It’s nearly a month since the EU Commission approved the UK Government’s financial arrangements with EdF to build two nuclear reactors at Hinkley Point. There was always a rather banal inevitability about this decision; despite the fact that the Commission’s initial response had been extremely hostile, it was clear that politics would win the day rather than any fair or transparent decision-making process.
To spare readers the pain of going over any old ground here, there are just two areas to explore in the light of that decision: First, what are the chances of Hinkley Point ever being built, now that this ‘critical hurdle’ has been negotiated? Second, what are the political implications of all this, especially for the Liberal Democrats?
On the first point, the consensus view would seem to be that there will be two spanking new EPR reactors up and running at Hinkley Point by 2023, generating about 7% of the UK’s electricity, returning massive profits to EdF for the next 35 years.
Really?! I simply don’t buy this sloppy consensus. It’s nothing more than a bit of fabricated PR hype from EdF and DECC to try and keep potential investors feeling vaguely positive about the prospects for nuclear in the UK. But it just isn’t going to happen.
There are so many hurdles for EdF still to negotiate, and it’s impossible for the company to draw a line under the £1 billion it’s already spent on getting this far in the process. The Commission’s decision was apparently based on a significant body of new evidence provided by the UK Government, and none of that has yet been reviewed independently. Austria has already decided that it will appeal the Commission’s decision to the European Court of Justice; Germany might still appeal; a number of UK-based renewable energy companies (including Ecotricity and Solar Century) have indicated that they will also bring some kind of legal action.
A new Commission will be in place to consider those appeals from other European countries, and those new Commissioners may be a lot less comfortable with such a shoddy deal than the outgoing bunch, who clearly just wanted to be shot of the whole thing before stepping down.
Even before those appeals are resolved, the National Audit Office will publish its investigation into the subsidy regime that has been agreed with EdF, testing the deal from a ‘value for money’ perspective. This could be very uncomfortable indeed for the Government, with the Environmental Audit Committee already very engaged in a watchdog rôle here, and more and more people questioning the wisdom of converting huge amounts of taxpayers’ money into guaranteed, massively inflated profits for a private company over a period of 35 years. Like for like, every electron generated by Hinkley Point will be eight times more expensive than an electron from a combined cycle gas turbine.
It’s actually really hard for people to get their heads around the magnitude of the subsidy involved here. EdF’s initial costing for the two reactors at Hinkley Point was £10 billion. Then it went to £14 billion. Then £16 billion. But that’s still not the end of it. The Commission’s ruling contained one little bombshell: that the price tag should now be set at £24 billion rather than £16 billion. This is so far off any known scale of cost projections as to make many people question whether Hinkley Point will ever be built.
So is Hinkley Point ‘unconstructable’? That was the word used by Tony Roulstone, a lifetime nuclear enthusiast who runs the Masters in Nuclear Engineering at Cambridge. He himself has severe doubts about the future of the EPR reactor design, and what’s becoming ever clearer is that most people in the nuclear industry now believe the EPR design to be a decidedly moribund if not definitively dead duck.
Apart from the two EPRs under construction at Olkiluoto in Finland and Flamanville in France (both massively over budget and massively behind schedule), it’s China that has held up the flag for the EPR. But no longer. All the signals from the Chinese nuclear industry are that the EPR is so hard to build (and therefore so expensive) that all new nuclear in China will focus on other reactor designs. Even Areva (which owns the EPR design) is no longer actively flogging its own reactor.
This is a pretty grim outlook for anyone thinking about the nuclear industry here in the UK. Chris Goodall, one of that small band of greenies who still believe that nuclear has an important rôle to play in the UK’s future energy system, put it as follows: ‘Perhaps those of us who still believe in the value of nuclear power should pray that sceptical investors refuse to commit their funds to the Hinkley Point project.’
In short, what we have at Hinkley Point are plans for the two most expensive power stations ever planned anywhere in the world, using a reactor design that has never come in on budget, under the management of two companies (EdF and Areva) who have lost faith in their own technology. Further modifications may still be necessary, further ramping up the cost, and the two Chinese companies involved in the partnership are unlikely to be that enthusiastic given the state of play back in China.
Which brings us on to the politics. Whilst it certainly isn’t the end of this particular sorry saga at Hinkley Point, it equally certainly is the end for any claim that the Lib Dems might once have had for either integrity or for any kind of green credentials. And that has real political significance.
Nick Clegg has been severely punished ever since he went back on his pledge on student loans, and that urge to punish the Lib Dems will run through to the General Election. But there’s now another equally powerful reason to punish the Lib Dems: namely, the undeniable fact that they have consistently lied about their support for nuclear power over the last four years.
Just to remind you, this was the pledge: Nuclear power stations would be permitted ‘provided that they receive no public subsidy’.
As soon as the deal with EdF first became known, 18 months ago, it was blindingly obvious to all and sundry that this would entail a massive subsidy from UK taxpayers to a company which is still majority-owned by the French Government. But any such suggestion at the time led to outraged denials, first by Chris Huhne, and since then by Ed Davey.
And that’s what makes the decision by the EU Commission such a double-edged sword for the Lib Dems. For something to be ruled legal by the European Commission, it has first to exist! And what’s been ruled on here is that the funding arrangement does not, in and of itself, constitute illegal state aid. Which, by definition, means that it is legal state aid. Which, by definition, makes it a massive subsidy, as confirmed by the Commission’s decision.
Ed Davey’s second line of defence was that it still wouldn’t be a subsidy if ‘the same level of support was available to renewables’. Not even Ed Davey can now argue that! If the equivalent of £24 billion was to be made available to renewables, over a 35-year period, then the prospects for sustainable energy here in the UK would look very different.
We shouldn’t be naïve about this. Politics is politics, and politicians often have to lie. And it must be unimaginably awful for poor old Ed Davey having to deal with his Tory coalition colleagues:
– with Amber Rudd, whose principal rôle seems to be to out-brag Nigel Farage on her hatred for onshore wind;
– with Liz Truss, who’s still so ill-informed that she thinks that ground-mounted solar farms are incompatible with food production;
– with Eric Pickles, who has on his office wall a map showing how many wind farm proposals he’s killed off on appeal, recently celebrating 50 kills – and 2,000 scarce rural jobs and £500 million of economic benefit in the process.
I made that last bit up – about the map – but you know what I mean. Ed Davey certainly does. And that’s before having to cope with the likes of Owen Paterson and Nigel Lawson.
Until recently, being pro-nuclear didn’t necessarily mean being anti-renewables. I think it’s now clear that the Tories are getting very close to declaring (in their Manifesto) as an anti-renewables party.
As for the Labour Party, it’s still in the same sad place as the Lib Dems: pro-renewables, but even more keenly pro-nuclear. When the EU Commission’s decision was announced, the considered response from Tom Greatrex, Shadow Energy spokesperson, was that this represented ‘great value for money for the consumer’. And he went on to comment that this decision ‘serves as a reminder to the Government that transparency and accountability are important principles’.
This puts Labour in the same league as the Lib Dems when it comes to nuclear mendacity. Think about it. This is a party that spends every waking moment extolling the benefits of the price freeze that it has proposed (despite most experts arguing that it will make no difference whatsoever as far as most low-income families in the UK are concerned), which ends up simultaneously extolling the benefits of a nuclear option that will have a massively detrimental impact on consumers’ bills for decades.
All of which should sound the death knell for that utterly spurious little catchphrase: ‘all of the above’ – the default answer for muddled politicians bamboozled by the question ‘so what’s the best way of ensuring a secure, low-carbon energy future for the UK?’
It’s absolutely not about ‘all of the above’. It’s not about fracking gas as a ‘transition fuel’. It’s not about nuclear energy. It’s not about Carbon Capture and Storage. It’s about renewables, energy efficiency, storage and smart grids. So get used to it!
And the tragedy for Ed Davey is a simple one. Like many others, I don’t believe Hinkley Point will ever be built. But UK energy policy is now so completely dependent on the assumption that it will be built that every aspect of that policy is now ruthlessly focussed on prioritising nuclear above all else. And that means prioritising a near-insane level of public support – to the detriment of everything else.
And particularly to the detriment of energy efficiency – seen by Ed Davey and his ministers as the policy intervention of last resort rather than the ‘first fuel’ that it should be seen as – and particularly renewables. Recent decisions made by Davey (regarding the new Contracts for Difference) and by Osborne (about the Levy Control Framework) have made it very clear to the renewables industry that they’d be well-advised to have near-zero expectations of any kind of fair allocation of available support.
It’s those Contracts for Difference that demonstrate just how desperate Davey has become in his pro-nuclear fantasy. The ‘difference’ referred to is the difference between wholesale prices and the price that the Government is prepared to offer EdF to ensure that the two reactors at Hinkley Point are built. By some warped logic, Davey has come to believe that wholesale energy prices from 2023 onwards will have risen steeply, in the process narrowing the gap between the cost of Hinkley Point and the cost of other generation.
In fact, it’s far more likely that wholesale prices will have fallen steeply, precisely because of improvements in energy efficiency and new investment in renewables – regardless of the Government’s massively unhelpful Levy Control Framework. And that means an ever wider gap between wholesale prices and EdF’s guaranteed price, directing a whole lot more money into EdF’s coffers.
You can’t help but ask what kind of reality-bending nuclear potion Ed Davey must be on. I bet in his heart of hearts, he too believes that Hinkley Point will never be built. He almost certainly won’t be a Minister at the moment when that ineluctable reality kicks in, so won’t have to deal with the consequences of yet another massive, inevitable failure on the part of the nuclear industry. But in the meantime, investment into renewables and energy efficiency will have been far less than it should have been, and we’ll be way off the pace in terms of our climate targets. We’ll have done nothing serious about energy security, and the very people that Ed Davey (and Tom Greatrex) purport to care about will be seeing more of their meagre incomes or pensions converted directly into profits for a secretive, incompetent, government-owned, rent-guzzling monster.
Ed Davey will, in effect, have destroyed the prospects for a prosperous, low-carbon Britain, and betrayed the interests of the poorest, most vulnerable people in Britain in the process. Owen Paterson will be hailing him as a hero.
That’s all some way off. But we’ve still got the real-time question of systematic lying to address. I accept that this kind of systematic lying, over four years, matters to far fewer people than does Nick Clegg’s about-turn on student loans. But right now, those for whom it is an issue are rather important people, with a rather important responsibility in next year’s General Election.
The Green Party is now polling at around the same level as the Lib Dems. It may be a bit different come May next year, but there will still be a lot of people who care passionately about the environment who will be weighing up how best to cast their vote. And why would they not cast their vote for the Greens, given this monumental betrayal on the part of the Lib Dems?
To be honest, I feel a bit ambivalent about this urge to see the Lib Dems punished. I sincerely hope that those Lib Dems who are both excellent constituency MPs, and who have never bought into the Clegg-Huhne-Davey pig in a nuclear poke, do not get punished at the General Election.
But I equally sincerely hope that all those who did buy into that nuclear poke, however regretfully, will get punished at the General Election, by former Lib Dem voters casting their vote for the one party – the Green Party – that has remained steadfast in its principled, intelligent, forward-looking opposition to this nuclear nightmare.