Monday, 21 October 2013

Read my lips. No nuclear subsidies

Picture the scene.  There we were, May 2010, exhausted, flushed, staggered, the Lib Dems taking part in the special conference at the National Exhibition Centre in Birmingham, to agree the coalition on the terms offered.

I was so staggered myself that I lost my diary (email me if anyone found it, I'd like to know what I was supposed to be doing for the rest of 2010).

At some point during the business of wandering round the fake corridors and escalators that bedevil conference centres of all kinds, I was hailed by Chris Huhne, the new Secretary of State with responsibility for delivering a greener energy policy.

I turned around and saw him at the top of the escalator, and remember thinking that I had never seen anyone look so exhilarated - as well he might, joining the Liberal Democrats decades before and finding himself in the cabinet.  He was also, as we know now, in love.

I knew, of course, as we all did, that the chances of him delivering a genuinely green energy policy were remote.  The political difficulties were immense, and certainly haven't reduced since.  But I believed that he would be able to shift the wasteful, creaking old monster we know as UK Energy Policy in a greener direction - and that it would help re-balance the economy too.

There was a problem: he would clearly not be able to adopt a strict Lib Dem position on nuclear energy, but there would be conditions, as Chris Huhne spelled out from the rostrum.

I was probably more reassured than I was by any other remark - in fact it is the only sentence I remember from the whole day.  This was the moment when he borrowed from George Bush Sr: "Read my lips," he said.  "No nuclear subsidies."

I am sure that, at the time, he believed this.  This is not an attack on his honesty, or an attack on Huhne at all - he is a huge loss to frontline politics.

But what are we to make of this morning's announcement of the deal with French company EDF, giving it a guaranteed price for electricity for 35 years amounting to a subsidy of somewhere around £1 billion a year (if electricity prices stay the same)?

Everyone knows that nuclear energy would be impossible without some kind of guarantee, and I seriously doubt whether EDF will ever make money even on that one.  But that was not what we promised ourselves - let alone anyone else.

The party's embarrassing new policy repeats the same glib non-position - no nuclear subsidies, when that is precisely what is now being agreed.

Don't get me wrong.  I support the coalition.  I think Ed Davey is doing an impressive job in the increasingly embattled position as Secretary of State for Energy and Climate Change.  I know how hard he has worked for a better deal on the new Hinkley Point nuclear power station.

I also know that everything now depends politically on denying that the fixed price guarantee is a subsidy.  It is - and it isn't the only one: there is another subsidy in the insurance against nuclear accidents and in the storage of nuclear waste for some centuries to come.  There are also loan guarantees to EDF.

It also needs to get through rapidly-changing EU regulations about energy subsidies, currently being taken apart by the Germans.

But it is the opportunity cost which enrages me.  Billion-pound-a-year subsidies are not that common, and imagine what we could do to the UK economy if that money - about £37.5 billion over 35 years - went into making the UK the manufacturing centre for renewable energy for the world.

And imagine, if we did so, how much lower our power bills would be at the end of it.


neil craig said...

There is no subsidy of nuclear, indeed the opposite. Hinkley costs £16 bn and takes 10 years but an equivalent pair in China is costing $7.5 bn (£4.5 bn) & in 3 years. With nuclear already cheap that means 90% of the cost is state parasitism and 100% of the subsidy is going to the parasites.

If that cost differential is true I do not think it is possible for any honest LabConDem to deny it, on the other hand I do not expect many of them to prove in any way honest.

Donnachadh McCarthy said...

It gets worse David.
Michael Fallon says they want 12 new reactors.
12 x 35 x £1 billion = £420 billion !!

Imagine how we could actually eliminate energy bills for ever for the poor with that kind of investment in home efficiency and renewables...

One of the blackest days for Liberal Democracy in years...

Added to the support for fracking, disastrous collapse of insulation industry due to awful green deal and abolition of Warm Front and the tax breaks for oil exploration and loan guarantees for Brazilian deep sea oil exploration, Shell holding workshops in all relevant departments including LD departments and you have the Lib Dems aiding and abetting a disastrous anti-green policy with only the renewables subsidies left that Miliband bequested them... even the Green Bank is being used to likewise tie councils into disastrous long term incineration programmes instead of waste reduction... game set match to The Prostitute State's lobbyists...

Joe Otten said...

But renewables all get a higher strike price for doing the same job. And who really thinks fossil fuels won't get more expensive and merit higher carbon charges?

neil craig said...

Who, who knows anything about the subject, thinks fossil fuels will get more expensive? Coal is falling in price and shale gas has reduced US gas prices by 2/3rds and has barely started. And what "merit" is there is taxing something which increase crop growth as CO2 does?

David Boyle said...

Joe, I know that renewables also get a subsidy in the form of a guaranteed price. The difference is in degree: at the same rate that Hinkley Point is being subsidised, the total extra costs imposed on us all are vast.

Neil, I tell you what. Let's agree to convene here in a year's time, and then we'll see whether fossil fuels cost more or less.

neil craig said...

Fair enough David.

What you are doing, though I suspect you are ignorant of it, is a reprise of the Simon Ehrlich bet.

Julian Simon was a liberal (in the proper meaning of the word) economist who, like me, believed in human progress.

Paul Ehrlich is a much lauded (not least by "LibDems") ecofascist who has predicted all sorts of humanity destroying catastrophes and incautiously dated them for dates that have now passed.

Guess who was proven right.

David Boyle said...

Neil, thanks so much for your reply. I suppose all I can say is that the extrapolation of trends - on either side - never seems to lead to the results the extrapolators predict. I suppose e might disagree about the threats to humanity, but maybe agree that human ingenuity is able to rise above extrapolations...

Mark Treveil said...

My understanding is that the production of solar panels et al has been blitzed by the Chinese in recent years. Even the Germans were complaining about unfair competitions and supposed 'dumping'.

The Chinese, with their scale, slave-labour, and gay abandon when it comes to H&S, will always be cheaper to make anything. Until their is a social revolution (which will come) we will struggle to be a world production centre.

I expect the reactors are cheaper in China because they are built by Chinese people, not Brits. Not directly to do with the involvement of the Government.

I haven't seen the details of the Hinckley deal, but I presume that the cost of the build is being recouped through the higher prices? It's an interesting strategy, and quite risky for the builders.

Do they have certainty that that the government will buy the power in the first place?

I think pundits need to do their sums properly on this before believing they have informed comment. Sometimes, like the tube maintenance deals, these things are not a free lunch for the supplier.

There is undoubtedly an element of crystal ball gazing in this deal, but that is probably where we are now: years of sweating the investment in out of date power stations, and a massive budget deficit.

Sorry, but renewables really aren't going to run factories in the near future.