Nuclear power can't happen without subsidy. So it shouldn't happen?
Post date: Friday, 30th March 2012
“A new generation of nuclear power stations will only be possible with vast taxpayer subsidies or a rigged market.”
Guess who said that? Well, it was our very own Secretary of State for Energy and Climate Change, Ed Davey, when he was the Liberal Democrat's Shadow Trade and Industry Secretary, on 17th July 2006.
And, on 6th February this year he followed this up with: “new nuclear can go ahead so long as it’s without subsidy".
Put these two statements together, and what do you get?
Quite. Mr. Davey was right in 2006, and he is even more right in 2012: nuclear power can't happen without subsidy.
The decision by Horizon, the consortium run by German energy firms EON and RWE npower to pull out of developing new nuclear power projects in the UK supports this thesis and has brought dismay to the governments in Westminster and Cardiff.
The Welsh Assembly Government feels particularly let down because it had only just published its Energy Wales policy document which, for the first time, had committed Wales to support nuclear power and had placed Horizon's anticipated new power station on Anglesey as a key plank of its policy to ‘create a sustainable, low carbon economy for Wales’.
What will it now do to make sure it meets its policy targets? A spokesperson for the Welsh government would add no more to the official line that "there is live and significant interest in the site", and "we are seeking the full support of the UK Government as we work with Horizon to deliver this investment and secure jobs for workers at Wylfa in the future".
Perhaps it hadn't really sunk in that Horizon is no longer interested. And what did he mean by support from the UK Government? It couldn't be the S-word, could it?
Volker Beckers, CEO of RWE npower, told BBC Radio 4's Today programme that the decision has been made purely on strategic grounds, adding that the recession was a factor.
Westminster is putting a brave face on this major setback to its masterplan. There is interest from other companies, but the undeniable truth is that the capital intensity of constructing and underwriting the costs of nuclear power makes it impossible for any player to enter the market without state support.
This was in effect admitted on Friday morning by Malcolm Grimston, associate fellow at the Energy, Environment and Development programme at Chatham House, when he said that "electricity is too important to be left to the free market and therefore the government has a central role to play".
Existing nuclear subsidies
Of course, subsidies already exist. Here are six of them:
1. Charles Hendry, Minister of State for Energy, has just made nuclear power even more expensive for operators (although this move was widely expected), by announcing on Friday that the operator's liability in the event of a nuclear accident will be raised from £140 million to €1.2bn, or just over £1 billion.
This removes some of what is an effective subsidy from the taxpayer to nuclear operators. However, in the event of a really serious accident, there is no doubt that the cost of reparation would be much higher than £1 billion: £800 billion is the current level of the cleanup bill at Fukushima. And this will be borne by the taxpayer.
2. Under the proposed Electricity Market Reform, the Contracts for Difference Feed in Tariffs will provide a subsidy of between £63 billion and £75 billion to EDF, the only nuclear player left in town, over the next 35 years. That is nearly £2.0 billion a year.
3. Waste disposal costs will also be subsidised since the Government has proposed capping the nuclear industry’s liabilities. Currently, DECC spends £6.93 billion a year, 86% of its budget, on managing nuclear waste and other liabilities from Britain’s current nuclear power programme: over eight times more than it spends on securing our future energy and climate security.
4. The four campaigners calculate that it is likely that new nuclear build in Britain will require the creation of special purpose financing mechanisms to protect the balance sheets of the proposers, even a well-apitalised company like EDF in the form of loan guarantees.
5. Dozens of agencies, offices, quangos and departments support the nuclear industry, costing billions of pounds per year. Similar levels of support do not exist for other low carbon technologies.
6. Finally, it is impossible to have nuclear power without huge security and counter-terrorism costs. Most of this is paid for by the taxpayer, but official secrecy prevents us from knowing how much.
These and other ways in which the taxpayer supports nuclear power and will support new nuclear power stations, are summarised in a briefing prepared for the government this week by antinuclear ex-directors of Friends of the Earth, Tom Burke, Tony Juniper, Jonathon Porritt and Charles Secrett.
It's not just the UK
The same S-word dilemma is occurring everywhere and getting worse. And it's not just woolly eco-freaks saying so.
At a symposium this week on the Future of Nuclear Power hosted by the Dick Thornburgh Forum for Law and Public Policy of the University of Pittsburgh, this extremely authoritative and august body, speaking from a birthplace of nuclear power, admitted the following in a comprehensive report on Nuclear Safety and Nuclear Economics, written by Mark Cooper, Ph.D., Senior Fellow for Economic Analysis, at the Institute for Energy and the Environment:
"The subsidy problem in nuclear reactor construction has actually become much more severe," he writes.
Besides increased liabilities resulting from heightened safety awareness following the Fukushima accident, "The utilities proposing new nuclear reactors have demanded many more and larger direct subsidies".
He continues: "Since construction of nuclear reactors cannot be financed in normal capital markets, federal loan guarantees and partnership with public power that has independent bonding authority appear to be necessary ingredients to move projects forward."
We shouldn't have to point out the ludicrous irony of the Tory part of the coalition, which is the half that actively supports nuclear power, relying on a socialist French government, which supports a nationalised industry, to bring about with British subsidies the nuclear power it wants in the UK.
Why not just abandon nuclear power?
All of this makes absurd the claim, continually made by Government, that nuclear power is the cheapest form of new generation energy. Most recently highlighted in its 2011 update of the costs of new generation capacity.
If even just one of EDF's proposed new nuclear power stations goes ahead (and they still haven't submitted a timetable for construction) there is absolutely no doubt that the country will regret it in the future.
And to those who say we need nuclear newbuild to combat climate change, I say with the billions saved from scrapping all the currents subsidies listed above we could build the equivalent amount of new renewable generation plants and install more energy saving products far quicker and with far better value for money and providing far more British jobs.