Two cheers for nuclear
The UK government has sealed a deal for new nuclear power stations. About time, too.
Pop the corks: nuclear is back! The UK government has finally agreed a deal (subject to EU approval) for the building of two new nuclear reactors at Hinkley Point, already home to two ageing reactors. Due to be completed in 2023, Hinkley Point C should provide up to 3,200 megawatts (MW) of electricity – equivalent to seven per cent of UK electricity demand. It’s been quite a wait. The last new nuclear station to come online in the UK was Sizewell B in 1995.
After years of attacking nuclear, then offering mere permission for new nuclear build, the UK government has finally admitted that nuclear energy is needed and it requires substantial financial support. The new station will cost a cool £16 billion. However, rather than simply build the power stations itself, it has agreed to pay a high price for the electricity generated, offering the operators – EDF and its partners – at least £92.50 per megawatt hour (MWh). The only way this looks good is in comparison to renewables; offshore windfarms currently receive £135 per MWh. The difference is the tie-in: Hinkley Point C will receive that inflated price for 35 years; offshore windfarms only get the guarantee for 15 years. By comparison, electricity generated from coal and gas currently costs £55 per MWh.
This could be the start of a renaissance for nuclear power in the UK. Included in the current deal is the potential for another nuclear station at Sizewell. Other groups are waiting in the wings to agree deals for new stations at Anglesey and Sellafield.
But it’s hard to shake the feeling that we’re paying over the odds. EDF claims it will make a return on its investment of just 10 per cent per year. But looked at another way, it’s a great deal for EDF. As one Telegraph writer puts it: ‘Accumulated revenues over the contract amount to £83 billion – not bad for an asset meant to cost £16 billion and with very low operating costs once built.’
The deal highlights a few obsessions of recent government policy – and not healthy ones, either.
The first is that nothing must appear ‘on the books’. We’ll all be paying for Hinkley Point C through our electricity bills rather than through government subsidy. But would it not have been cheaper for the government to simply build the new plants itself rather than having to factor in enormous incentives to get the private sector to pay for it instead?
Which brings us to another problem: the loss of faith in the state as a progressive force in the economy. It is now assumed that anything the state does directly will be expensive and late. Which is ironic because projects for building nuclear reactors of the kind planned for Hinkley Point – in Finland and France – are, er, expensive and running late. But there is a role for the state in building capital-intensive infrastructure like nuclear power stations where the payback time makes it hugely expensive for private-sector companies. (Sadly, this loss of faith in the state does not apply to our private lives, where the state apparently sees no limit to involving itself.)
Above all, the deal illustrates the current obsession with low-carbon power – at almost any price. At a time when many households are struggling with energy bills, and with the UK’s big six energy companies all announcing price rises of around 10 per cent, the government is committing through this contract to increasing prices still further. The Department for Energy and Climate Change (DECC) claims Hinkley Point is actually a good deal: ‘Building a new fleet of nuclear power stations could reduce bills by more than £75 a year in 2030, compared to a future where nuclear is not part of the energy mix.’ But this is only on the basis of an ever-rising share of low-carbon energy and financial disincentives being placed on coal and gas. The state may shy away from building anything, but it does love to regulate and rig markets to meet its pet concerns.
All that said, at a time when Germany, Japan and Italy have turned away from nuclear power, the announcement of new nuclear power stations in an ‘old’ developed country is good news not just for people in Britain but as an example to other countries. Nuclear power is very safe and reliable, even if it is somewhat more expensive than coal and gas right now. Concerns about climate change aside, having diverse energy sources is generally a good thing and nuclear power is certainly less messy than coal.
In fact, any positive decision to build reliable new energy infrastructure is a relief after years of prevarication by successive governments. So, for all the problems, Hinkley Point C is a deal worth celebrating.
Rob Lyons is associate editor at spiked.
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