From dithering over nuclear power to promoting the virtues of wind, the UK government's energy policy is running out of steam.
Three months ago, the UK government faced a crisis decision about British Energy.
British Energy owns and operates eight nuclear power stations, which, together with BNFL’s Magnox stations, generate over 20 percent of Britain’s electricity. The government had a choice: would it bail out the ailing company with state aid, nationalise it, or let it go to the wall?
But instead of making a long-term decision about British Energy’s future, the government granted it a temporary loan of £650million to tide things over.
Three months on, the loan ran out, and British Energy faced another crisis. It was decision time for the British government again. Threats were made over renationalisation and the need for restructuring, but the decision was taken to extend the temporary loan for a further three months….and on it goes.
The failure to make clear policy on British Energy typifies New Labour’s approach to the nuclear industry. This lack of clarity destroys the possibility of long-term nuclear planning, forcing the nuclear industry to operate on a day-to-day basis and compounding the difficulty of making investment decisions.
British Energy’s difficulties are as much do to with financial engineering as nuclear engineering. This became clear in November 2002 with the replacement of chairman Robin Jeffrey, who made his career in the nuclear industry, by Adrian Montague, a lawyer-turned-banker with government connections.
The extension of government aid is conditional on British Energy ‘restructuring’. But so far, such restructuring has meant little more than playing ‘financial gymnastics’ with British Energy’s corporate structure, in a desperate attempt to keep the company out of big trouble (1).
So British Energy will sell off its Canadian business, renegotiate contracts with BNFL, and carry out a debt-for-equity swap. But unless the government takes more decisive action, it is hard to envisage the advance and modernisation of nuclear energy.
Greenpeace has teamed up with the private renewable electricity generator Ecotricity to challenge the government loan to British Energy as ‘illegal aid’ under European Commission rules. Ecotricity paints itself as a brave free marketer, complaining about the government’s ‘distortion of the market’. But like other free marketers, it is state support for its competitors that Ecotricity really objects to, not state intervention as such (2).
The reality for all electricity generators is that economics is closely entwined with government regulation. British Energy moved out of retail sales at exactly the time when new government-backed rules made it hard for anybody to make money in wholesale. And despite producing no carbon dioxide, nuclear power has to pay a ‘climate change levy’ because…the government says so. Also, nuclear power stations pay anomalously high local taxes, running into tens of millions of pounds. With all these rules and regulations, British Energy’s management really are at the mercy of government whim.
In contrast to government indecision over the nuclear industry, even Greenpeace has a clear policy on the issue. Greenpeace’s solution, to shut down the nuclear industry and replace it with wind, may be unrealistic and undesirable – but it does at least have the virtue of being a definite proposal.
In an attempt to demonstrate the feasibility of closing down Britain’s nuclear industry, Greenpeace commissioned a study from energy consultants ILEX. ILEX found that renewable energy is not a viable alternative, but that Britain’s nuclear power stations could indeed be phased out in two to three years. All that would be required is the construction of gas-powered stations to replace them, together with bringing mothballed old gas stations back into service….
ILEX estimated that this scheme would raise the wholesale price of electricity by 50 percent – a price that Greenpeace thinks it would be worth us paying, as it would make expensive renewable power more competitive (3).
Despite ILEX’s hairbrained scheme to bring back gas stations, its assessment that renewable energy is not a viable alternative is a realistic one. The most widely touted source of renewable energy is wind. According to the British Wind Energy Association, there are 974 turbines at 75 sites in the UK. But even when working at full capacity, all these turbines would be equivalent to about half a nuclear power station – and since wind blows on and off, they can only provide about a third of the energy generated by half a nuclear power station (4).
These facts and figures haven’t put off advocates of wind power – even those within the Cabinet. This includes former UK energy minister Peter Hain, now secretary of state for Wales, where there is much debate and disagreement about the building of wind farms. Hain, among others, wants to replace nuclear power with wind.
In the nuclear debate, the government follows the advice of green sociologists who insist that the views of anti-nuclear protesters, however irrational, must be respected. So politeness trumps science. But when it comes to wind, Hain uses blunt language that would shock the sensitivities of Friends of the Earth or Greenpeace (5).
‘We’ve got to end the curse of nimbyism, which is really like a plague, or we will end up with, whether we like it or not, more nuclear-power stations’, he says, dismissing concerns that wind turbines disfigure the countryside, are noisy, and inefficient (6).
Nuclear power is an essential part of modern infrastructure. In addition to generating electricity it provides a wide range of scientific, medical and industrial benefits. The danger today is that rather than advancing to the next generation, nuclear technology will be left to stagnate.
British Energy’s financial difficulties are real ones – but in the long term they are not its greatest challenge. The nuclear industry is one of the most over-regulated in the world, as a result of absurdly exaggerated fears of radiation, and now the new fears of terror attacks.
Nuclear energy has great potential, but it is not a technology that can be pursued in a piecemeal way. The government relies on nuclear energy, but refuses to back it. If it doesn’t get its nuclear policy in order, the government might one day find it can rely on nuclear power no longer.
(1) British Energy rescue to cost taxpayers £3bn, Independent, 29 November 2002
(2) British Energy, State Aid, the High Court & the EC Treaty, Greenpeace, November 2002
(3) The closure of British Energy’s nuclear power stations, Greenpeace, November 2002
(4) British Wind Energy Association
(5) See How offshore wind in East Anglia could supply a quarter of UK electricity needs, Greenpeace, July 2002
(6) Shut Nuclear stations – Hain Western Mail, 25 November 2002