A GREAT DEAL TO BE PLEASED ABOUT
I am fortunate to have succeeded my old friend Sir Bernard Ingham as SONE ’s Secretary at a time when we have a great deal to be pleased about and to look forward to.
There have been false dawns in the past but this time I sense a growing recognition of the need for nuclear energy right across the board – Government, industry and the population at large.
That recognition even extends to people with genuine concerns about the environment. They have come to see that being green in an environmental sense doesn’t mean that you have to be green as in naïve, guileless and easily taken in by unsupported argument, another dictionary definition of green. However reluctantly, they have come to acknowledge that accepting nuclear power (not necessarily loving it) is consistent with being an environmentalist.
So what am I so pleased about? Firstly, and most obviously, I am delighted that EDF and the Government have gained the approval of the European Commission for the Hinkley Point C State aid case. With this decision, construction of the first new nuclear power station in Britain for 25 years has moved an important step closer and now looks more and more certain to happen.
Hot on the heels of the Hinkley Point C decision came an announcement that the 28 member states of the European Union are to be allowed to make up their own minds on how to reduce carbon dioxide emissions. They can choose to build more nuclear power stations or add carbon capture systems to coal and gas plants, for instance, rather than subsidise even more wind turbines.
Another indicator that nuclear energy is on the move is the renewed interest in the fast reactor, with its potential for using the plutonium stored at Sellafield and burning actinides which are otherwise the long-lived component of high level nuclear waste, helping to reduce waste volumes.
HINKLEY POINT AID PACKAGE AGREED
The debate over State aid for Hinkley Point C – the strike price issue – has been a heated one, not least within SONE. Perhaps things will cool down now that agreement on the price has been reached between the government and EDF and the EU approval is in place.
I believe that the deal now agreed covers the main area of concern, the worry that the Government, anxious to get on with a much delayed nuclear power station construction programme, would be persuaded to provide excessive subsidies and that EDF and its partners would make too big a profit.
The Hinkley Point C debate won’t go away, of course, but its focus is likely to change to issues such as the merits of EDF’s choice of reactor and its experience building it elsewhere and whether Hinkley Point C represents the start of a nuclear renaissance or is no more than a token, one-off political gesture.
I’m not in favour of subsidies as a general rule and it is arguable whether they were really needed for this particular project. But once the Government decided to throw money at the wind turbine and solar farm industries, the die was cast. It was pretty well inevitable that similar support would be sought (or at least accepted) by the potential nuclear power station builders. And why not?
Wind, solar and nuclear are all low carbon electricity producers to varying degrees (with nuclear by far the best of them) and to a limited extent they are in competition, certainly politically. Pressing for something approaching a level playing field seems entirely reasonable to me.
ALICE IN WONDERLAND
What irks me is that in the Alice in Wonderland world of the Department of Energy and Climate Change reality is turned on its head and the impression is still being given that pressure for subsidies came from the nuclear industry.
“Our policy is not to give support to new nuclear unless similar support is also made available more widely to other types of generation,” the Department says. Such nonsense.
I don’t have a problem with businesses making profits which some might consider excessive. It happens all the time, in every branch of industrial and business endeavour. Caveat emptor say I – and if you believe you’ve been taken for a ride maybe you’ll be a bit more careful in future.
I can understand the argument that excessive subsidies might lead to nuclear energy losing its “cheapest energy resource” tag but as I see it there’s little chance of that happening if accurate cost comparisons are made. And “safest” and “most environmentally friendly” are qualities which are at least as important as cost in selling the idea of nuclear energy.
Bear in mind, too, that building Hinkley Point C has its uncertainties – every major infrastructure project does. For instance the cost of construction is now projected to be £24.5bn, more than £8bn up on the anticipated cost only a few months ago. The EU was persuaded (and so am I) that obtaining a UK Government Guarantee for the project was essential if EDF was to obtain the necessary debt finance, given the current state of the capital markets.
Crucially for EDF there has been no change to the strike price. It has been set at £92.50 per megawatt hour, guaranteed for 35 years after the proposed reactors begin operation and will be increased in line with inflation. It will be reduced to £89.50 if EDF decides to go ahead with the construction of Sizewell C because of the opportunity for EDF to share first of a kind costs of EPR reactors.
What has changed is the introduction of ‘gain-share’ mechanisms designed to recoup any unexpectedly high profits from the construction of the plant or from any refinancing and equity sales. Moreover, the strike price itself can be adjusted up or down in certain circumstances.
We won’t really know how successful the Hinkley Point C project is for some years but I believe mechanisms are now in place to ensure that EDF gets a decent return and that the electricity consumer isn’t taken to the cleaners. In all, in my view it’s a deal to be pleased about.
OUR FLEXIBLE FRIENDS IN BRUSSELS
Somewhat to my surprise, the 28 member states of the European Union are to be given a fairly free hand over the ways in which they cut emissions.
They agreed to a UK proposal that by 2030 they should aim to cut emissions collectively by 40 per cent compared with 1990 levels, with each member deciding how it met its share of the target. That is very different to the existing 2020 deal which forces each country to subsidise a minimum level of renewable energy.
Germany, which has invested heavily in renewable energy and exports wind turbines wanted binding 2030 renewable energy targets for each country, similar to those which apply under the 2020 deal. The Germans didn’t get what they wanted. All they got was a statement that 27 per cent of the EU’s energy should come from renewable sources by 2030 but that this would not be binding on member states. Note that – not binding.
Another target under the 2030 deal is for a 27 per cent improvement in energy
efficiency, but even this will be optional. Referring to the two targets the
text of the new deal states: “Targets will not be translated into nationally
binding targets.” Note that – not binding.
Ed Davey, the energy and climate change secretary, has described the deal as a major win for Britain. “ Until now only five countries in Europe had climate targets post 2020 and now all of them do” he said.”It’s good for consumers because we can decarbonise at the lowest possible cost using a diverse mix of technologies.”
Well yes, but let’s not get carried away. The deal sounds a bit like the “Solomon Binding” deals which industry and the unions used to make and break in the bad old days of industrial relations.
Let’s see what happens in practice. Nevertheless, it does look as though the EU intends to allow member states to be more flexible when it comes to meeting environmental emission targets and that must be a good thing.
Gavin Stacey, of the Engineering Employers Federation certainly thinks so. “The EU now has an emissions target broadly in line with the UK’s own ambitions, helping level the playing field for UK manufacturers and strengthening the market for low-carbon goods and services.
“EU leaders have signaled that they recognise the importance of protecting carbon-intensive industries threatened by overseas competitors from the EU emissions trading system.”
If that is so I am sure that Vince Cable, the Business Secretary, will be delighted. I am not so sure how Ed Davey will respond, however. Freedom to decide how to to reduce CO2 emissions doesn’t necessarily mean that the right decisions will be made. We may still be in for a further rash of unwanted, unnecessary and expensive wind turbines.
CLEAN ENERGY’S DIRTY SECRET
“ The Liberal’s green agenda imposes too high a cost on industry.” – Vince Cable, the Liberal Democrat Business Secretary in the UK’s coalition government, speaking at a fringe meeting at this year’s Lib Dem conference.
“We are proving people can have greener energy and cheaper energy – even as vested interests are desperate to persuade people you can’t.” – Ed Davey, the Liberal Democrat Energy and Climate Change Secretary in the coalition, speaking at the same conference.
So greener means either cheaper or dearer electricity, depending which politician, from the same party, you listen to. Mr. Cable and Mr. Davey can’t both be right surely? The answer is that it all depends on what you feed into the equation – or don’t! As with computers – rubbish in, rubbish out.
Rupert Dorwall, in an article in National Review Online headed “Clean Energy’s Dirty Secret” argues that renewable energy (wind, waves, solar) provides a text book case of what the French 19th century economist Frederic Bastiat meant when he described the difference between a bad economist and a good one.
The bad economist confines himself to the “visible” effect of what is proposed or which has been recently introduced. The visible effect of renewables is their useful “free” wind, sun and running water.
All that’s needed to make the transition from a world of dark, satanic power stations to a clean, low carbon world are temporary subsidies until renewable power becomes competitive, the bad economist argument goes. That sounds like the Ed Davey position to me.
In his speech Vince Cable expressed particular concern over the damage caused by the over-greening policies of the Lib Dems to industries using a great deal of electricity – steel and cement for instance. These industries, he argued, could become uncompetitive, move abroad and simply transfer our emissions problem to other countries, to no net environmental advantage.
I suspect that Mr. Cable is much closer to the good economist position. This recognises and takes account of the variable, unpredictable nature of the renewables, acknowledging that there is a cost to be paid for their unpredictability – and for the perceived political advantage of adopting them as part of an ever greener agenda.
To the life-cycle cost of renewables must be added the cost of short term load balancing and the provision of longer-term, reliable capacity. Put simply the need to match supply to demand, second by second, now and into the future, must be costed in. I am sure Mr Davey also understands that and would agree that developed societies cannot afford a serious interruption to their electricity supply.
At least I hope so.
Some would argue, however, that an over concentration on encouraging the use of renewables by the Energy and Climate Change Department rather than on keeping older power stations operating or, more sensibly, replacing them, have made such interruptions a real possibility this winter, for all the National Grid’s insistence that we’ll get through without them.
Jeremy Nicholson, of the Energy Intensive Users Group, representing the sort of big electricity users whose prospects concern Vince Cable, had this to say on the subject.
“There was an obsession early on with being the greenest government ever. We all want to see cleaner energy – who wouldn’t – but it is becoming increasingly obvious that we want clean energy at a price we can afford. We urgently need to be building new gas fired power stations and to get cracking on the nuclear programme.”
The simplistic, bad economist position seems to ignore the fact that the National Grid has to balance supply and demand continuously as well as ensure a consistent quality of electricity. Sudden surges of power are bad news and extremely damaging to electrical equipment.
Unfortunately, because renewables depend on the weather, an electricity system with a high proportion of renewables needs far more oil, coal or gas generating capacity as back up. Without renewables Britain would need 22 Gigawatts of new capacity to replace ageing coal and nuclear power stations. With renewables Britain will need 50 Gigowatts extra, to cope with the intermittency problem. The more renewables in the system the worse the problem becomes.
Take the logic of that situation to its extreme and it could be argued that we would be better off paying the renewables suppliers to “pretend” to supply the Grid. We pay them not to produce at certain times already so the idea isn’t that outrageous.
By the end of October we had paid wind farms a record £43 million to stand idle so far this year – way up on the £32 million splashed out during the whole of last year, itself a record. The average wind turbine generates only a quarter of its theoretical capacity and then quite often at times when it’s not needed.
None of this seems to concern Mr. Davey, who seems content to see Britain subsidise the construction of at least 1,000 more onshore wind turbines than are needed to meet the current 2020 renewable energy targets.
The bad economist ignores the cost of keeping back-up oil, gas and coal stations on standby, ticking over wastefully in reserve mode, even though this adds to the cost in terms of carbon emissions, unproductive operation and the wear and tear caused by the units being switched on an off. The good economist would insist on the cost of all of these being taken into account.
No matter how many wind turbines you build you must have the equivalent of 90 per cent of their nominal capacity covered by reliable, predictable sources such gas, coal or oil-fired power stations which, of course, emit carbon. Could there be anything more absurd? (Nuclear energy has a base-load rather than back-up role because of its miniscule emissions).
In his NRO article Rupert Dorwall, an American, draws particular attention to
the situation in Germany, where deriving a large proportion of its energy from
renewables is proving extremely costly, and suggests that Britain is heading
in the same direction.
“Last year,” he wrote, “Peter Altmaier, then the Energy and Environment Minister and now one of Chancellor Merkel’s closest advisers, said that Germany’s efforts to decarbonise electricity generation could cost one trillion Euros by the end of the 2030s. Not that you would necessarily see that from Germany’s carbon dioxide emissions.
“Despite lower economic growth in Germany than in the United States German emissions have been rising seven times faster – up 9.3 per cent between 2009 and 2013 compared with 1.3 per cent for the U.S.”
Mr. Dorwall ends his thoughtful and stimulating piece with a final good guy/bad guy reference to the economic thoughts of the 19th century Frenchman Frederic Bastiat.
“The bad economist,”Bastiat wrote, “pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come at the risk of a small present evil.” Dorwall’s conclusion (and mine) : “It will not only be good economists who see that imitating Europe would be a colossal blunder.”
HAS THE FAST REACTOR’S TIME FINALLY ARRIVED?
When I joined the nuclear energy industry some 40 years ago it was more or less a given among my new colleagues that the recovery of uranium and plutonium from spent nuclear fuel and the development of a fast breeder reactor system using it was the way forward for electricity generation in Britain.
By the mid-1970s the UK Atomic Energy Authority (UKAEA) was talking of Britain having at least 20 commercial fast reactors operating by the end of the last century and probably many more.
Plutonium was said to be worth seven times its weight in gold.
In 1988, however, the government of the day chose to abandon the fast reactor research programme, citing a few technical disappointments and minor safety issues for its decision. Closure of the programme also just happened to provide the Treasury with the opportunity to save some money.
The electricity generating companies weren’t worried either. In addition to burning coal they were by then allowed to burn oil and gas, previously seen by many as a valuable chemical feedstock.
Other countries pressed on and there are fast reactors operating around the world and new ones being developed, some of them highly promising.
In the UK we chose to develop the use of mixed oxide fuel (Mox) to recycle separated plutonium in light water reactors rather than fast reactors. However, it is now beginning to look as if the fast reactor, using and possibly producing plutonium, may yet come into its inheritance in the UK, albeit using technology developed elsewhere.
A truly eclectic group of scientists, environmentalists, business people and politicians are taking an interest in its potential, the best known perhaps being George Monbiot, the environmentalist and writer, Stephen Tindale, former Executive Director of Greenpeace, and Sir Richard Branson. (I’m not too sure about the value of Sir Richard’s support but he’s certainly well known).
Big name support for the fast reactor is welcome, of course, but that of local people living near Sellafield in the Copeland area of West Cumbria is possibly more significant. They want a decision sooner rather than later on what is to be done with the massive plutonium stockpile which has built up at Sellafield – an inevitable and foreseeable consequence of not using it as an energy resource.
The workforce has made it clear that they are prepared to support construction of a fast reactor or a new Mox plant at Sellafield or both. Just get on with it, is the message.
THE TECHNICAL OPTIONS
Until recently it had seemed that a new Mox plant was the likely choice of the Nuclear Decommissioning Authority (NDA) which is responsible for Sellafield. Now the NDA position has softened and it is simply saying that re- use of the plutonium, rather than its disposal, is its preferred option.
It has also stated that over the next year or two it will be examining three technical posssibilities– (a) reuse of most of the 140 tonnes or so of plutonium in store at Sellafield as Mox in light water reactors; (b) its reuse in Candu EC6 reactors; and (c) its reuse in GEHitachi Prism fast reactors.
Particular interest is currently being taken in the Prism reactors, which could be installed at Sellafield and optimised to consume the plutonium stockpile as quickly as possible. If, however, the government decided to prioritise low carbon power generation rather than rapid waste disposal a larger number of Prism reactors could theoretically be combined with a fuel recycling system to extract as much electricity as possible from the plutonium and depleted uranium.
You won’t be surprised, given my history, that I would like to see the plutonium and depleted uranium held at Sellafield used as an energy resource and not treated as an embarrassment, something of no value, to be got rid of. Maybe one day plutonium will again be regarded as worth seven times its weight in gold.
We regret to record the death of one of SONE’s staunchest supporters, David Erskine,at the age of 90. He joined the UK Atomic Energy Authority in 1959 and helped start up Calder Hall. He was also involved with the Admiralty Reactor Test Establishment (ARTE), the Dounreay Prototype Fast Reactor and other important nuclear projects in the UK and overseas concerned with civil and defence applications of nuclear energy.