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.

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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…

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