Cheers or jeers over EU nuclear subsidy U-turn?

A last minute change of heart in Brussels appears to give the go-ahead to Britain's first new nuclear power plant in a generation. But is it good news?

by Andrew Saunders
Last Updated: 23 Sep 2014

Outgoing EU competition commissioner Joaquin Almunia has apparently changed his mind, approving in principle millions of Euros of subsidy for the £17.6bn Hinkley Point C power station. The plant has been the subject of a 9 month competition investigation, which initially seemed unlikely to OK it for subsidies because of the hefty price guarantees offered unilaterally by the UK government. So is this good or bad for the UK?

Pros

Well, our ageing power infrastructure is creaking and we do need something to keep the lights on, whilst also of course keeping the carbon dioxide emissions down. This is the nub of the pro-nuclear case which the UK government, after decades of vacillation, now appears to support (at least until the next election campaign gets under way).

Nothing, they say, can beat nuclear for long-term, reliable low-carbon electricity production, making it the perfect partner to other more volatile renewables. Wind turbines only work when the wind is blowing, and even then if the wind blows too hard they can break down.

The price of solar PV has dropped massively (partly thanks to more subsidies which have helped push up production and economies of scale) But the cells still have a finite lifespan and the potential solar yield here is limited by the weather - the UK is not California or the Sahara desert.

Nuclear can satisfy the steady state load to keep everything humming in between the windy and sunny bits, and if the substantial planning, funding and regulatory hurdles of building one new nuclear plant can be overcome at Hinkley, then the process could be rolled out for other new plants subsequently. Simples.

Cons

Yes we urgently need more power, but at what price? The government was so desperate to do a deal with EDF for Hinkley that it gave the firm a frankly-Croesan price guarantee of £92.50 per megawatt hour for no fewer than 35 yrs from the date of the plant going online. That is roughly twice the current wholesale going rate, and rather negates the fundamental economics of nuclear which is that build costs are high but running costs very low.

So why does EDF need such a hefty price guarantee? Has our government simply negotiated another lousy deal for the taxpayer?

Nuclear is low carbon, but it’s not waste-free. There remains the issue of what to do with the spent radioactive fuel. Estimated lifetime clean up costs for the current generation of reactors are heading north of £80bn so this is not a trivial problem.

Lack of innovation. For (partly) understandable safety reasons, there has been very little real innovation in nuclear power for decades. The brand of nuclear energy is on sale in Europe today is essentially 20th century, state-sponsored and definitely not market or customer -centric.

Consequently nothing much has changed technologically for a generation, meanwhile the other renewables have been catching up fast. Some analysts predict that the strike price of soalr PV could fall below Hinkley's guaranteed £92.50 by 2018, five years before the plant is due to come online.

Free market effects. Industry watchers point out that if the proposed EU subsidies do go ahead, it may signal the end of the free market in energy in Europe, with potentially devastating results. Why would any investor risk capital on power infrastructure when a better-politically-connected rival could come along and undercut then thanks to bagging massive subsidies?


Meanwhile over in the USA, renewable energy seems to be finally coming of age - even the Rockefeller family (of Standard oil fame) are getting out of fossil fuels and into renewables. But despite the urgent need for new UK generation capacity to replace the old, and the inherent suitability of nuclear for at least some of that, it’s far from clear that Hinkley Point C as it stands is such a great idea.

Better stock up on candles and torch batteries, just in case…

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