November Newsletter No170

Posted by SONE on 8 November 2012 in Newsletters

WE KNEW THINGS WERE DIFFICULT, BUT NOT THAT DESPERATE

SONE exists for but one purpose: to promote civil nuclear power. With energy policy in its present parlous state, we were sooner or later going to have to review how we do so. In an ideal world, this would have come after discovering the “strike price” for subsidising “low carbon” sources of energy.

That, according to the Daily Telegraph, may not now be until next June – a delay that is par for the course. You have to have the patience of Job to be a nuclear supporter.

Your committee, however, is going to have a first run at the issue on December 5 and your Secretary has already canvassed the views of members whose e-mail addresses are up to date (see below). We have been impelled to do so by a truly astonishing development.

We awoke on November 5 to find that the Nuclear Industry Association had joined with RenewableUK (the wind farm lot) and the Carbon Capture and Storage Association in writing to Energy Secretary Ed Davey on notepaper containing their three logos, They sought – vainly it turns out – the inclusion of a commitment to decarbonise electricity supply by 2030 to lower the political risks to potential investors.

Let us leave aside the fact that wind turbines are an expensively poor way of reducing carbon emissions and the serious doubts whether carbon capture and storage (CCS) can ever be practical, let alone affordable. Instead, let us face the fact that nuclear has joined with the subsidy kings of the energy world – wind and CCS – in seeking more concessions from the Government when it is already linked with expensive wind in the “strike price” negotiations.

We knew things were difficult but not that desperate. The issue for December 5 is how on earth we can now promote nuclear as the only route to secure, low carbon electricity at affordable cost.

THE DECARBONISATION LETTER TO DAVEY

So that you are in full possession of the facts, this is the text of the NIA/RUK/CCSA letter to Secretary Davey. Under the heading “Re: Power sector decarbonisation” it states: “As trade associations representing the three key low carbon energy technologies, we very much support the Government’s objectives for reforming the electricity market. If we are to meet the UK’s energy security and climate change targets, it is vital that the momentum is maintained in building new low carbon generation. We believe the proposed reforms should help raise the necessary investment. Like Government, we believe that a diverse energy mix is likely to be the most cost-effective pathway to largely decarbonising the power sector, which means investment in nuclear, renewables and fossil fuels with carbon capture and storage.

“We also support the recommendation by the Committee on Climate Change that the power sector will need to be largely decarbonised by 2030 if the UK is to meet its long term emissions targets. If a reference were included in the Energy Bill to this objective, this would not only reassure potential investors by lowering the perceived political risks, but could also reduce the cost of capital for decarbonising the power sector. We therefore believe that this could be very important for investment going forward.

“Alongside this, it is important that the Government’s reforms are implemented as quickly as possible if companies are to plan their investments efficiently in these vital low-carbon energy projects. It is therefore essential that the Energy Bill should proceed without delay, with Royal Assent as early as possible in 2013. Any significant slippage could result in investment being postponed with major implications for associated new industrial development and jobs in a high-tech, high growth sector.”

It was signed by Maria McCaffery, CEO, Renewable UK; Jeff Chapman, CEO, CCSA; and Keith Parker CEO, NIA.

PANIC IN THE STREETS

What does this suggest? Something like panic in the nuclear sector, especially as the Chancellor is reported to have ruled out any commitment to de-carbonise electricity supply by 2020 as too expensive. The idea has been slung into the long grass – not before 2016.

We fully recognise that, politics being what they are – witness Angela Merkel – companies contemplating big investments are nervous about political risks. But in practice only governments as loopy as the SNP in Scotland and the CDU coalition in Germany – think they can do without nuclear in substantially decarbonising electricity supply. They certainly will not do it with wind power, which requires massive gas back up. Nor can we rely on CCS being scaled up sufficiently to bury 180m tonnes of CO2 from the UK to start with under the North Sea without bankrupting us.
It sounds very much as if EdF, representing the French taxpayer at least as much as the British consumer, is turning the screw for all it can get in the strike price negotiations. This may be a good thing for EdF and its shareholders. There will also be those who say it will be a good thing for Britain, too, if it goes ahead with two new reactors at Hinkley Point in Somerset. But it will not be a good thing for British consumers or jobs at any strike price likely to satisfy the rapacious demands of wind as well as nuclear – unless, that is, it keeps the lights on.

But according to Ofgem the risk of blackouts will come as early as the winter of 2015-16 when the capacity margin is likely to fall from today’s precarious 14% to a virtually non-existent 4% because of the rigours of EU environmental legislation phasing out coal and oil power generation. With the best will in the world, that is at least five years before Hinkley Point could have any influence on supply. Thanks to the incompetence of our politicians over a couple of decades, nuclear is at best the salvation for the 2020s.

Incidentally, it seems truly rich that Ofgem, even with its limited usefulness as the gas and electricity regulator, should now be warning us of blackouts to come when it surely should have been exercising some influence over supply. We also think the National Grid has much to answer for. How any organisation in its position can responsibly contemplate up to a nominal 35,000MW of wind power on line – i.e. anything from zero generation to 35,000MW regardless of when we need it – is beyond us. We are simple people, but not that simple.

A LITTLE LESS DOGMA AND MORE PRACTICALITY NEEDED

In practice, we believe that there is no ultimate guarantee of political constancy. Politicians will always by definition be slippery people because they skate on thin ice, which is for ever in a state of flux and freeze. But if EdF were really concerned about political risks (assuming it builds its plants to time and price and operates them safely), it would be seeking to go into business with the Coalition, especially when Labour seems unlikely in the foreseeable future to run away from a bit of public enterprise.

After all, surely the best way to keep the politicians’ noses to the grindstone is to be in a fruitful partnership with them that delivers security of low carbon electricity supply at a price the nation can afford. It is, of course, too late for this now, but a nuclear industry with an eye to business and a government that meant to get secure, competitive low-carbon power would recognise their mutual interests. Such a government would help the nuclear developer over the hump of initial outlay, recover its costs when power started flowing and even join in profit sharing.

Instead, we are ruled by a ridiculous paranoia about carbon emissions (about which globally we can do next to nothing) and a worship of renewables and the market, though the market would not produce any renewable source of power left to its own devices. There are only three years to go, according to Ofgem, before we find out their severe limitations. It will not have escaped the notice of members looking for a sense of urgency that that test will come after the next general election. God save us.

HITACHI AND ALL THAT

Some members will be surprised that we have concentrated so far on the problem of promoting nuclear power in these new circumstances when a lot of people, Prime Minister included, have been ecstatic about Hitachi buying the Horizon project. RWE/E.ON put Horizon, with plans to build new nuclear plants at Wylfa, Anglesey, and Oldbury on the Severn, on the market when the German Chancellor wrecked their balance sheets with the phase out of nuclear power. A £300m price tag was put on it. Hitachi paid £696m. It surely must mean business.

Well, yes – it says £20bn worth, creating 12,000 jobs and with Rolls-Royce and Babcock International already on board. But Hitachi’s boiling water design is new to Britain and up to four years away from being licensed for construction in the UK. It represents further delay, though it will be welcome when it materialises, subject to the price.

It should also be pointed out that in terms of security a mix of reactors is not to be sniffed at. But there are others who wonder how many designs a relatively small country like Britain can support, especially when it seeks the benefits of replication, which influences the eventual cost of generation.

We are not pouring cold water on Hitachi’s bold bid for a slice of the UK market, but SONE should surely be more measured in its welcome than either politicians (hype) and Greenpeace (sneers).

Meanwhile, the Daily Telegraph reported on November 19 that Centrica is “widely expected to withdraw” from its option to take a 20% stake in EdF’s Hinkley Point project to focus on expansion in the USA where it supplies 5.6m customers. City sources claim it is under pressure from shareholders to refocus on projects with shorter return times. Another example, if it is true, where the market is not working for Britain.

HARMONY IS NOT WHAT YOU FIND IN DECC

Which brings us to the Government from which the NIA/RUK/CCSA sought help. We have known some dysfunctional governments in our time. For example, Tony Benn, as Energy Secretary, conducting a guerrilla war with the Government from inside the Cabinet, and the Conservatives from 1979-81 before Margaret Thatcher advised her party: “You turn if you want to. The lady’s not for turning” and sacked the “Wets.” But surely this Coalition takes the biscuit.

Thanks to a Greenpeace agent provocateur, we learn from his father-in-law, Lord Howell, a former Energy secretary, that the Chancellor is driving the effort to get the Coalition off the hook on which it has “foolishly” impaled itself – namely, to be “the greenest government ever”. He is putting pressure on David Cameron, “who does not understand the issue,” and has brought a hardening of Government policy against, for example, expensive wind power with the appointments of Owen Paterson (Environment Secretary), John Hayes (Energy Minister) and Peter Lilley, ex-Industry Secretary and climate change sceptic, to the Energy Select Committee.

How on earth the Lib Dem Energy Secretary, Ed Davey, and the Conservative Hayes co-exist in the DECC is a matter for speculation when Hayes has said of wind power “enough is enough” with turbines “peppered” around the country with little regard for public opinion. Lilley has also described Davey’s Tory Minister for Climate Change, Greg Barker, as “barking – a complete nutter”.

Not surprisingly, Tim Yeo, chairman of the Energy Select Committee, says the confusion over energy policy looks “like a laughable plot line from The Thick of It”. Unfortunately, he says, pension funds and investors needed to build new energy infrastructure in the UK are not finding it very funny. The more uncertainty there is about energy policy, the higher the perceived risk for investors.

In short, it is a terrible mess that is likely to get messier and place the economy in peril.

ENERGY POLICY – A SYMPTOM OF WESTERN DECLINE

How have we been reduced to this? It is not just tensions between Tories and Lib Dems in the current Coalition. It is the perceived incredibility of energy policy going back years. It is failing on virtually every count – wind, solar, biomass, coal, gas, CCS, energy conservation, reducing CO2 emissions, security of supply, cost to industrial and domestic consumers, with some 6m classed as living in fuel poverty, and so far nuclear. It just does not add up.
But that is not solely because of the palsy or wrong-headedness of the Coalition. It is operating within an EU straightjacket of mandatory and almost certainly unattainable targets. It is true that the Coalition has added to those expensive targets, notably with a forthcoming carbon tax, and has now been encouraged by the NIA/RUK/CCSA to add another. But the EU undoubtedly reinforces the madness of current energy policy since there is so little we can do about it short of shaking the dust of Brussels off our feet on which the politicians are again divided.
Things are also pretty bad in the United States where there is also no real political enthusiasm for nuclear. In short, Britain’s energy “omnishambles” is merely a symptom of Western confusion and decline. Go East, young man.
SCIENTIFIC ALLIANCE ’S “THE SLEEP OF REASON”

It is at this point that we should honour our promise in the October Newsletter to give a fuller account of the talk to SONE patrons on October 31 by Martin Livermore, director of the Scientific Alliance, since it bears on the Western energy “omnishambles.”

He said that modern environmentalism started in the USA 50 years ago but it was in Europe that it was most influential. With rising prosperity, concern for the environment had grown but people had increasingly come to be seen as destroyers of a pristine natural environment. This tapped into an innate sense of guilt. “Deep Greens” even considered humans to be a blight on the planet. And in an age where religious observance in the West had plummeted many people were only too ready to subscribe to an alternative belief system. Hence the strength of the movement.

Bjorn Lomborg, then at the University of Aarhus, asked his graduate students to assemble evidence to support the pessimistic Green view of the world. To his surprise, the evidence showed otherwise. This produced his book “The Skeptical Environmentalist,” which questioned the environmental movement’s litany. Lomborg was condemned as a heretic and even investigated by the Danish Committee on Scientific Dishonesty.

The scientific method – testing hypotheses against evidence and changing and refining them in the light of it – was wonderful. But scientists were also human and their view of evidence was coloured by their world view. The Scientific Alliance was formed to help redress the balance and secure rational, evidenced-based policymaking. The key issue today was energy policy shaped by the UN IPCC’s view on climate change. The emphasis on renewable energy was a blind alley leading to higher prices and less reliable supply with a relatively small impact on CO2 emissions.

ANYTHING THE GERMANS CAN DO, WE CAN DO BETTER

Just as we were going to press we learned that the Coalition had secured agreement on what is to go into the impending Energy Bill. It reminded us of the incredulity that greeted recent news that the levy on German consumers for renewable energy was to be increased by 47% next year. On this evidence Angela Merkel has a gift for reinforcing failure that is already damaging German industry.

Then we learned on November 23 that the UK Energy Bill is roughly to treble – yes, nothing so measly as 45% but treble – by 2020 the levy on the UK consumer by way of market support for new nuclear and other low carbon technologies. Please note that nuclear is now routinely being lumped with high costs because its needs are being related to those of grossly expensive wind power.

Under the Levy Control Framework (LCF) – another bit of machinery required to administer distortion of a market that is not working – the current allocation for low carbon electricity of £2.35bn will rise to £7.6bn in real terms in 2020-21. It is, of course, true that the UK is not yet in as deep up to the neck as Germany in renewables, though all this spending is designed to meet (probably unattainable) EU renewables targets. It is also true that the UK is seeking – at a price – to include nuclear in its generating mix while Germany is phasing it out. But both Governments are also doing their level best simultaneously to milk the consumer and undermine industry, jobs and growth in the name of global warming. The UK Government is also destroying (with the enthusiastic support of the nuclear industry) nuclear’s appeal as the cheapest source of secure low carbon energy. Hence the SONE committee’s discussion of our promotional policy on December 5.

AT LAST SOME COMMON SENSE

We like to include some unadulterated good news in each Newsletter. It is exclusively culled from abroad. China plans the steady development of nuclear with a small number of Generation III nuclear plants in each of the next five years. The Czech Republic is selling its plans for two new reactors as a Euros 24bn economic stimulus – Westminster please note – and Russia confirms the importance of nuclear technology with an accelerated programme. Turkey is planning its first nuclear power station and all 20 of Canada’s nuclear power plants are now on line with the return of one after refurbishment.

THE LAST POST?

Ian Bateman, a Cheshire member, has just written this unpublished letter to the Daily Telegraph in response to criticism of nuclear power. It reflects a view more widely held in SONE. Regretting that no one from the nuclear industry had risen to its defence, he wrote: “My understanding is that we have generated baseload nuclear power safely and consistently for about 50 years. The power plants occupy small amounts of land near the coast. There have been no complaints about the price of the energy produced. The amount of CO2 saved in that time is inestimable. The tragedy is that the development of this power source, in which we once led the world, has all gone overseas,
either deliberately or by neglect. Had it not, we might not be in such difficulty now. If we are to say goodbye to nuclear energy in the UK in favour of less competent technologies, let us at least say thank you.

OBITUARY

We regret to record the death of a valued long-time member, E G Harling, of Rustall, Tunbridge Wells, who was a regular attender at AGMs

E-MAIL ADDRESSES

We recently tried to improve our service to members by sending to them, among other things, the transcript of SONE’s evidence to the Energy Select Committee on October 22. We have never held more than a minority of members’ e-mail addresses but this exercise showed it is even a smaller minority of correct, up-to-date addresses. If you are happy to be sent material from time to time please e-mail the Secretary on bernardinghamcom@aol.com to confirm this.