Left Foot Forward understands that via complicated, structural measures, the government is planning on green-lighting a multi-billion pound taxpayer giveaway to the nuclear industry.
“Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects…
“And also provided that they receive no public subsidy.”
That’s the Coalition Agreement on nuclear power. It’s pretty clear – no taxpayers’ money for new nuclear power.
Energy secretary Chris Huhne – who in opposition called nuclear power a “failed technology” – elaborated on this shortly after taking the job, telling The Times (£):
“I have explained my position to the industry and said public subsidies include contingent liabilities.”
But Left Foot Forward understands that via complicated, structural measures, the government is planning on green-lighting a multi-billion pound taxpayer giveaway to the nuclear industry.
Here’s how:
Firstly, Chris Huhne has:
“…agreed to reduce the risk to industry of building nuclear plants by setting a fixed price for disposal of waste.”
This transfers the huge risks associated with nuclear power to taxpayers. As the Oxford Professor of Energy Policy, Dieter Helm, explained back in 2008:
“It’s a fixed-price contract for the government to take the waste. The government absorbs the final-end risk.”
Helm has said recently Mr Huhne’s pledge not to subsidise nuclear plants is “more rhetoric than substance”; he told (£) The Times:
“There has never been a nuclear programme which is entirely funded by the private sector.”
Secondly, as The Sunday Times explained (£) back in May:
“The government is planning to rig the carbon trading market in a move that will encourage the creation of nuclear power plants.”
Peter Atherton, head of European utilities at Citigroup, said:
“Putting a floor under the power price would effectively transfer risk from the nuclear developer to the electricity consumer.”
That sounds a lot like a subsidy. Today the Financial Times published new findings showing the nuclear industry could receive a £3.43 billion windfall this way between 2013 and 2026 via a plan outlined in Mr Huhne’s new energy market reform proposals.
There is nothing intrinsically wrong with introducing a floor price for carbon. It could even be a good idea – offering greater support for clean energy projects and improved energy efficiency. But it should not be used as a backdoor way of giving taxpayer support to a nuclear industry that has already benefited from more than £10 billion in public support in the last decade and that has proven that it can’t stand on its own two feet.
For example, in 1995 the Sizewell B nuclear power plant was completed at a cost to electricity consumers of more than £3bn, yet a year later when the newer nuclear plants were privatised as British Energy, it and seven other nuclear power plants of about the same size were sold for only about half this cost.
In 2002, despite acquiring eight nuclear plants for a fraction of their construction cost, British Energy went bankrupt and was saved only by the government committing £10bn of taxpayers’ money.
The government should find ways to avoid channelling our money into the black hole that is the failing nuclear industry, especially at a time when Ministers say there is such need for cut backs. Green campaigners including WWF point out windfalls for nuclear utilities could be avoided via a windfall tax on those companies to claw back these revenues.
30 Responses to “Ministers are breaking their promise on subsidies for nuclear power”
Peter Wood
@John Busby
For more information on how a price floor works, there are several posts on my blog ‘Climate Dilemma’, which you should be able to access by clicking on my name. You may also want to read
Wood, P.J., Jotzo, F., Price floors for emissions trading. Energy Policy (2011), doi:10.1016/j.enpol.2011.01.004
There are two ways to implement a price floor: one approach is to have a reserve price at auction, as you mention. The UK approach is a different one – as well as firms paying for EU ETS permits based on their emissions, they also pay an extra fee/tax based on their emissions. This extra tax will be based on a reformed ‘Climate Change Levy’ and applied to fossil fuels. Under this approach, the effective carbon price is the sum of the EU ETS permit price and the UK Climate Change Levy.
John Busby
@Peter Wood
With the passing of a global “all-oils” production peak in 2008, we are seeing the resultant price rise in oil products, which will mean that gas and coal prices will follow. Electricity generation is not the only emitter of carbon dioxide, so to add to industries costs with not just permits but an additional levy will be totally unacceptable.
Even so the concept of a “floor” price has arisen because of the demands of EdF to DECC and parliamentary committees for it as prerequisite for new nuclear build in the UK. Even so this has proved to be insufficient incentive for RWE and E.On and now there are FiTs, capacity grants and an imposition of emission standards added to the basket of subsidies.
The actual total of the “floor” price and the levy/tax needed to make nuclear an “economic” investment is so far not specified, but as nuclear generation costs three times its fossil fuel competitors, it will be astronomically high. As it usually takes ten years to build a nuclear plant, by the time it could be earning at the enhanced tariffs produced by the levies on its competitors, the same competitors will have threatened closure and to avoid the lights going out the whole system will have been suspended.
The rise in fossil fuel prices over the next ten years will reduce economic activity and the associated emissions without resorting to carbon trading, which in any case appears to be on the way out.
Daniel Elton
We originally described Dr Dieter Helm as staunchly pro-nuclear. We have withdrawn this as Dr Helm describes himself as technologically neutral.
Coalition subsidy for nuclear could spark major political fallout | Left Foot Forward
[…] to say, this all makes a mockery of the coalition pledge to provide no public money for new nuclear builds – and the political implications should not be underestimated. Before the 2010 general […]
gareth clubb
Taliadau cudd i'r diwydiant #niwclear http://t.co/YehRRAh