While we are all still playing “hunt the subsidy” to try to find out if the Government’s Energy Review really does herald the rebirth of the UK nuclear power industry, and well before meaningful consideration of where any new power stations might be built, the Government is already moving to render any future planning inquiries impotent.
The eyes of the world will be on the United Kingdom over the next few years. After a brief six-month energy review the Government has sanctioned a new generation of nuclear reactors, but has stressed there will be no public subsidies. (1) Serious doubts remain over whether private investors will take the risk and invest in new reactors without further guarantees or rigging of the market. New reactors have not been financed within a liberalised electricity market anywhere in the world. (2)
The UK is not alone in discussing new reactors, but other countries – even those that are the very embodiment of the free market – expect to provide subsidies or guarantee prices. (3) The US has plans for 20 new plants and Washington wants them built as soon as possible. The Energy Policy Act in 2005 included $13.7 billion in subsidies, to cover insurance for construction delays, loan guarantees for construction costs and operating subsidies.(4) This is enough to fund the entire capital cost of six reactors. (5) The Liberal Democrats say a nuclear revival can only be made to work using vast taxpayer subsidies or a rigged market. “The real question … is where will Blair hide his nuclear subsidy?” (6) Their analysis suggests that if consumers were forced to pay a ‘nuclear tax’ on electricity bills, it could amount to £170 a year. (7)
Mr Blair and his officials appear to be victims of “nuclear amnesia”. Walt Patterson of the Royal Institute of International Affairs, says “If we make the same mistakes all over again, let us at least be sure that our children know who to blame. Let us call the first one the Tony Blair nuclear plant.” (8)
Nuclear is not and never was feasible without heavy subsidy. The Nuclear Industry Association demanded that the 2006 Energy Review deliver a streamlined planning system, a mechanism to support the price of nuclear power by forcing all suppliers to buy it at above a certain price, and a cap to decommissioning liabilities. (9) So what has suddenly changed? Even the current high gas prices were predicted when the last energy review decided that nuclear power was too expensive. When the government swears there will be no price guarantee or subsidy, none of the experts believe it – though the industry naturally pretends. Investors will only build on the unspoken understanding that the state will step in, one way or another. Always has, always will.
The nuclear lobby now claims that a streamlined and shortened planning and licensing regime is all that is needed to make a new construction programme viable. But City experts, according to The Independent, believe it will require government guarantees before any private investors will put money into the industry. (10) The newspaper said the report on the energy review was desperately short on the practicalities. Beyond the planning proposals, there is no convincing set of policy initiatives suggested that would ensure new reactors are built. Instead, the Government seems blithely to assume that the market will somehow provide. (11)
Even the CEO of the US nuclear power company Dominion said that, despite US government wishes for new nuclear power stations, he would not build, to avoid giving credit raters Standard & Poors and his own chief financial officer “a heart attack”. Standard & Poors say that not even government help with construction costs changes this reality: “an electric utility with a nuclear exposure has weaker credit than one without and can expect to pay more … for credit”.
The Treasury has just said it will sell a chunk of its British Energy interest. Who wants it? Probably EDF, the French government-subsidised company bidding to build new nuclear on BE land. (Watch for favours or subsidies in return.) BE had to have a £5.1 bn liability guaranteed by the taxpayer as one lot of shareholders saw their investment go bust. Yet somehow fresh “value” has been added. The Treasury hopes to raise £2bn of its paper £6bn BE holding.
If nuclear building begins, all future governments must back it. Once we start down the nuclear road the taxpayer will have no choice but to bail it out, as with the railways, pfi hospitals, etc. Even if tax money flows in one end, shareholders can still take it out the other. But nuclear power will be worse than the likes of Railtrack, because of the huge, unknown, waste and decommissioning liabilities. Shareholders will not only have taken their “profits” but be long dead before the full costs are even known.
The New Statesman accuses Blair of a lack of imagination. This is not the same as a lack of boldness. Blair mistakes a readiness to grasp the nettle for a genuine vision of Britain’s future. What has really changed since the 2003 Energy Review is that the nuclear industry’s PR machine has got its act together.
As New Statesman says: “A pattern is emerging. There is something repellent about allowing radioactive waste to lie around until future generations invent the technology to deal with it. But, as in the case of those other toxic legacies (from Trident to tuition fees), our children and grandchildren will be the ones to suffer from this government’s failure to think big.”(12)
Would-be nuclear builders are also watching Areva, the French government-subsidised company building in Finland the first new nuclear station anywhere in Europe for decades. It has just admitted it is already one year behind, after its first year of construction. Beset with design problems and skill shortages, this is no market tester but a loss-leader financed by Finnish local and central government and the French, borrowing at a subsidised 2.6% from a bank that owns the company building the turbines. Even then, its says it will generate electricity at twice the cost the UK government uses as its guesstimate of the price of new nuclear power here. (13)
Once embarked on, nuclear stations will drain political enthusiasm for any other energy finance. Governments hide the true cost from voters, and even from themselves. State insurance against disaster isn’t even counted in. Watching the small print will not reveal all: hidden taxpayer backing will be watermarked into every clause of new nuclear contracts. If not, if Labour genuinely means no subsidy, there will be no new stations and all this nuclear posturing may be fantasy politics.
Even before we know where any new nuclear power stations will be proposed, we only have until 31 October 2006 to object if we want to use the “economics” or “necessity” of nuclear power in our argument. Because from 31 October, the government will consider both arguments settled. But the sites will not be chosen until after a review which starts in January next year. (14) Once it has published a “statement of need” in a White Paper at the turn of the year, the necessity or economics of individual nuclear power stations will not form part of any local enquiry. And it’s not just the economic argument that starts being settled now. The first stages of a separate enquiry into the safety of nuclear power could begin this year, though the process, known as justification, will eventually involve a public consultation. The licensing of the most likely reactor designs could start this year and once the sites are decided, local planning enquiries will not be able to question whether there are more suitable locations, or whether a particular reactor is safe.
Once the issues of economics, necessity and safety have been determined in the abstract, planning enquiries for real nuclear power stations will have fewer grounds for objection than a small supermarket – what would there be left to debate – the landscaping? (15)
References
(1) The Energy Challenge, UK Department of Trade and Industry, July 2006
(2) The Energy Review, Performance and Innovation Unit, February 2002, page 195 para 42.
(3) Financial Times Editorial 21st June 2006
(4) Where will Blair hide his nuclear tax bombshell? Liberal Democrat Trade and Industry Team, June 2006.
(5) Centre for Media and Democracy 26th July 2006
(6) Where will Blair hide his nuclear tax bombshell? Liberal Democrat Trade and Industry Team, June 2006.
(7) Daily Mail 18th May 2006
(8) Walt Patterson
(9) Observer 4th June 2006
(10) Independent 12th July 2006
(11) Independent 12th July 2006
(12) New Statesman Leader 17th July 2006
(13) Interactive Investor 13th July 2006
(14) The Business 16th July 2006 See Annex A, Page 161: The Energy Challenge
(15) More info on the so-called Nuclear Policy Framework consultation, See also Guardian 18th July 2006
