David Morris is Member of Parliament for Morecambe and Lunesdale.
After decades of inaction on Nuclear New Build, this Coalition Government is finally getting to grips with the need to diversify our electricity production. Along the way we have seen genuine commitment on the part of government and the private sector to make it happen.
The path that is new nuclear has not been entirely straightforward. EDF Energy had threatened to pull the plug if the strike price was not set at the right level. But to be fair to EDF, they understand that their role is to design and build the plants, whereas government’s role is to ensure that market conditions are conducive to them being able to do it.
Nuclear power stations cost around £7bn to build, but they cost a lot less to run than conventional fossil fuel plants. So the largest cost of a station is paying back the cost of building it. This, in turn, gives us an outcome that is a headache to energy companies, but can be good for consumers: the cost of nuclear power is stable.
Since privatisation, the cost of energy in the UK has been pegged to commodity prices, principally oil, gas, and most of all coal. So the traditional worry was that when prices dropped, an energy firm might be left with an uneconomic nuclear power station and still have to pay the bill for it. Obviously, this worry made borrowing the money to build one almost impossible.
In 2010, the Coalition began a process that would resolve this worry once and for all, with the Strike Price and Contracts for Difference. These two combined would ensure that whilst electricity prices can fluctuate, nuclear would always be viable, as the plants would continue to be paid a fair price. My own view is that this process would of itself stabilise prices.
It would be wrong to say that this has allayed every fear that the energy companies have – after all, EDF points out that the Strike Price has to be right or the whole process is pointless – but the energy market reforms make nuclear possible again. Equally, after Horizon Nuclear lost its German backers, a concerted effort by DECC, the Welsh Office and Downing Street ensured a new Japanese investor was found.
But the critical point still stands: energy firms cannot invest in nuclear unless they know there will be a payback. Ed Miliband’s proposal to cap electricity prices stamps on the guarantees that this Government has given makes it understandable that the energy firms, and (perhaps more importantly) their financial backers, have got very nervous.
What’s most galling about all of this is that Miliband knows he doesn’t have to be in Downing Street to ruin things. Like with the immediate stock market loses, the mere threat of a Miliband Government is enough to send nuclear investors running for cover. And all our plans to diversify our energy market and increase energy security are left in tatters.
This is a double win for Miliband: he gets his headline-grabbing policy, and if he does successfully wreck the energy market reforms he can blame the government. It may be irresponsible, but Miliband would play politics with anything if he thought he’d benefit. For consumers, this risk means more of the same – a total reliance on foreign imports with all the price fluctuations that entails. And in my constituency and across the other nuclear sites, jobs are put at risk.
Miliband is risking our energy security, future price stabilisation and British jobs. I suppose we should be used to his hollow rhetoric by now, but this is the first time he’s had the ability to use his socialist dogma to do real harm. We must make the case that attacking the energy companies now puts at risk vital investment. As someone who watches the energy sector closely, I can tell you that new nuclear, fracking and viable green energy is tantalisingly close. But this future is not certain or assured – it can be ruined by bad ideas and ruinous caps. The stability of the National Grid is not worth destroying to save one man’s failing political career.