Hinkley Point – a shockingly bad deal for the British taxpayer

The Alice in Wonderland economics of nuclear power.

The Alice in Wonderland economics of nuclear power

There are so many things I could write about yesterday’s shameful decision by the European Commission to approve the coalition government’s plan to hand over £17.6bn to EDF to build a 1970s style nuclear power station at Hinkley Point.

But the overwhelming sentiment felt by many who have watched this saga is just how extraordinarily disingenuous the advocates of new nuclear have had to be to get this far; and what a shockingly bad and expensive deal it is for the British taxpayer and energy bill payers.

If anyone needs further evidence of why so many people don’t trust politicians to keep their promises, have conviction behind their arguments, or demonstrate fresh thinking and leadership for real change, then this is it.

Consider this; the Conservative Party’s manifesto at the last election signalled their desire to build new nuclear power stations “provided they receive no public subsidy”. The Liberal Democrat manifesto said that the party would “Reject a new generation of nuclear power stations; based on the evidence nuclear is a far more expensive way of reducing carbon emissions than promoting energy conservation and renewable energy”.

The Coalition Agreement highlighted this difference of opinion, but indicated new nuclear power stations might be built “provided that they receive no public subsidy” (those words again). It promised that Lib Dem MPs would abstain in relevant votes.

Then last year, after three years of being locked away in Whitehall bunkers with their coalition partners, the Lib Dems performed a spectacular flip-flop, and officially became pro-nuke. I was at the Liberal Democrat conference last year and saw Ed Davey offer a sincere promise to disgruntled party activists; “There will be no public subsidy”.

If the Conservatives and Lib Dems really believe their own rhetoric on this, then they are delusional. If they don’t, then they are being deceitful.

The government’s contract with EDF locks us into a set price for electricity for the next 35 years. And goodness, what a price: twice the current market rate. It guarantees EDF a 10 percent return on investment over the period. Nice work if you can get it; all paid for by poor old energy consumers.

And if this kind of hand-out is not a subsidy, then I don’t know what is. In fact, yesterday’s decision by the European Commission to approve the deal confirmed it to be a subsidy; just one that they reluctantly agreed, after fierce lobbying by the UK, to be compatible with “state aid” rules.

Proponents of nuclear power should at least have courage of their convictions and be honest about this, rather than try and dupe the electorate and bill payers through wordplay.

It’s right to give public subsidies to support new clean technologies with environmental benefits. But nuclear fails on both counts – it leaves a mountain of waste for countless future generations, and is still no cheaper than it was six decades ago.

For solar and wind, subsidies are needed to bring them to market, and deliver at scale as quickly as possible, bringing costs down. It’s working: the cost of some renewable technologies has fallen by 30 per cent in the last year.

Both solar and on-shore wind are expected to reach cost parity with fossil fuels here in the UK within the next decade or so. At that point, subsidies will no longer be needed, and renewables will be winning on raw economics alone.

The prize of cheap renewables is so large that the sensible thing would be for the government to be doing everything it can to make it happen. Subsidy is worth the short-term cost. But it has not worked for nuclear – and we are already paying a huge price: dealing with nuclear waste alone is already costing us £70 billion. Instead of 35 more years of subsidy it is time to pull the plug on new nuclear.

And where are Labour? So far, they are part of the cosy Westminster consensus supporting new nuclear power.

As the madness of the Hinkley deal unravels over the next few years – as it surely will – it will sit very badly alongside Ed Miliband’s promise of an energy price freeze, and Caroline Flint’s recent and very welcome promises to tacking the scandal of fuel poverty through energy efficiency schemes.

It’s been estimated, for example, that the vast majority of homes in the country could be brought up to Energy Performance Standard C, supported by interest free loans to householders, at a cost to the taxpayer of just over £2billion per annum. This would make a real different to the health and wealth of millions of low income households.

The Hinkley deal, in contrast, takes money away from these same households and gives it to EDF – for the next 35 years.

Thankfully, it’s far from over yet. Austria has announced it is going to challenge the deal in the European courts (hardly known for their agility), and it is highly likely renewable energy companies will do the same.

Labour should take this opportunity to pause and think very carefully about which side of the debate it wants to be on in the years ahead; on the side of consumers, or EDF and the Alice in Wonderland economics of nuclear power.

Craig Bennett is director of policy and campaigns at Friends of the Earth

For a full briefing on why Friends of the Earth opposes the building of new nuclear power stations see here.

25 Responses to “Hinkley Point – a shockingly bad deal for the British taxpayer”

  1. itdoesntaddup

    Your sentiments about the cost of the HInkley C project are entirely correct – all the more so given that the EU is apparently warning us that the cost will be at least £24.5bn according to reports in the FT and Daily Mail. For that money we could buy 40GW of CCGT capacity, not 3.2 GW. Perhaps it has conveniently escaped your notice, but the DECC has conceded that its forecasts for fossil fuel prices were on the high side – having used them to justify all manner of investments including Hinkley Point. This chart of global gas prices shows we have an international change in gas pricing, albeit we lack a global price because gas remains expensive to transport between markets.

    http://www.timera-energy.com/wp-content/uploads/2014/08/LNG-prices-Aug14.jpg

    The reality is that this also undermines Ed Davey’s CFD economics for wind and solar, tidal power and biomass – which equally shamefully have inflation indexation built in to them – as perhaps Patricia Hodge could have pointed out in her examination of the Hinkey deal in Select Committee.

    It also undermines the Ed Miliband of a price freeze – we should instead be expecting price falls if we stopped providing highly subsidised returns to so-called green technologies – especially when it turns out that they really aren’t so green after all. We have the scandal that biomass based on imported wood chippings offers no savings in emissions to add to the windfarms built on peat bogs where the same is true without even considering the impact of the lack of dispatchability on supply. The evidence is mounting that we are exceeding the level of wind and solar that can be accommodated in the grid without emissions penalties.

    This assessment of the Scottish position is a foretaste of where the rest of the UK will soon find themselves as coal and nuclear plants are shut down over the coming years – mainly because markets are being rigged against them.

    http://royalscottishgeographicalsociety.blogspot.co.uk/2014/10/scotlands-renewable-energy-transition.html

    We should observe the panic building of new coal capacity in Germany brought on by the problems of its over-reliance on solar and wind generation. Engineering reality is intruding rather rapidly, as is the economics of making power unaffordable to more and more people.

  2. blarg1987

    What really takes the biscuit is that it is a company that is owned by the French State that is providing this power station because we keep being told by this government and previous others that the state is incapable of building such things!!!!!

  3. Leon Wolfeson

    You’re blaming new nuclear advocates? It’s your constant opposition and attempts to drive up the cost which have, er, driven up the costs and driven away the more modern plant designs.

    Given you support things like offshore wind, which are far more expensive, you are also being disingenuous. Neither do you count grid costs or gas backing for wind and solar. No surprise you’re not done trying to push up the costs massively again, though.

    You’re all for smart meters and their ability to shut off power for poorer people, though. Your plan is absolutely dependent on that capacity, as you ignore people in rented households and as you talk about “loans” which Landlords – even when they agree – charge tenants for, and don’t do much when people can’t afford to turn the heating on at all, which will become far, far more prevalent in your plans again.

  4. Leon Wolfeson

    Ignoring all externalities and passing the costs onto the poor. And not 40, more like 12 of course. Moreover, DECC have consistently underestimated consumer prices, which are rising despite fuel cost falls, as they are not really linked at all – company profit demands higher pricing regardless and there is essentially no check on this.

    http://www.iworkforthecoalandgasindustry.ripoff.com

    Yea.

  5. Leon Wolfeson

    Er no, *Britain* is not capeable of building them. We don’t have the engineers or the experience. We’d need to train them, which means new degree programs, it means paying…

  6. swat

    It makes perfectly good sense. What is the point in Britain buying energy from the French produced by nuclear power, when we can produce it ourselves. The uclear Industry is probably the safest industry going at the moment. £26m is a small price to pay for security and getting to grips with the expertise, which we can sell onto others.And nulear is the cleanest energy, which does not contribute to climate change.

  7. itdoesntaddup

    If it were only £26m, it would be a bargain. But it’s 1,000 times as much.

  8. GhostofJimMorrison

    There you go again, Lordblagger, spewing your hate, justifying your pogroms, drowning kittens….

  9. David Lindsay

    We need nuclear power, which was strongly supported by Gordon Brown and Ed Miliband when David Cameron was calling it “a last resort”.

    And we need coal. Of which, thankfully, we have a vast supply just waiting to be extracted.

    Not necessarily in that order.

    All else is ancillary to those two.

    But we need them in British ownership. The only absolute guarantee of that is public ownership.

  10. Leon Wolfeson

    You’re just spamming me now, I see. Anything to disrupt conversations, as you talk about yourself.

  11. Guest

    We need to push AGCC costs off onto the poor, with coal?
    Right. (Nuclear “oddly” won’t get a look in)

    And you need to make sure that it’s controlled, for the few.

  12. blarg1987

    Sorry I did;t explain myself, we flogged of our nuclear industry because we were told the state was incapable of being able to build such things. Now the irony being that we are relying on a foreign state.
    It is true we don;t have the experience now, however that is something we should have written into the Hinckley programme so we can build our own nuclear reactors etc. Short term it would cost more, but long term it could lead to us being an exported of such technologies like we were years ago.

  13. Leon Wolfeson

    It’s not something which we should expect EDL, a French company, to address. It’s something which would be UK policy.

  14. MartinC

    Probably the second most far-reaching and consequential decision that has been taken in
    the modern era about Britain’s energy future, was made in 2005 by the Blair-Brown government. That was when they decided to sell our nuclear builder, BNFL-Westinghouse, to the Japanese for $5bn dollars. That clever little decision permanently stripped us of our ability to build our own nuclear power stations because they sold the lot: designs, licensing rights, absolutely everything. Now, in an industry where we once led the world, we are reduced to going cap in hand to the French, and get to the back of the queue to pay them to build nukes for us. No doubt too, that $5bn has long since been p!ssed away on public-sector pay and pensions.

    Since then Labour has compounded the problem; the most far-reaching and consequential decision about Britain’s energy future was made in 2008 by the then Energy Minister of the Gordon Brown government, a Mr. Ed Milliband (heard of him?) who passed the 2008 Climate Change act. This act was drafted by a young and enthusiastic Friends of the Earth activist Bryony Worthington (now a Labour Baroness). It commits us to reducing carbon emissions by 80% by 2050, an impossible target unless we close all energy intensive industry in the UK. To be fair here, the rest of the Commons voted it in like sheep though.

  15. Dakiro

    It might not be a very good deal but still remains a good deal.

    Waste problem – are you so sure? Just recently a new reactor, BN-800 was opened. It will burn what you think is waste. So here your argument totally fails already.
    Do you believe that building more renewable source power plants will cost less human lives than building and maintaining a few good and modern nuclear plants, lets say in the next 100 years? Do your maths yourself.

    Solar and wind, any other renewable energy source produces a lot of waste, takes valuable space from green lands, needs access roads (if not on sea). All the considerations about renewables are done using maximal capacity, not what it really produces.

    Hinkley-point – a good thing for stability and certainty of power supply, wish it was cheaper as it could have been. If this and the next governments commits, 100 percent of current carbon-derived electric supply can be replaced with nuclear within the next 10-20 years, not the next 100 as with renewables.

    There is urgent need to build more, cheaper and more advanced nuclear reactors quickly. In the meantime while they are being built, invest good money in research and design of new types – molten fuel atmospheric pressure for example.

  16. blarg1987

    As I said it is something we (i.e. the UK govermnet) should have written into the contract e.g. EDL manufacture the reactor in the Uk etc.

  17. Leon Wolfeson

    Then bill-payers end up footing the price, including the poorest. Better to fund it out of general taxation.

  18. blarg1987

    That is what I agree with, and then later on use the skills we create to lower the cost for all :).

  19. Keith M

    Interesting in other forums that some write France off as a basket case; I would have thought the deal by a French state company is an example of shrewd business and incompentence on the part of the hell bent on privatisation British government.

  20. Keith M

    You need the French.

  21. Leon Wolfeson

    …For *this* generation of reactors, yes.

  22. guest

    Just like Thatcher p!ssed away the tax revenue from north sea oil on joining the ERM at any unrealistic value and on a wave of mass unemployment resulting from the destruction of British industry and a variety of other policies (instead of using the money to set up a sovereign wealth fund)

  23. guest

    There isn’t much energy intensive industry left. Most of British manufacturing was closed down by Thatcher in the1980s.Even the car industry imports most of the energy intensive parts eg engines leaving just 38% actually manufactured in the UK

  24. guest

    (continued)
    and we do need to reduce emissions (nuclear will help achieve that at the

    cost of enormously expensive clean up) but there are much better ways of cutting our emissions.

  25. MartinC

    Thatcher didnt get us into ERM. Thatcher was knifed by the europhile wing of the Conservative party because she was refusing to move toward a federal europe, and because she recognised ERM as being the precursor to monetary union, which it was. John Major took us into ERM after Thatcher was ousted, with exactly the disastrous results that she had predicted. The then Labour party under Neil Kinnock was strongly europhile and would have taken us into ERM too, if Major had not won the 1992 election and got there first.
    Our most energy-intensive industries are probably aviation, followed by construction (concrete/cement and brick manufacture) however these consume fossil-fuels direct and cannot be powered by windmills, although there is still plenty of electric-energy intensive industry left. However, reducing our carbon emissions by 50% will mean exporting all these industries: not flying anywhere, buying cement and steel and aluminium from elsewhere (China). This of course will be an utterly pointless exercise as the same atmosphere blankets us as it does China.
    The Hinckley Point-C reactor strike price of £89.50/MWh is about double the current market price of electricity. I hope the clean-up comes included in that deal. If it doesnt then we’ve been even more royally shafted than I thought, and EdF will be laughing all the way to the bank.
    If there are much better ways of reducing carbon emissions that do not involve a serious reduction in living standards then I would like to know what they are.

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