned that they are moving towards a position of preferring the Lib Dems to Labour.

If it does become the case that Greens back the Lib Dems ahead of Labour in seats where Labour are the leading contenders with the Tories then I suspect that many Green Party members will wonder why they joined the Green Party in the first place. Even a deal involving Greens stepping aside to back the Lib Dems in contests with Labour could have disastrous impacts on the Green Party.

Now I want to make it clear that 'Remain' is my first option. However, simply having a general alliance between avowed Remain parties at the coming General Election may well play into the hands of what could well turn out to be a soft electoral alliance between Brexit Party supporters and Conservative candidates committed to tolerating 'no-deal'.

There was an effective soft alliance at the 2015 election between many UKIP sympathisers and the Conservatives; indeed it was a successful strategy so that where the Conservatives (committed to holding a referendum). were in close contention with Labour, including many northern seats, UKIP sympathisers often voted tactically for the Conservatives. Cameron won an overall majority. The danger of the current situation is that this general pattern could be repeated (with the Brexit Party replacing UKIP of course), this time in support for 'no deal'.

Ironically, as much as Jo Swinson may declare her dislike of Corbyn,  the main chance of getting another referendum is to get a (almost certainly minority) Government led by Corbyn to organise a three way referendum. This would be about whatever 'deal' he cooked up with the EU, remaining or no-deal. It is fairly transparent nonsense for Lib-Dems to claim that they will refuse to support a minority Corbyn Government (in confidence votes) so long it is following such a path. No, the Labour Party is not going to ditch Corbyn as leader in the week following a General Election at which the Conservatives have lost their majority. It strains credulity to think that the Lib Dems are going to (or even be allowed to) call another election in short notice (it could be very bad news if they did). Given that the Lib Dems cannot do a deal with Bojo, that doesn't leave many other options.

The Lib Dems were willing to be a full coalition partner in a five year austerity Cameron Government, tolerating xenophobic immigration initatives, Hinkley C, shale gas and so on, but are they seriously saying they won't even back a minority Corbyn Government on a short term basis? If they won't back Corbyn what would they do? Have another General Eection quickly so that Bojo could drive us into a no-deal Brexit?  And the Green Party is going to be at their side when this happens?

Having a pure Remain Alliance may work well in a place like Brecon where the Lib Dems are the most credible alternative to a 'no-deal is tolerable' Conservative, but it would be disastrous in a place like Peterborough where the choice was between a 'no-deal' candidate  and Labour. There was, in Peterborough, a wise decision not to have a pure-Remain alliance, but instead, to have an implicit soft tactical voting alliance to support the Labour candidate. That's the pattern we need. If, on the other hand Greens agree to back Lib Dems in battles where lib Dems and Labour are the leading contenders then whatever benefits the Greens get in return, strategically the Greens will then be dismissed as a an adjunct of the Lib Dems, and will lose left wing support.

If as seems very likely, there is a pattern of tactical voting between the Brexit Party and the Conservatives, then there needs to be an equivalent pattern of tactical voting between the anti-no-deal parties. Indeed, there ought to be one anyway, regardless of what Brexit Party voters do or not do. We desperately need to stop a no-deal? Comprendi? That's what I call a Progressive Alliance.

Sunday, 28 July 2019

The bonkers politics (never mind economics) of a no deal Brexit

Much attention has been focussed so far on the extent to which the UK will suffer economically from a no-deal Brexit, but regardless of this to me the most worrysome aspects of this scenario are the political ramifications. That is not to minimise the likely economic consequences - but it is to emphasise how bad in political terms a no-deal scenario is for the UK. I will discuss some of these likely consequences below.

Ironically, support for this no-deal outcome seems to be rising under the argument that it is getting Brexit 'over and done with'. One is tempted to make a comparison with the metaphor of the condemned person about to be executed who wishes it all to be over quickly. The trouble is that this metaphor is erroneous, since, it seems, a lot of people actually believe that it is worth suffering some short term economic pain (greater or lesser) for a what they assume will be a political settlement, at least of sorts.

But there will be no prospect of a political settlement. Indeed all we will get is an acceleration of political breakdowns. Really it is more like a descent into prolonged purgatory,

The Euro-experts, Arnand Menon and others, have pointed out that if there is a no-deal, exactly the same issue of the Irish border will remain to be settled (as well as all the trade issues), with all of the post-Brexit options still to be decided. The only substantive difference is that a political settlement with the EU will be made much more difficult by the political dislocation between the UK and the EU. The Brexiteers victory will be purely symbolic, and very pyrrhic

It should be (but apparently isn't  generally regarded as) an obvious fantasy to believe that if the EU haven't dropped, or amended the backstop and the Withdrawal Agreement, before the 'no-deal', then  they should give way any more afterwards. If we wouldn't give way why would they? Indeed, the more a British Government turns this into some sort of rhetorical war (for domestic political purposes) the more unlikely any 'blinking' on the EU's part will be.

Indeed the more the 'war' rhetoric continues, the more the UK will be hostage to whatever restrictions on goods and services entering France and other countries these nations seek to impose. Wars of any type (in this case trade and business) can't be stopped by threats unless you have overpowering advantage over your opponent (and not even always under this situation). We don't have an overpowering advantage. Anything but.

Really, the outcome of the Irish border issue hangs on the Irish Government, especially since they will have a veto over the long term agreements with the UK (done by a unanimity rule in the EU). The Irish are unlikely to be in the least phased by the talk of 'war' (read some history books on this one). Indeed the prospect that the number of people in the North favouring a united Ireland will increase will almost certainly make the Republic feel that their political strategy is making progress. They will be emboldened to keep a tough line with the UK.

Any thought that we are going to be rescued by a fast track Trade Agreement with the USA is very illusory. Apart from anything else, the Democrats appear hell-bent on stopping any UK-US trade agreement until, in effect, the Irish border issue is resolved to the satisfaction of the Irish Republic. Hence there is no prospect of a 'fast track track' trade agreement without the approval of the Democrats, so long as they control the House of Represenatives. The UK Government, would, under this scenario of putting more priority on a trade agreement with the US rather than the EU, become a political captive of the Trump Government. It would be captive sine the UK Government would need Trump not only to win the 2020 Presidential election, but assure a Republican majority in both Sente and the House.

And then there is Scotland............Faced with this political slide many more Scots are likely to plum for independence. Sure, Westminster can refuse to sanction another referendum, but we shall still live in a democracy, and a strong call for another Scottish referendum, in practice, cannot be resisted for very long. Under such circumstances the Unionist campaign to oppose independence in another indyref will be a shambles compared to the last effort in 2014.

At the end of the day a no-deal Brexit and, by extension, the whole Brexit project, is based on a failure to understand that it is not membership of the EU that limits UK sovereignty, but the very existence of the EU. Hence the logic for being part of a powerful bloc rather than a supplicant whose interests are by defintion treated as second order compared to those of its members.

Tuesday, 23 July 2019

A layman's guide to the 'Regulated Asset Base' that will fund Sizewell C nuclear power plant


The Government's proposed new 'Regulated Asset Base' (RAB) means of funding nuclear has just been published, and it is living as far down to its expectations as could be expected. I've ploughed through the sometimes (deliberately?) convoluted description of the scheme and translated a few key passages to help you understand it all.

The Government failed to learn from the days when nuclear power were constructed from the 1950s to the 1990s. In those days nuclear power was very expensive, but the Government was able to con the public into believing that it was cheap. They did this by making sure the public could not understand the vaguaries of nuclear power funding and by putting all of the cost overruns that building the power stations involved onto consumer bills without them noticing. Basically, we are reurning to these days when the public was kept in the dark about the cost of building nuclear power plant and the same public will be paying for the cost overruns resulting from the project.

The Government made the mistake of giving a contract price for Hinkley C. Although it featherbedded the developers EDF by giving an ultra long premium price contract (35 years) and the promise of Government lending to cover the bulk of the costs, the contract (CfD) allowed some sort of comparison to be made with competitior sources. Solar and wind power's costs have fallen well below the price given to Hinkley C (£92.50 in 2012 prices).

So now the Government, having learned this mistake, has produced the RAB. This will allow the Government, though an appointed 'Regulator' to launder electricity consumer's money to pay for the inevitable cost overruns, whilst the Regulator assures the public that this all represents 'value for money'. The project that is earmarked for RAB funding is Sizewll C, involving the same reactor type (EPR) as is being constructed at Hinkley C.

What some key passages mean:


1. 'Despite the progress at HPC, the challenges facing the global nuclear industry have meant that replicating a CfD model for further new nuclear projects has proved very challenging. Few project developers have a balance sheet that can accommodate the £15-20bn cost of delivering a new nuclear project, and financial investors have been unwilling to invest during the construction phase given the long construction period and risk of cost increases and delays. We are therefore looking to work with the sector to develop an alternative funding model for new nuclear projects that can attract private finance at a cost that represents value for money to consumers and are considering its wider applicability to other firm low carbon technologies' (page 9)
Translation: The Hinkley C contract (CfD) was a big boobie by the UK Government since it showed just how expensive nuclear power could be even if we believe the developers own (French Government backed) hopes that the project works out as planned. The nuclear industry around the world has tanked - all the projects in the West this century have been monumental disasters and even the French EPR model built in China took twice as long to build as planned.  (As a rule of thumb the cost is more or less directly proportional to its construction time). So no private investor in their right minds would invest in nuclear power. So, essentially, we've got to give the next nuclear project a state-backed blank cheque and cover this up by having a Regulator publish a lot of accountancy jargon that will fool the public into thinking they're getting a reasonable deal.

2. 'A large-scale new nuclear project bears some similarities with the Thames Tideway Tunnel (TTT) project, in that it is a complex single asset construction project with a significant upfront capital expenditure requirement, long construction period and a long asset life. In developing a potential nuclear RAB model, we have taken the model used for TTT, which was also developed under a RAB, as a starting point, whilst recognising that new nuclear projects are greater in scale and face specific challenges that were not relevant to TTT' (page 11)
Translation: Nuclear power stations are not real power plant, but rather they are giant civil engineering projects involving lots of radiation when they get switched on, and thus complex measures to protect the public. However, this great complexity means they are much more prone to cost overruns compared to projects like the TTT, so we have to make sure that the consumer picks up the tab for the cost overruns, whilst pretending that this is a normal well run civil engineering project, which it isn't of course. 

3. 'A target total construction cost would be set for the project company which would be used as the Baseline for incentivisation and risk sharing. If construction costs increased above the Baseline, a portion of the additional costs would be added to the RAB, such that the impact would be shared between investors and suppliers (and through them, their consumers) (page 14)...(this approach will) 'provide clarity and certainty to investors, suppliers and consumers, which is particularly important for a large single-asset project with a complex and relatively long construction period' (page 15)
Translation: The Regulator will produce lots of impenetrable accountancy jargon based on hilariously optimistic projections about construction times and costs which the regulator will swallow whole. When the inevitable happens and costs overrun the investors will still get a reasonable rate of return on their investments and the electricity consumers will pay for most of the cost overruns.

4. 'Role of the Regulator
We currently consider that the Regulator should have responsibility for protecting the interests of consumers, whilst having regard to the ability of the project company to finance the project i.e. construction and operation of the plant' (page 19)
Translation: The Regulator will have no choice but to adopt the ridiculously optimistic cost projections and construction time estimates made by the developers (EDF). They will declare the whole project great value for money for the consumer, whilst in practice allowing the developer to run up whatever bills they want and pass most of them onto the consumer. A facade of an auditing system will be set up, but since EDF have all the information anyway, the Regulator will not be able to make more than token adjustments even if they wanted to.When the time comes for the consumer to shell out for cost overruns the Regulator will not want to point this out too much as they will get the blame.

'The EPR technology has now started commercial operations in China' (pages 8-9)
Translation: So far the constructions of the EPR have been disastrous in all cases, in Finland, France and even in China. The last one is a bit of a shocker. It took twice as long as planned to get the first reactor at Taishan generating electricity - that's despite the fact that the Chinese have a massive reserve of workers and engineers compared to us, and, as our Office for Nuclear Regulation has put it, a different approach to health and safety compared to what is practiced in the UK. Of course EDF are announcing a 'triumph' of early construction at Hinkley C - yet they have only just started seriously constructing the project in March this year having spent a lot of money since 2013 acheving remarkably little. But EDF have the French Government to rely upon to fund its own (French state owned) reactor model at Hinkley. In the case of Sizewell C, through the aegis of the so-called RAB mechanism, it will be the British electricity consumer who will be paying for the cost overruns.

You can read the Government's RAB consultation and make a response at https://www.gov.uk/government/consultations/regulated-asset-base-rab-model-for-nuclear

Thursday, 18 July 2019

Zero carbon by 2050? Make it 30 by 30!

BY ANDREW WARREN

This month the UK formally becomes the first G7 nation to adopt as a legally binding commitment that we shall be living in a net zero carbon economy in 30 years’ time.
It is a clear and bold commitment, that has rightly been lauded practically everywhere..

The few cynics have concentrated upon the undeniable fact that practically all of the politicians taking the plaudits will long since have quit the public stage, well before the magic year of 2050. And thus won’t be around to face any difficult  questions . Or indeed to accept the congratulations that will be due.

That is undeniably a fair point. Doubtless a good reason why many are calling for more immediate targets to be created.  Like the “30 by 30 Energy Efficiency Act.” 

What is this? Put simply, a firm commitment and programme to ensure that around 27 million homes and 3 million non-residential buildings will be made completely energy efficiency. Completed by 2030. Hence the slogan: 30 by 30. 

Already we have the genesis of this, created by Theresa May, who ceases being Prime Minister  this month. Back in 2017, she launched the Clean Growth Strategy for the next thirty years. This identifies the enormous economic potential for  business to save fuel. At least one-fifth could very cost-effectively be saved. Interestingly, the vast majority of this potential (over 80%)  was to be released not so much by improving industrial processes . But significantly  by improving the way buildings are run. 

Doubtless that was one of the main motivations why as Prime Minister she launched  last summer her “Buildings Mission” in a speech at the Jodrell Bank observatory complex in Cheshire.

She promised that within twelve years- in other words, by 2030 - energy usage in all new  construction will be “at least half” of that  permitted under current building regulations . 
“Heating and powering buildings accounts for 40% of our total energy usage.
By making our buildings more energy efficient and embracing smart technologies, we can slash household energy bills, reduce demand for energy, and meet our targets for carbon reduction”, promised Theresa May.
She continued: “By halving the energy use of buildings, we could reduce the energy bills for their occupants by as much as 50%.”
Subsequently the Government has confirmed that whilst such calculations will for the first time  include energy usage from appliances within their calculations, they will not include transport usage. Presumably that caveat is to remove any recharging of electric vehicles from assessments.
Describing her initiative as the “catalyst for new technologies and more productive methods”, which she maintained could be “exported to a large and growing market”, acknowledging the enormous potential to improve the existing building stock. 
As part of the “clean growth and grand challenge mission”, the Government is also aiming to halve the energy costs for the existing building stock - both domestically and commercially by “reaching the same standards in existing buildings too.” 

And not just delivering ecological benefits. The social benefits of  the 30 by 30 programme are uniquely broad. Fusing the public’s clear rejection of continuing austerity and cuts with the growing desire to tackle climate change , it make this the key capital infrastructure investment priority. 

It provides occupants with comfortable living conditions in cold winter and high summer. It requires a massive training programme, resulting  in a wide range of jobs, both skilled and unskilled. Already far more people are employed in manufacturing, distributing, installing and maintaining energy efficient equipment than in any other part of the energy sector. The programme offers new business and investment opportunities in every single constituency. And it will, at last, abolish the scourge of fuel poverty forever.

We know  the technical potential exists to cut energy consumption levels by  over 50%.Achieving this target will require the adoption of world-leading quality standards for retrofitting and constructing buildings. 

This is a genuinely ambitious project. After all, the vast majority of buildings we will be living and working in by 2050 have already been built. Upgrading these has been likened by civil servants charged with delivery as being much akin to the challenge set in President Kennedy inaugural speech in 1961. This was to see a man walk on the moon before the decade was out. 

At that point, nobody knew with any precision how this noble objective would be achieved. But that speech became the catalyst. It ensured that in July 1969, a man named Armstrong would walk upon the moon.

I don’t really think that realising this buildings’ Mission is anything like as difficult. Unlike with space research, we do already have practically all the technologies around to achieve our goal. It is the delivery techniques we have to improve upon. Do that. And we shall have knitted together the most effective social and environmentally beneficial programme. So, 30 by 30 it must be.

Andrew Warren is Chairman of the British Energy Efficiency Federation, and this post is reproduced from an article by him published in the July/August edition of 'Energy in Buildings and Industry', page 10

 Note from David Toke: I asked Andrew if I could post this article because I thought it was very important to do so. This fact is underscored by the fact that this is the first time I have EVER carried a contribution by anybody else on this energy blog!