Our nuclear reactors have reached the end of their lives, North Sea oil is running out, coal is dirty: Britain faces an energy crisis of rising demand and falling supply. In our Nuclear Futures series, we examine the potential for the clean but controversial nuclear energy to fill the gap.
One of David Cameron’s first steps on becoming Prime Minister was to state his ambition to lead the greenest government ever; easier said than done, of course.
The Energy Bill currently travelling through parliament will ensure that the power-generating infrastructure we need for the future gets built. But it is an odd bill – it encourages us to abandon fossil fuels, yet adds incentives to build natural gas power stations. Is it really sensible to subsidise new plants that we hope only to use as emergency back-up to renewables?
With the Climate Change Act 2008 Britain passed the world’s first legally binding emissions reduction plan. Europe is struggling to establish energy and climate policy and beyond Europe the world is not de-carbonising at all.
Britain was the first European country to liberalise its electricity sector more than 20 years ago, and consumers now choose between providers in a genuine market. The British government does not build power stations; this is left to private companies, who must consider return on investment, and business risks. This liberalisation prompted the “dash for gas” in the 1990s that introduced gas power stations with their lower greenhouse emissions, but has not yielded the investment needed to de-carbonise our power sector.
Through the Energy Bill the government seeks to steer investors’ decisions, but what to build remains a difficult question. Should we retreat from our ambition and allow a heavy role for natural gas, or should we press on with the expensive long-term infrastructure that a de-carbonised electricity system requires? My view aligns with the latter, but I appreciate the concerns underlying the alternative.
So much has changed since May 2010, with a sluggish economy and concerns about the impact of energy prices on jobs and growth. The EU carbon price has collapsed again and might never recover. Efforts in the US to exploit unconventional shale gas have transformed the natural gas markets, and the US shift from coal to gas is contributing to lower coal prices. On top of this the Fukushima disaster in Japan severely dented confidence in nuclear power, causing Germany to close its nuclear power stations.
Nuclear new build is arguably the most difficult of all the infrastructure challenges facing the government. The costs and timescales of a nuclear power plant are daunting and the economic risks and uncertainties make things even worse for investors. The Energy Bill contains an innovative measure, which fixes a future price for electricity they generate (a “strike price”), that aims to reduce that risk and tempt investors to build the infrastructure needed.
French power giant EDF has ambitions to build new nuclear power plants in Britain but strike price negotiations for the first, the twin-reactor Hinkley Point C in Somerset, are proving difficult. Conscious of the challenges, EDF is driving a hard bargain. Nuclear power, like renewables, is not cheap.
In the late 1980s the UK planned to build a fleet of Pressurised Water Reactors (PWRs). Only one was built, Sizewell B in Suffolk. The advantages of scale that would have come from a fleet were never realised. Twenty years on there is a risk that once again a UK nuclear renaissance might not get beyond one new station. Keen to make progress, it is possible that the Prime Minister could use his scarce political capital to persuade the public that a high strike price is worth paying for Hinkley Point. But presumably later nuclear plants could not be eased over the bar by political intervention; they must be cheaper.
If nuclear power is to be a major and long-term contributor to de-carbonisation, then we must reinvigorate our skills base and technical capabilities. Government understands this and it has produced a swathe of new reports and policy documents examining nuclear research strategy. The uncertainty concerning the UK’s future energy investments is obvious and hence the documents point to the importance of our nuclear skills and competencies in serving a global nuclear renaissance – signs of which remain strong in China, India, and Russia. A new-build programme at home would enhance British credibility in export markets.
The decisions taken in the coming months will shape our energy future for decades to come. They will affect our economic competitiveness and ability to influence global climate policy. They will shield us from, or expose us to, risks. The decisions are indeed difficult, but the goal to be the greenest government ever remains worthy and important.
Part of our Nuclear Future series: