October Newsletter No.169

Posted by PJ Owen (SONE Webmaster) on 30 October 2012 in Newsletters

IT’S GOING TO HAPPEN – BUT AT WHAT PRICE, INDUSTRY ASKS.

Lord Hutton, chairman of the Nuclear Industry Association, told SONE’s AGM on October 22 that it was meeting at a watershed for nuclear power development in Britain with the French company, EdF, coming up to a major investment decision on Hinkley Point, Somerset. As the process entered its final stretch, he was confident that, in spite of all the setbacks this year, “we are going to get there”.

“It is going to happen” he said. “The challenge then is to build a new nuclear programme for the future”.

Like Lord Hutton, Jeremy Nicholson, Director of the Energy Intensive Users’ Group, worried about a future without nuclear in his preoccupation with maintaining the competitiveness of British industry. He saw the “strike price” negotiations over a subsidy for low carbon sources of electricity as “critical” and gave a warning about the problem of presenting anything over £100/MWh as value for money for consumers.

About 50 members and guests attended the meeting at the Institution of Civil Engineers. There were 26 apologies for absence. The minutes of the 2011 AGM, previously circulated as the October 2011 Newsletter, No 157, were approved and signed by the chairman.

Before the annual report and accounts were adopted Terry Westmoreland, Treasurer, said that, thanks to the generosity of members, SONE’s financial situation had been transformed. At the current level of expenditure finance was no longer an immediate issue. Moreover, Lord Vinson, a patron, had generously offered continued financial support. Latterly recruitment had improved and there were now 279 members.

The meeting re-elected:

The directors:  Sir William McAlpine, Sir Bernard Ingham and Terry Westmoreland;

The committee:  the directors plus John Assheton, A J Bull, Neville Chamberlain, Gerald Clark, Jim Corner, Robert Freer, Geoffrey Greenhalgh, Martin Morland, Keith Parker, Simon Rippon, Ann Robinson, Professor J A Simmons, Robin Smith, Paul Spare, Peter Vey, and Dr W L Wilkinson FRS.

The accountants:  Gary Sargeant & Co.

SECRETARY’S REPORT

The Secretary said the aim of his annual report would be to provide a full background for the subsequent discussion by bringing the account of the year in the printed annual report up to date.

“Strike price” negotiations

It was now clear that nuclear’s tag for providing the cheapest electricity was in peril. Under the “strike price” negotiations for a subsidy for low carbon sources of power, nuclear would be offered assistance not according to its needs but to those of expensive (and largely useless) renewables, notably wind. This stemmed from political expediency. The Government had somehow to get round its original mantra that nuclear would get no public subsidy, subsequently refined into “no subsidy that is not also available to other low carbon sources.”

SONE’s directors had met representatives of EdF two weeks earlier. They were satisfied that EdF wanted to lead a nuclear renaissance in the UK and was gearing itself up to do so. But the “strike price” was crucial to satisfying its Paris HQ that the investment was viable. On the face of it, a strike price of well over £100/MWh, compared with today’s market price of £50/MWh and the £70/MWh projected by the British Government last year for new nuclear, should have them raring to go. But EdF were clearly wary of adverse political decisions in the future. This was understandable after Angela Merkel’s ditching of nuclear by 2022 in Germany and President Hollande’s aim eventually to cut French reliance on nuclear from 75% to 50%.

Alternative sources

It was problematical who else might supply the UK with new nuclear power stations. The German RWE/E.ON, impoverished by Germany’s phase out of nuclear power, had pulled out of the UK race and put its Horizon project for new nuclear power stations at Wylfa and Oldbury . Horizon remained on the market, with all sorts of rumours of controversial Chinese and Russian interest and other firms blowing hot or cold. In addition, there had been rumours about Iberdrola’s continued involvement in a new conventional reactor at Sellafield from 2015 because of Spain’s debts This reliance on foreign firms was the inevitable consequence of Britain’s nuclear de-industrialisation over the last 15 years which had left it without a British reactor or native consortium to build one.

Meanwhile, EdF was in a monopoly position with the only reactor likely to be licensed soon. Westinghouse had chosen not to complete the licensing process until it got an order.

On top of all this, three local authorities in Cumbria had postponed a decision until January on whether to host a nuclear waste repository, thereby opening up a potential vacuum in the effort to provide a solution to the political problem of disposing of long term nuclear waste.

On the other hand GE Hitachi was keen on providing through a consortium a fast reactor to burn up the plutonium stockpile at Sellafield but estimated it would take it four years to secure a licence. Its bid raised questions about the utility of building a new MOX fuel plant and the Nuclear Decommissioning Agency’s qualifications to pronounce on commissioning as distinct from decommissioning issues.
Parliamentary manoeuvres

Against this background, two other things had occurred: First, SONE wrote to Chancellor George Osborne in September asking him to make the strike price negotiations more transparent; to take all costs into account – e.g. the cost of standby generation for newewables; and not to sign up to anything until he was satisfied he was getting value for money. The chairman repeated SONE’s doubts whether nuclear needed a subsidy as distinct from help with the initial capital outlay and produced illustrative figures showing the vast earning potential of nuclear at various “strike prices.” A reply was awaited.

The Commons’ Energy and Climate Change Select Committee (chairman, Tim Yeo MP) had also invited the Chairman and Secretary to give evidence on the future of nuclear in the UK alongside Greenpeace. SONE had promptly told Yeo and his Committee that we did not think they were serious and that this smacked of the worst kind of televisual confrontation. The outcome was that SONE’s representatives gave evidence in a separate slot from Greenpeace on October 23, the day after the AGM (See below). They were preceded before the Committee by EdF, Iberdrola and GDF/Suez. The proceedings were broadcast on the Parliamentary TV Channel.

Summing up

The Secretary said that after 14 years’ campaigning nuclear appeared to be in a worse mess than at the beginning of a promising year. “There is no point in glossing over what has happened and pretending it will all come right on the night”, he said “Your directors have no doubt EdF want to develop Hinkley Point and may even decide to do so next year. But, given the state of play among other developers, the question will them be whether it will be just another token nuclear development like Sizewell B in the mid-1990s. In conclusion the Secretary thanked members for attending and especially those who had sought to put over the need for nuclear to their MP and the public. He also sought to remedy an omission in the annual report to thank the Chairman for making accommodation available for SONE meetings and his unfailing support for SONE’s objectives.

DISCUSSION – Costs, public opinion, Fukushima and the wind trap.

In a wide-ranging discussion Lord Parkinson urged nuclear supporters to get behind the Chancellor who had got the message about the cost and inadequacy of energy policy. The current negotiations to try to secure new nuclear development – one of the most important decisions – were being conducted within a framework that stemmed from the Conservatives in Opposition getting carried away by Greens in trying to prove they were not the “nasty” party.
David Jefferies asked whether it was possible to cast further light on the costs involved in the proposed EdF Hinkley Point development. The Secretary said EdF attributed the rise in the cost of the proposed reactors to £7bn each to inflation, especially of raw materials, and the need for much more concreting to take waste water out to sea. However, one would have assumed that the amount of concreting would have been factored into the original estimate. As for running costs for 1,600MW reactors, a figure of £30/MWh had been mentioned, which fell far short of a possible strike price of £100/MWh.

Malcolm Grimston counselled caution about SONE focussing on the “strike price” in the circumstances of a market-led energy policy. A generous settlement might be necessary to secure investment. He also advised nuclear supporters not to dwell on nuclear’s safety but rather to take it for granted since assertions about nuclear safety tended to play into the hands of nuclear opponents. To those who worried about public opinion, he pointed out that it had held up extremely well after Fukushima.

Terry Wynn said nuclear’s problem had always been political rather than safety in the sense that – and he said he spoke from experience – few politicians wished to be associated with it. Yet they needed to be advocating its development. Professor Wade Allison, a radiation expert, said the story that never got told was that nuclear would be good for the people. There was no need for any increase in nuclear’s costs after Fukushima. Indeed, its costs could be reduced if safety regulations were put on a more realistic footing.

Other subjects raised were the need for the nuclear industry to be more innovative, for example, over the development of thorium reactors, and the trap involved in wind development. Brendan McNamara said a study had

LORD HUTTON’S OPTIMISM

The first speaker, Lord Hutton, paid tribute to SONE’s work during the “wilderness years” for nuclear power when it had very few advocates. It was owed a debt of gratitude.

He found considerable sympathy when he said he worried about the long term future of Britain as a successful economy without a strong nuclear power industry. The country could not rely on fossil fuels. The Middle East had become less stable and if Iran became a nuclear weapons state all bets were off about security of gas supplies. Logic pointed to a strong nuclear power industry. It was encouraging that the Chancellor was clearly concerned about where energy policy was going.

At the same time support for new nuclear build was higher than at any time in his political life and both politicians and public had shown great maturity after the Fukushima tsunami. Nonetheless, the industry needed to recognise that attitudes of young voters and women were less positive and that it needed a broader consensus so that it was not left to the industry alone to sing nuclear’s praises.

He acknowledged that the collapse of the RWE/E.ON project was a setback but he expected a credible bidder for it to emerge. But the fact remained that there was now a Conservative/Labour consensus in the need for nuclear. On its own the market would not provide a new nuclear power station so investors had to be incentivised.
“We are in the final stretch”, he concluded. “But we are going to get there. It is going to happen and the challenge then is to build a new nuclear programme for the future”.

JEREMY NICHOLSON’S CHOICE OF ENERGY POLICY

The second speaker, Jeremy Nicholson, Director, Energy Intensive Users Group, represents about a dozen sectors of British industry covering, for example, steelmaking and chemicals, cement, paper and glass manufacture. He inexorably built up a picture of escalating industrial power costs and the risk of interruptions in supply from 2015.

His frustrations were signalled with this slide:

“Two approaches to energy policy: 1 – Progressively internalise the cost of carbon, allowing investors to supply energy and carbon reductions at lowest cost; or 2 – Get Government to pick losers, giving the largest subsidies to the least economically efficient technology, inflating transmission and distribution charges to cross-subsidise their economically inefficient location, socialising the cost of fossil fuel to accommodate unreliable wind power, set arbitrary, unilateral, ambitious targets decades into the future, regardless of their practicality or affordability, while complicating the energy market by the imposition of an increasing multiplicity of overlapping, cost-raising interventions (CCL, CCAs CRC, CPF, ETS, RO, FiTs, CERT, CESP, ECO etc). Which approach do you think is likely to work?”

Mr Nicholson produced a graph that showed that the UK had relatively furthest to go in the EU to meet the 2020 target of 20% of EU energy to be produced by renewables, representing 25% of the total cost to the EU of hitting the target. Yet in practice it had nothing to do with decarbonising electricity supply. Another graph demonstrated the incremental impact of energy and climate change policies on UK industrial power prices, including the UK’s carbon price floor (unique in Europe). It showed the massively disproportionately penal effect on the UK compared with the rest of Europe and opening up a gap of up to £33/MWh with the USA, Russia and China.

The plus points for nuclear in the UK were strong public and political support and the growing public and political response to escalating renewable subsidy costs. The strike price for nuclear new build would be critical. Could anything over £100/MWh be defended as value for money for consumers?

WHY NOT FINNISH MODEL AND MODULAR REACTORS?

In the discussion following the two talks considerable exasperation was expressed over the operations being funded by wind subsidies and the “deceit” of the public over the jobs to be had from renewables. Robert MacLachlan likened the inclusion of wind as a major component in a modern energy policy to insisting donkeys should be part of a modern transport policy.

Mr Nicholson did not dismiss the Finnish model of co-operative funding of new nuclear in the UK but saw potentially important differences between the two economies. Candida Whitmill struck a chord with the meeting when she asked whether smaller, modular, even community, reactors that could be developed progressively in contrast to 1600MW plants might ease funding problems.

ATTENDANCE AND APOLOGIES

Those who indicated their intention to attend were:

PATRONS: Gordon Adam, Sir William and Lady McAlpine, George M Nissen, Lord Parkinson and Ann Robinson.

MEMBERS: Kirsty Alexander, Professor Wade Allison, Bryan Barkes, Dr Robert S Barnes, Ian Bateman, James Birkin, Dr Peter Chester, Ian Currie, Professor Ken Durrands, Michael Gammon, Malcolm Grimston, Sir John Guinness, David Jefferies, George Jennings, Martin Jenner, Joseph Lambert, Derek Limbert, Ian MacFarlane, Robert Maclachlan, Brendan McNamara, George Muir, Angus Ross, Commander Kevin Stagg, Richard Sergant-Manse, Roger Vaughan, Terry Wynn.

Apologies for absence: PATRONS: Giles Chichester MEP, Lord Clitheroe, Damon de Laszlo, Lord Vinson.

COMMITTEE: Adrian J Bull, Neville Chamberlain, Gerald Clark, Jim Corner, Martin Morland, Robin Smith and Paul Spare.

MEMBERS: T R Barrett, Robert Beith, Sir Stuart Burgess, Dr Vernon Eldred, Mrs Beryl Ellis, David Evans, Gwyn Evans, Lord Jenkin, Sir Robert Malpas, Dr E O Maxwell, Fred Nicholson, Ruth M Shepherd, Gordon and Sally Steele, G M Stowell and Elijah Williamson.

OBITUARIES: We regret to record the death of a London member, Norman Burrows, and also of Malcolm Wicks, Labour MP for Croydon N and former Minister for Energy, who did much in the mid-2000s to restore nuclear power to the proposed mix of generating systems. Ian Currie paid tribute to him at the AGM.

THE SELECT COMMITTEE HEARING

Your representatives – the Chairman and Secretary – had an easy ride before what seemed to be a largely pro-nuclear Energy Select Committee on October 23, though not all members were present. The session was chaired in the absence of the chairman, Tim Yeo MP, by Sir Robert Smith, a Lib Dem MP.

Your witnesses stressed the importance of getting new nuclear power stations built and operational and their belief that they did not need a subsidy as distinct from help, which could be repaid, with the heavy initial capital outlay. Sir William looked forward to 40% of UK electricity being generated by nuclear. Speaking from experience of nuclear construction, he also believed they could be built to cost and time.

Sir Bernard said he was fed up with hearing from Ministers and MPs who said they were in favour of nuclear power but never seemed to do much to get it.

They needed to demonstrate their support to the public and the nuclear industry. Asked about the consequences of a failure to secure nuclear development, Sir Bernard said it was necessary to distinguish between short and longer term. Short term there would be a dash for gas, an extension of the lives of existing nuclear and even coal fired power stations and a largely presentational drive for energy efficiency. With a bit of luck we might escape blackouts. Longer term, if wind power development continued, Britain would be in trouble both in terms of power prices and reliability of supply. CO2 would continue to rise. Vincent de Rivaz, CEO of EdF, whose evidence preceded SONE’s, showed  considerable sensitivity to Sir William’s letter of September 11 to the Chancellor in which he expressed concerns about nuclear being lumped with renewables, and especially wind, in the “strike price” negotiations. He argued that SONE could have no idea what the costs involved were.

This, in fact, was the point of letter to the Chancellor – namely the lack of transparency. Mr de Rivaz said: “I am in the job of trying to demonstrate that nuclear is competitive.” That – competitiveness – Sir Bernard told the committee, was the “brand nuclear” SONE was trying to protect.

ENVIRONMENTALISM, GUILT AND THE SLEEP OF REASON

This was the intriguing title of a talk given by Martin Livermore, director of the Scientific Alliance, who spoke at a lunch given for 10 of his fellow SONE patrons by Damon de Laszlo on October 31. It stimulated a very lively discussion. He said growing prosperity had brought greater concern for the environment but the downside had been that people had increasingly come to be seen as destroyers of a natural environment. This tapped into an innate sense of guilt that made people very ready to accept the environmentalist thesis and had even become an alternative belief system with the decline of religious observance. Hence the strength of the movement.

The Scientific Alliance had been formed to redress the balance which had also been affected by scientists whose view of evidence had been coloured by their own view of the world. Rational, evidence-based policy was the aim. Today’s emphasis on renewable energy was a blind alley leading to higher prices, less reliability of supply and little impact on emissions.