Make No Mistake, the Government Wants to Subsidise Nuclear - And It Will Cost Us Dear

08/02/2013 10:03 | Updated 09 April 2013

There is far too much secrecy around exactly how much taxpayers will have to cough up if Ministers get their way.

In the 2010 Coalition Agreement, the government pledged that, even though it was openly committed to a new generation of nuclear power, there would be "no public subsidy" for it.

Yet with the unveiling of plans for Contracts for Difference, a carbon price floor and other measures as part of the Electricity Market Reform (EMR), it has become increasingly clear that ministers are now set on gifting huge windfall payouts to nuclear generators.

Negotiations are currently taking place between the Department of Energy and Climate Change and new nuclear suppliers to fix a 'strike price' in advance of the EMR legislation.

Not only do these talks pre-empt the legislative process in a way which suggests commercial interests are being given priority over democratic decision-making - they also reveal an alarming degree of secrecy around exactly how much public money will be thrown at this increasingly expensive technology.

In the current climate, given that pretty much all other energy firms have pulled out of UK nuclear, the primary beneficiary of the "subsidy by another name" policies will be the French state-owned nuclear company EDF.

EDF looks set to receive billions of pounds to cover the cost of the new power station at Hinkley Point in Somerset, particularly if secretive proposals to underwrite construction costs, or even waste or accident liabilities, are successful.

If the proposed investment at Hinkley goes ahead - at an estimated strike price of £100/MW and on a 30 year contract - it will require a subsidy of £1 billion a year above today's wholesale electricity price.

In other words, this is £30 billion over that period going straight from British households and businesses to EDF. And if the 16GW of new nuclear anticipated by energy secretary Ed Davey were to be financed on similar terms, it would cost householders and businesses £150 billion by 2050.

As well as failing to show how this could possibly represent good value for money, coalition ministers have failed to explain how their parallel policies for bringing down the wholesale price of electricity are supposed to be compatible with the EDF handouts.

If DECC's policies to lower the market price of electricity succeed, the amount of subsidy going to EDF would have to increase yet further - by signing up to a fixed price, the contract would surely then eliminate any benefit to consumers that might otherwise result from lowering the price of electricity.

Time and again, we've seen the power that the nuclear lobby wields in Whitehall. Most recently, the nuclear spin doctors appear to have been trying to persuade the public that a nuclear phase out in the UK would automatically lead to more polluting coal.

In fact, the Emissions Performance Standard for power stations included in the government's Energy Bill - while it does need serious strengthening - should rule out new coal fired power stations completely.

And when pro-nuclear voices draw on the example of Germany, which began to phase out nuclear after the Fukushima disaster, they don't tell the whole story.

While there has been a spike in coal burning since then, this is largely due to the EU carbon price collapsing and gas prices rising - making it cheaper to burn coal and lignite than gas. Right now, Germany's renewable energy boom is displacing gas, rather than coal.

Moreover, since the decision to phase out nuclear, no new coal plants have been proposed and some have even been cancelled.

Nor do they mention the fact that Germany remains committed to its renewables, efficiency and climate targets - which are more ambitious than ours - and already delivering benefits in terms of jobs, revenue from energy exports, and lower market prices for electricity.

They are also quiet about last year's study by VDE, the German Association for Electrical, Electronic & Information Technologies, which found that Germany's plans to phase out nuclear by 2022 - and to increase the share of renewable capacity from 25% in 2012 to 40% by 2020 - should actually result in there being no place for coal as base load power in around a decade.

With the huge benefits of investing in renewables, energy efficiency and demand reduction becoming ever more obvious, it's clear that there needs to be far greater scrutiny of the policy decisions that are propelling Britain towards a nuclear future.

The government should now halt the nuclear contracting process and allow the Public Accounts Committee, for example, to examine whether public subsidies for nuclear - let alone the vast sums being offered to EDF - are the right solution to deliver affordable, sustainable and secure energy for the UK.