Electricity Market Reform and Nuclear Subsidies

On Thursday, November 29th 2012, the Secretary of State for Energy and Climate Change confirmed the Introduction of the Energy Bill to the House of Commons. The Bill includes provisions for:

  • Contracts for Difference (CFD): long-term contracts to provide stable and predictable incentives for companies to invest in low-carbon  generation;
  • Capacity Market: to ensure the security of electricity supply; and
  • Emissions Performance Standard (EPS): to limit carbon dioxide emissions from new fossil fuel power stations.1

On 12th July 2011 the Government published its White Paper on Electricity Market Reform. This marked the first stage of an electricity market reform process. The Government hopes legislation will reach the statute book by spring 2013 so the first low-carbon projects can be supported under its provisions around 2014. A Carbon Floor Price was introduced in April 2013.

The UK Coalition Agreement allows the Government to promote the construction of new nuclear reactors provided they receive “no public subsidy”. The Secretary of State for Energy at the time, Liberal Democrat MP Chris Huhne, told The Today Programme just after the May 2010 General Election, that, despite previously being anti-nuclear, he might oversee new reactor construction if power companies can do it without government subsidy. The key point, Huhne stressed, on which there was agreement within the coalition Government, is the principle there will be no public subsidy.2

But it was clear to almost everyone by December 2010 when the Government launched its plans for Electricity Market Reform (EMR) that it was planning to break its promises and subsidise new reactors. (See Broken Promises: Subsidising the Nuclear Industry, Spinwatch 8th May 2012)

Fiona Hall, leader of the Liberal-Democrat group in the European parliament, says she has no doubt the CfD is a subsidy. She has called for Liberal Democrats to speak out against this public subsidy for nuclear energy, which goes completely against the Coalition Government Agreement. She says if it goes ahead British consumers may find themselves subsidising nuclear technology for over 40 years. Billions of pounds will be diverted from the wind and marine energy sectors where the UK’s natural advantage lies, hampering British industrial leadership in these sectors and risking a major loss of business opportunities and new jobs.3

Bridget Woodman, of the energy policy group at the University of Exeter, said: “Rarely can an energy measure have attracted such universal condemnation. The key players renewable generators, most energy companies, consumer groups and commentators all recognise that [it] won’t deliver a sustainable energy future … The government is in a hole and needs to stop digging before it’s too late to put the UK on a path to a sustainable energy future.”

EDF began talks in 2012 with the Department of Energy and Climate Change (DECC) about the guaranteed price it wants for the nuclear electricity it hopes to generate after spending at least £14 billion building Hinkley Point C. The talks were meant to be concluded by the end of the year, but 6 months later Energy Minister Michael Fallon said the Government and EDF still disagree on “five or six” issues.

See also Nuclear Costs and Finances.

Further Information:

 

1. See DECC website Energy Bill page.
2. Radio 4 Today Programme 13th May 2010
3. Fiona Hall MEP writes: Subsidies for nuclear energy go against coalition agreement and economic common sense. LibDem Voice 18th April 2012.

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Published: 5 December 2012
Last updated: 21 June 2013