The UK government
has sealed a deal for new nuclear power stations. About time, too.
By ROB LYONS
Top the corks:
nuclear is back! The UK government has finally agreed a deal (subject to EU
approval) for the building of two new nuclear reactors at Hinkley Point,
already home to two ageing reactors. Due to be completed in 2023, Hinkley Point
C should provide up to 3,200 megawatts (MW) of electricity - equivalent to
seven per cent of UK electricity demand. It’s been quite a wait. The last new
nuclear station to come online in the UK was Sizewell B in 1995.
After years of
attacking nuclear, then offering mere permission for new nuclear build, the UK
government has finally admitted that nuclear energy is needed and it requires
substantial financial support. The new station will cost a cool £16 billion.
However, rather than simply build the power stations itself, it has agreed to
pay a high price for the electricity generated, offering the operators - EDF
and its partners - at least £92.50 per megawatt hour (MWh). The only way this
looks good is in comparison to renewables; offshore windfarms currently receive
£135 per MWh. The difference is the tie-in: Hinkley Point C will receive that
inflated price for 35 years; offshore windfarms only get the guarantee for 15
years. By comparison, electricity generated from coal and gas currently costs
£55 per MWh.
This could be the
start of a renaissance for nuclear power in the UK. Included in the current
deal is the potential for another nuclear station at Sizewell. Other groups are
waiting in the wings to agree deals for new stations at Anglesey and
Sellafield.
But it’s hard to
shake the feeling that we’re paying over the odds. EDF claims it will make a
return on its investment of just 10 per cent per year. But looked at another
way, it’s a great deal for EDF. As one Telegraph writer puts
it: ‘Accumulated revenues over the contract amount to £83 billion – not bad for
an asset meant to cost £16 billion and with very low operating costs once
built.’
The deal
highlights a few obsessions of recent government policy - and not healthy ones,
either.
The first is that
nothing must appear ‘on the books’. We’ll all be paying for Hinkley Point C
through our electricity bills rather than through government subsidy. But would
it not have been cheaper for the government to simply build the new plants
itself rather than having to factor in enormous incentives to get the private
sector to pay for it instead?
Which brings us to
another problem: the loss of faith in the state as a progressive force in the
economy. It is now assumed that anything the state does directly will be
expensive and late. Which is ironic because projects for building nuclear
reactors of the kind planned for Hinkley Point - in Finland and France - are,
er, expensive and running late. But there is a role for the state in building
capital-intensive infrastructure like nuclear power stations where the payback
time makes it hugely expensive for private-sector companies. (Sadly, this loss
of faith in the state does not apply to our private lives, where the state
apparently sees no limit to involving itself.)
Above all, the
deal illustrates the current obsession with low-carbon power - at almost any
price. At a time when many households are struggling with energy bills, and with
the UK’s big six energy companies all announcing price rises of around 10 per
cent, the government is committing through this contract to increasing prices
still further. The Department for Energy and Climate Change (DECC) claims
Hinkley Point is actually a good deal: ‘Building a new fleet of nuclear power
stations could reduce bills by more than £75 a year in 2030, compared to a
future where nuclear is not part of the energy mix.’ But this is only on the
basis of an ever-rising share of low-carbon energy and financial disincentives
being placed on coal and gas. The state may shy away from building anything,
but it does love to regulate and rig markets to meet its pet concerns.
All that said, at
a time when Germany, Japan and Italy have turned away from nuclear power, the
announcement of new nuclear power stations in an ‘old’ developed country is
good news not just for people in Britain but as an example to other countries.
Nuclear power is very safe and reliable, even if it is somewhat more expensive
than coal and gas right now. Concerns about climate change aside, having
diverse energy sources is generally a good thing and nuclear power is certainly
less messy than coal.
In fact, any positive
decision to build reliable new energy infrastructure is a relief after years of
prevarication by successive governments. So, for all the problems, Hinkley
Point C is a deal worth celebrating.
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