January Newsletter No196

Posted by SONE on 30 January 2015 in Newsletters

An energy world full of contradictions

We live in a world of extraordinary contradictions, particularly if we work in the energy sector. In the UK a ten-year life extension for an important nuclear plant has just been announced while in Germany utilities have revealed that they are claiming billions of Euros from the Government, which happens to own them, for shutting reactors down prematurely.

In the UK one of the key fringe parties in the May General Election, the United Kingdom Independence Party (UKIP), has declared itself an enthusiastic supporter of nuclear energy while another, the Green Party (equally important as a potential coalition partner for one of the larger political parties) remains an opponent, although possibly not as fervent as it once was.

Not only that, but Nigel Farage, UKIP’s Leader, and Jean-Claude Juncker, President of the European Commission, who don’t normally agree on anything, have made statements expressing similar views on the need for nuclear energy, which they both want to see expand and prosper.

Meanwhile, the delegates at the UN climate change talks in Lima agreed to disagree, at least for the time being. Paddington Bear left deep, darkest Peru with his battered suitcase holding very little and the 194 countries represented at this eagerly awaited climate change summit left Peru pretty well empty handed too. They did agree there was a problem but contradicted each other about who was to blame and what should be done about it.

First the good news, the announcement by EDF Energy that it is to extend the operating lifetime of Dungeness B, its two-unit advanced gas-cooled reactor (AGR) plant and continue generating electricity until 2028. It has also signed new contracts supporting the ongoing operations of its UK fleet.

The Dungeness plant’s life extension is part of EDF Energy’s strategy to keep its nuclear fleet in operation until at least 2023 – the date that its planned new nuclear plant at Hinkley Point C is due to be commissioned (and not 2020, an earlier forcast I used in last month’s Newsletter).

“This means existing nuclear plants can hand over directly to the next generation of nuclear power stations without the need for more fossil fuel generation,” EDF Energy’s Chief Executive Officer, Vincent de Rivaz, said when the extension announcement was made.

The life extension follows a £150 million investment programme at Dungeness B, including a £75 million upgrade to control room computer systems and enhanced flood defences costing £8 million. Extensive reviews of the plant’s safety cases have been carried out and the plant will also be subject to continuing independent safety reviews by the UK’s Office for Nuclear Regulation (ONR)

EDF is currently investing around £600 million a year in its eight UK nuclear plants. The case for investment in Dungeness B and the company’s other nuclear power stations has been supported by the existence of the UK’s electricity capacity market, which EDF regards as giving investors confidence in “highly challenging conditions”.

The capacity market is intended to ensure security of electricity supply by providing a payment for reliable sources of generating capacity, alongside their electricity revenues, when required. This is meant to encourage the investment needed to replace older power stations (and to keep some of them operating it seems) to provide back-up for more intermittent and inflexible low carbon generating systems such as wind turbines and solar panels.

EDF may also benefit from the announcement made by Mr. Juncker that major nuclear energy projects are included in a list of priority investments which could be financed through the European Investment Bank as part of a 315 billion Euros investment plan. Among the projects on the list are the nuclear new build power stations planned for Moorside, Wylfa and EDF’s Hinkley Point C project.

The EU’s latest signal of support for nuclear energy comes hot on the heels of its approval for UK Government aid to be provided for Hinkley Point C, Britain’s first new nuclear power station for 25 years, a decision which not everyone expected.

And more good news is on the way for the Hinkley Point C project according to my old paper, the Financial Times.

The FT says that a final investment agreement between EDF and the China General Nuclear Power Corporation on the construction of the two Areva EPR reactors planned for the Hinkley site could come as early as March.

How EU support for an expansion of nuclear energy will resonate with Angela Merkel, the German Chancellor, can only be imagined. She is stuck with a coalition inspired programme for the complete closure of all Germany’s nuclear power stations and that could prove very expensive, economically and environmentally.

Last month EnBW announced that it was suing the German federal government and the state of Baden-Wurtemberg over the unlawful shut-down of two of its reactors four years ago. As the government and the state own 99.6 per cent of the company that is a somewhat unusual situation to say the least.

This latest legal action joins a raft of cases which challenge every aspect of the German nuclear shut-down programme. The total amount of compensation sought to cover the cost of a punitive nuclear fuel tax and the premature closure of eight reactors could be as high as 30 billion Euros, the size of the provisions put aside by the four utilities involved in claims.

The German state’s apparent determination to end the use of nuclear energy has led to the country becoming one of the biggest importers of gas, coal and oil in the world and a near fanatical manufacturer, builder and exporter of wind turbines. Germany talks green and carries on burning brown coal.

The nuclear hokey cokey

It should be noted, however, that Germany’s nuclear energy policy has changed several times over the years as the shape of its various coalition governments has altered. Broadly speaking it has been a case of Greens in nuclear out, Greens out nuclear back in favour as part of some sort of political fudge. You put your

Green team in, your Green team out, your Green team in and you shake it all about… It’s one way to run a government I suppose.

Don’t think it can’t happen in the UK either, although it does seem unlikely. There are some very strange manoeuvres taking place as the politicians wend their weary and wearisome way towards the May General Election and almost certainly more to come

There was an early skirmish in January as the political parties hitherto seen as

the major ones flexed their muscles over who should and who shouldn’t take part in televised election debates before the General Election after David Cameron

had threatened to boycott any debate unless the Green Party had a seat round the table.

At the height of the row in mid-January Ed Milliband, Nick Clegg and Nigel Farage shot off identical letters to Cameron. They urged him to drop his demand for the Green Party to be allowed on to our television screens with the four of them. One alternative, they suggested might be for the Prime Minister himself to stay away, represented by an empty chair and watching a debate involving just the three letter writers from an armchair in Downing Street.

Duck – The chickens are flying

“Chicken” has become a much over used word in this debate about a debate. The

Prime Minister was accused by the gang of three of playing chicken by trying to

duck the debate altogether with his insistence on the presence of a Green Party representative (and yes, the duck and the chicken did put in an appearance). David Cameron, in turn, charged them – and particularly Ed Milliband – with being chickens and running scared of losing votes to the Greens.

To confuse the matter still further I distinctly heard Norman Smith, the BBC’s political correspondent, throw in a reference to Monty Python’s dead parrot joke in one of his broadcasts on the issue. That just about summed it up. I found it all a bit silly and childish and I’m convinced that a high proportion of the electorate felt much the same. It just shows how desperate the larger parties have become as the moment of truth approaches and we prepare to go to the Polls.

The unedifying spectacle began when Ofcom, the media regulator, published a draft guidance note in January indicating that it felt that UKIP should be treated as a “major party” at the election, but not the Greens. The note upset the Greens (and the Scottish National Party and Plaid Cymru for that matter) and it most certainly upset the Prime Minister.

He took a somewhat spiteful swipe at his coalition partners, the Liberal Democrats, whom I assume are still in government with the Conservatives even if it’s not too obvious. If the Green Party was a minor party and therefore not entitled to be on the telly so was the Liberal Democratic s party, given the apparent collapse of its vote, Mr. Cameron said. That must have really stung.

Strictly speaking the Ofcom guidance note does not directly affect which party leaders are invited to take part in the TV debates, which is a matter for each broadcaster to decide. Ofcom’s broadcasting code simply requires that “due weight must be given to the broadcast coverage of major parties during the election campaign.” So what constitutes a major party?

Ofcom’s view is that UKIP has now joined the magic circle and the Greens have not. Its reasoning is that support for UKIP was running at an average of 15 per cent in the opinion polls last year, while the party won 29 per cent of the vote in last year’s European Parliament elections.

By contrast, Ofcom said, the Green Party had “not demonstrated significant past electoral support in general elections” and still had only 4 per cent support in opinion polls last year. (It’s doing much better as I write).

On hugging trees and huskies

The Prime Minister,“Tree hugger Dave” as he was called after calling for a carbon tax five years ago and dressing up in a duvet and driving a dog sled across the Arctic a few years later is no longer seen as any sort of

environmentalist, if he ever was. So why is he so keen on the Green Party having a place at the broadcasting table? “It’s politics stupid” seems to be the answer.

The Prime Minister clearly believes that the Green Party might take critical votes

away from Labour and the Liberal Democrats but not the Tories while UKIP might steal some Tory votes if Mr. Farage performs well during a TV debate,which is why Labour and the LibDems want him in the TV studios. Mr. Cameron doesn’t expect many Tory votes switching to the Greens in any circumstances and certainly not as a result of having a relative unknown on TV. That seems a bit risky to me.

Gordon Brown probably thought that the Liberal Democrats wouldn’t dent his chances of an outright victory at the last General Election before the TV debate which catapulted Nick Clegg into public prominence and the Deputy Prime Minister’s office in Downing Street.

The real message from this bit of nonsense is that over the next few months the politics of environmentalism rather than its ideas will come to the fore. Because of this the minor parties, no matter how you define them, have the parties we have traditionally seen as the major ones – Conservative, Labour and Liberal Democrats – distinctly worried. Worried politicians are more difficult to predict and that must be a matter of some concern for SONE.

When push comes to shove there may even be politicians who become more interested in remaining in office than in pursuing policies which they believe in and appear to support if they are opposed by fringe parties with a few useful Commons votes to trade. They may not need many votes either if the opinion polls currently showing the Labour and Conservative parties running neck-to- neck are correct.

UKIP’s enthusiastic endorsement of nuclear energy comes as a breath of fresh air when compared with the rather more timid support expressed by the three main political parties.

“We believe that nuclear is a vital part of the energy mix,” UKIP says. “Despite the black propaganda of the green movement and the quite understandable concerns of the public following the Fukushima incident, nuclear remains the safest mainstream generating technology available – far safer than coal or hydro.”

UKIP isn’t at all keen on renewables either, especially wind turbines. “No wind turbines would have been built in the UK without massive subsidies. They’re not farming wind at all – they’re farming taxpayer subsidies.”

Power at any price

Having already said that I can see UKIP joining forces with the Conservative Party in government it’s only fair that I consider other possible coalition permutations and the effect they might have on the chances of a full-blown nuclear energy renaissance.

The Labour Party may hope to attract the support of the rather fewer Lib Dems

expected to make it back to the Commons, minus Nick Clegg, who is not at all popular with Labour and the Lib Dems have never been that keen on nuclear energy.

Labour’s other possible partner is the Scottish National Party, which is expected to do well – at Labour’s expense – north of the border and has said that it won’t join a Conservative coalition at any price.

The Scots Nats have also said that they don’t want any new nuclear power stations built in Scotland but as far as I’m aware no-one has that in mind so that shouldn’t be a problem. In any case the Scots are likely to be preoccupied with the problems of another form of energy, North Sea oil, the value of which has slumped dramatically.

The Scottish National Party may have something to offer, by way of coalition votes, but they also need something, the continuing support for the Scottish economy during the oil price crisis which they get from being part of the Union. To me that suggests the possibility of a compromise over nuclear energy is in the air.

Plaid Cymru has adopted the same “no nuclear here” stance as the Scots Nats. Sort of. It seems prepared to let its members who live in the area where the new Wylfa power station will be built to make up their own minds – and they support the project. Plaid Cymru has said that it won’t join the Tories in coalition but might join Labour. As its leaders seem to say different things at different times, however, it’s difficult to read the Plaid entrails.

The Green Party is, well, the Green Party. The message from its entrails is not in doubt – or so it seems. It remains opposed to nuclear energy even though leading environmentalists now support it but would accept carbon captured coal as an interim measure as the UK moves towards an electricity system based solely on renewables.

Nowhere in its extremely long energy policy document does it explain how the problems caused by the intermittent nature of wind, wave and solar electricity generation will be overcome without recourse to a consistent and continuous energy supply such as that provided by nuclear energy. It’s a pity their hot air can’t be harnessed.

To be fair, when she was interviewed by Andrew Marr in mid-January, the Green Party’s Leader, Natalie Bennett, didn’t mention civil nuclear power at all, limiting herself to a call for the Trident nuclear weapons programme not to be renewed next year. Could it be that the Greens are edging towards a new nuclear position, concentrating on a more winnable “ban the bomb”campaign

rather than its traditional “nuclear power no thanks” position on electricity generation.

On balance I think it’s most unlikely that any of the four political parties regarded by Ofcom as the main ones would really sacrifice their support for nuclear energy if a minority anti-nuclear party wormed its way into government as a coalition partner. Such a union might, however, delay the nuclear renaissance we have come to anticipate. Our political leaders support for nuclear energy may have been buoyed by the results of two recent opinion polls which have shown encouraging growth in public support for nuclear energy.

A YouGov poll carried out on behalf of the Nuclear Industry Association summarises the views of 2015 adults who were questioned between 10 and 17

November last year and indicates that support for the construction of new nuclear power plants in the UK has grown by more than 10 per cent over the past decade. Support now stands at 45 per cent.

More than two thirds (68 per cent) of those who suppport the construction of new reactors to replace existing ones do so because of concerns about the UK’s energy self-sufficiency, the NIA poll shows. Some 66 per cent said they believe new reactors could reduce reliance on coal and gas.

The reliability of electricity supply from nuclear power plants was named as the main reason for supporting the construction of new reactors by 64 per cent of respondents, an increase of seven per cent over the past two years. Job creation was cited as the second reason.

A worrying aspect of the NIA poll is the number of those questioned who have little knowledge of how the nuclear industry deals with its waste, with 82 per cent of respondents who oppose the construction of new reactors citing this as their main reason. Only 21 per cent of those questioned said they were aware of future plans for waste disposal. This is a subject I will return to in a future Newsletter.

We can take some encouragement, however, from the fact that concerns about public safety was cited by 39 per cent of those questioned as the main disadvantage of nuclear energy, down from 46 per cent in 2012, a move in the right direction.

The second opinion poll indicated that 58 per cent of the adult population support the use of nuclear power to provide energy in the UK. This poll was commissioned by New Nuclear Watch Europe, a newly-formed interest group which has Tim Yeo MP as its Chairman.

Not surprisingly, public interest in the safe operation of new technology is very high. Of those polled 82 per cent said that this is a factor when thinking about supporting or opposing a new nuclear power station close to their homes. I

would have expected it to be even higher, given the perfectly natural strength of the Not In My Backyard (NIMBY) instincts of people when it comes to things they don’t really understand.

The Paddington Bear Summit

Talking of trade-offs, compromises and contradictions that’s a fair description of what went on at the climate change talks in Peru. The talks meandered on for a fortnight and we are still not much clearer about what it will take to achieve the historic global climate deal due to be sealed in Paris in December.

The best that can be said of what transpired is that the Lima meeting did eventually manage to approve guidelines for how countries will set out their plans to cut greenhouse gas emissions in the lead-up to the Paris meeting, something the wealthier countries were keen on.

If the agreement is eventually approved – and it is a big if – it would be the first to commit all countries to make such reductions but there are important contradictions in the way various countries see outstanding problems being resolved.

Not for the first time – or the last one suspects – there were considerable divisions between rich and poor countries, as here have been for the whole of the

20 years the UN has held these talks, over how to spread the burden of pledges to cut emissions. With 194 countries involved, each with its own interests to defend, this was inevitable and expectations will have to be more realistic if anything more than wishful thinking is to come out of Paris.

The emerging countries will be extremely reluctant to agree to legally binding caps on emissions which were not imposed on advanced countries at the same stage of their development (when the climate change debate hadn’t started of course) and want the richer nations to do more. They have a point and intend to make sure that any pledges made at the Paris meeting also include a recognition of the need for financial aid, as well as a firmer acknowledgement of the differences between developed and developing nations – the haves and have nots of planet earth.