Is there such a thing as a rightwing energy policy? If there is, you might think it would be based on the rigorous application of free market principles. However, that doesn’t accord with the right’s traditional support for nuclear power – a form of energy that is utterly dominated by the state.
Nuclear politics has always been complicated. After all, it was Margaret Thatcher who, dismayed by the cost of Sizewell B, decided to stop the construction of further nuclear power stations in this country; and it was David Cameron who reversed that decision by pushing through the deal on Hinckley Point C.
Last week, that deal got the go-ahead from the EU – but Allister Heath, despite his own impeccable rightwing credentials, is not happy. Writing in the Telegraph, he says this is a bad deal for British energy consumers:
“It turns out that the plant, to be located in Somerset, will cost at least £24.5bn to build, the EU regulators disclosed as they gave state aid approval. This is a massive figure and is far larger than before, partly because it correctly includes interest costs which had been excluded from previous estimates.
“The contract agreed by the UK government guarantees EDF and its partners a price of £92.50 – twice the current market price of electricity – for each megawatt-hour of power that the reactors generate over a 35-year period. The EU originally said this could mean £17.6bn in cumulative subsidies. These will remain following the EU ruling.”
He points out that the ruling does improve things slightly for the British public, by insisting that some of the savings should be passed on to us should EDF be “able to build its plant more quickly and cheaply than its base case assumptions”:
“It’s a minor tweak yet it raises a profound question: why exactly do we need the EU to improve what is in effect a UK Government procurement contract? Why couldn’t our own negotiators thrash out a better deal in the first place?”
Perhaps it’s because the chance of a nuclear power station coming in under-budget are so remote that the Government negotiators couldn’t be bothered to even address the possibility.
Allister Heath isn’t against nuclear power on principle, rather he believes that we need to concentrate energy sources that won’t have to be subsidised by the state for decades to come:
“…we must focus on areas that don’t require a subsidy: shale and soon, hopefully, solar energy…
“…a welcome collapse in the price of solar cells has transformed its economics and means that it will increasingly be competitive with other forms of electricity… Citigroup argues that solar has already reached grid parity with residential electricity prices in Germany, Italy, Spain, Portugal, Australia and the US south-west. Japan will cross this year, Korea in 2018. As my colleague Ambrose Evans-Pritchard reported recently, the bank has even forecast that Britain will achieve grid parity by 2020.”
What Heath doesn’t explain are the underlying reasons why technologies like shale and solar have made such progress, while nuclear remains resolutely – indeed, increasingly – expensive. To understand the dynamics we need to look at the technology itself and the structure of the industry surrounding it. With both shale and solar, the tech is modular and adaptable, while the industry is characterised by multiple, private sector companies competing fiercely with one another on innovation and cost. Nuclear, on the other hand, requires enormous one-off construction projects of fearsome complexity; while the industry consists mainly of state-owned monoliths.
That is why, decades after Margaret Thatcher pulled the plug, Britain’s first new power station is to be built by the French, with Chinese finance and the backing of an EU-approved contract that will lock-in British consumers until the year 2058.