Clamour for new Nuclear Subsidies in Britain

Failing New Nuclear Programme should be Scrapped No2NuclearPower, No.93 March 2017

GMB national secretary for energy Justin Bowden reiterated his call for the government to bankroll the project. “It is time for government to show leadership and take over the reins at Moorside,” said Bowden. “The fiasco with Toshiba shows exactly why relying on foreign companies for our energy needs is just plain stupid.” Tim Yeo, a former minister and chairman of New Nuclear Watch Europe, a pro-nuclear group, said Moorside provided a “prime opportunity” for Theresa May’s administration to demonstrate its industrial strategy with support for the UK nuclear supply chain. He said that with lingering doubts over the viability of Hinkley Point and Wylfa “the only way forward is if the government is willing to participate”. This could involve the government taking a minority stake, or providing loans that would be repaid after construction was complete, added Mr Yeo. (17) The GMB says Moorside is vital as Sellafield’s workforce starts shrinking. By 2020 up to 3,000 jobs could be lost as the Thorp nuclear fuel facility closes and reprocessing of Magnox fuel ends. (18)

Ministers should also actively encourage investment from nuclear companies in China, South Korea and Russia where the industry is relatively insulated from the challenges faced by European companies thanks to strong state backing, says Yeo – there is a real danger that the pipeline of nuclear projects will fail to come on stream before 2030 unless Government agrees to intervene. The existing support regime, which guarantees a fixed price for each megawatt of power produced, does not go far enough to help investors who face billions in construction costs before the nuclear plant begins producing power. The Government should offer loans to developers which can be paid back once the plant comes on stream, or take an equity stake in the project which could be sold off to investors when construction is complete. “In neither case would the Government’s support constitute a permanent subsidy. It would directly cut the cost of electricity produced by the new plant because the Government’s borrowing costs will be lower than those of any private investor,” says Yeo. (19)

Right on cue, says Greenpeace Policy Director, Doug Parr, stories have begun to appear in the press saying that government is thinking about or even “under pressure” to inject huge amounts of taxpayers cash into new reactors in order to get them built. “Neither proposed plant (Moorside and Wylfa) is crying out as a good bet for a private investor” says Parr. “So why would it be a better investment for a government? Or for British taxpayers?” If the UK government takes stakes in these projects, it would be expensive. A 25% share in both Moorside and Wylfa on Anglesey could cost over £7 billion – and that’s before taking into account the cost overruns synonymous with nuclear projects. That would still leave over £20bn to find from other investors, but is a substantial commitment of public money. So it is worth spending a few No2NuclearPower nuClear news No.93, March 2017 6 moments to consider why direct government funding of these nuclear stations is such an eccentric and ill-conceived idea. (20)

First, why do these projects need public funding? The obvious answer is that private investors think they are too risky and too poor a return, even at the high price of £92.50 (2012 prices) that EDF got for their Hinkley Point plant. So why are they risky? Well, one of key reasons Toshiba is in such deep financial trouble is that its reactor design, the AP1000, has never been completed and operated, and is actually more costly and difficult to build than it thought. Its four AP1000 reactors now under construction in the US are ruinously late and over-budget.

Tens of billions of taxpayers’ money are at risk as pressure mounts to spend billions more on new nuclear, according to Dr Dave Toke, reader in energy politics at Aberdeen University. Giant portions of the public spending could be poured down a nuclear black hole as calls for the Government to make direct investments into new nuclear power plant intensify. Ultimately the sums at risk would be much larger than the Government’s own estimates of the cost of Trident. There has been a flurry of demands for government investment in new nuclear projects in the wake of the near bankruptcy of Toshiba. In fact nuclear power is proving to be virtually undeliverable and ruinously expensive in western countries. Despite the manifest bankruptcy of the technology, rather than question whether it is right to continue with the new nuclear programme, its supporters are in effect wanting us all to bet the British economy on it. If the Treasury are forced against their will to sanction ‘equity’ stakes in new nuclear reactors, the losses and., eventually, all the liabilities will fall on the taxpayer. (21)

Companies vying to build nuclear power stations in the UK have been told they must offer a price for their electricity sharply lower than the £92.50/MWh approved for Hinkley Point C, according to the FT. Prices 15-20% lower are seen as crucial to maintaining political support for new nuclear plants. “One of the biggest factors pushing up the strike price is the cost of capital. If government wants a low strike price, it is pretty clear that government has to think about a different kind of [financing] solution,” said one of the industry leaders. The FT says the government remains cautious about the idea of investing taxpayers’ money in nuclear power. One source told the FT there were signs the government wanted to pit NuGen and Horizon against each other in a competitive process, with no guarantee that both would go ahead. (22)

The Sunday Times said ministers are poised to admit that taxpayer cash will be used to fund a new fleet of nuclear power stations – reversing years of government opposition to direct public subsidy. Industry sources claim the business and energy secretary, Greg Clark, accepts that the hands-off approach cannot persist if the plants are to be built. They say Whitehall is preparing to launch a consultation, possibly this summer, on the government taking minority equity stakes in new nuclear projects to kick-start their construction. British taxpayer cash will probably be matched with funds from the Japanese government, possibly via the Japan Bank for International Co-operation and Nippon Export and Investment Insurance. Japan’s Hitachi, which is behind the Wylfa project, is locked in talks with the British and Japanese governments over how to fund the 2.7-gigawatt station. The consultation on state equity is likely to be launched alongside an outline deal on funding Wylfa. Sources said the deal and the consultation are not certain and could yet collapse. (23)

Treasury officials are still hostile to the direct state subsidy idea but Chancellor Philip Hammond, and business secretary, Greg Clark, have both taken part in talks over support for Wylfa and Moorside. Any deal would have to overcome opposition from parts of the Treasury, which has for decades

March 4, 2017 - Posted by Christina Macpherson | politics, UK