Ministers are breaking their promise on subsidies for nuclear power

“Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects…

“And also provided that they receive no public subsidy.”

That’s the Coalition Agreement on nuclear power. It’s pretty clear – no taxpayers’ money for new nuclear power.

Nuclear-power-plant-at-night
Energy secretary Chris Huhne – who in opposition called nuclear power a “failed technology” – elaborated on this shortly after taking the job, telling The Times (£):

“I have explained my position to the industry and said public subsidies include contingent liabilities.”

But Left Foot Forward understands that via complicated, structural measures, the government is planning on green-lighting a multi-billion pound taxpayer giveaway to the nuclear industry.

Here’s how:

Firstly, Chris Huhne has:

“…agreed to reduce the risk to industry of building nuclear plants by setting a fixed price for disposal of waste.”

This transfers the huge risks associated with nuclear power to taxpayers. As the Oxford Professor of Energy Policy, Dieter Helm, explained back in 2008:

“It’s a fixed-price contract for the government to take the waste. The government absorbs the final-end risk.”

Helm has said recently Mr Huhne’s pledge not to subsidise nuclear plants is “more rhetoric than substance”; he told (£) The Times:

“There has never been a nuclear programme which is entirely funded by the private sector.”

Secondly, as The Sunday Times explained (£) back in May:

“The government is planning to rig the carbon trading market in a move that will encourage the creation of nuclear power plants.”

Peter Atherton, head of European utilities at Citigroup, said:

“Putting a floor under the power price would effectively transfer risk from the nuclear developer to the electricity consumer.”

That sounds a lot like a subsidy. Today the Financial Times published new findings showing the nuclear industry could receive a £3.43 billion windfall this way between 2013 and 2026 via a plan outlined in Mr Huhne’s new energy market reform proposals.

There is nothing intrinsically wrong with introducing a floor price for carbon. It could even be a good idea – offering greater support for clean energy projects and improved energy efficiency. But it should not be used as a backdoor way of giving taxpayer support to a nuclear industry that has already benefited from more than £10 billion in public support in the last decade and that has proven that it can’t stand on its own two feet.

For example, in 1995 the Sizewell B nuclear power plant was completed at a cost to electricity consumers of more than £3bn, yet a year later when the newer nuclear plants were privatised as British Energy, it and seven other nuclear power plants of about the same size were sold for only about half this cost.

In 2002, despite acquiring eight nuclear plants for a fraction of their construction cost, British Energy went bankrupt and was saved only by the government committing £10bn of taxpayers’ money.

The government should find ways to avoid channelling our money into the black hole that is the failing nuclear industry, especially at a time when Ministers say there is such need for cut backs. Green campaigners including WWF point out windfalls for nuclear utilities could be avoided via a windfall tax on those companies to claw back these revenues.

http://twitter.com/jossgarman/status/37152829953163264 Joss Garman

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/bill_bold/status/37153045557018624 bill bold

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/adrianhollister/status/37153189752999936 Adrian Hollister

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/steve_trow/status/37154165452963840 Steve Trow

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/tennerfilms/status/37155180675858433 Tenner Films

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/c_a_jonestechno/status/37156020828508161 CAROLE JONES

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/hk_energy/status/37157251915456512 HK_Energy

Here's what @JossGarman thinks: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9
http://twitter.com/darrenjohnsonam/status/37158230526267392 Darren Johnson

Govt breaking promise on no subsidy for nukes – "failed technology" @leftfootforward http://bit.ly/hIhmqe #nuclear #energy #libdem
http://twitter.com/scott_redding/status/37160150829633536 Scott Redding

RT @DarrenJohnsonAM: Govt breaking promise on no subsidy for nukes – "failed technology" @leftfootforward http://bit.ly/hIhmqe #nuclear …
anyleftiwonder

Are there any promises this government are keeping ?
http://twitter.com/c_a_jonestechno/status/37170636354756609 CAROLE JONES

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://lnk.ms/KcsZn reveals @JossGarman
http://twitter.com/c_a_jonestechno/status/37171789071257600 CAROLE JONES

Ministers are breaking their promise on subsidies for nuclear power: http://lnk.ms/KcsZn reveals
http://twitter.com/dominictristram/status/37172548537946113 Dominic Tristram

Nuclear can only work with subsidies – it's time to drop it: http://bit.ly/edHmd9
http://twitter.com/slintottuk/status/37175290702602240 Stephen Lintott

RT @DarrenJohnsonAM: Govt breaking promise on no subsidy for nukes – "failed technology" @leftfootforward http://bit.ly/hIhmqe #nuclear …
http://twitter.com/oranjd/status/37190912090046464 James Doran

Ministers are breaking their promise on subsidies for nuclear power http://bit.ly/hARknB
http://twitter.com/salardeen/status/37191884296167424 salardeen

RT @oranjd: Ministers are breaking their promise on subsidies for nuclear power http://bit.ly/hARknB
http://www.after-oil.co.uk/edf_financial.htm John Busby

Subject: DECC’s four nuclear “incentives”

The supposed “incentives” need further analysis.
Carbon trading has ceased in Chicago and is suspended in Europe because of fraud, but the operation of a “floor” auction price for carbon remains obscure. At an auction if the reserve price is not exceeded there is “no sale”. If the floor price at a UK sale is set too high the buyer can revert to another exchange to get a lower price. It is unlikely that EC competition rules would allow the UK Treasury to load up the carbon price with a supplementary tax.
In any case it would only favour companies with no fossil fuel generation, such as EdF. RWE and E.On have considerable gas-fired generation and, well before their nuclear sector was generating, the revenue from their other activities would be subject to penalties.
An over generous application of feed-in-tariffs (FiTs) would reduce the market for realistic tariffs. For instance the distributor has to pay perhaps three times the wholesale rate for consumers’ solar power, while losing revenue when the consumer enjoys free electricity. A realistic FiT for nuclear would also be three times the wholesale price and because of the high output could not be absorbed in the overall pricing.
The idea of rewarding nuclear for providing peak low-carbon power is also weak in that electricity demand is falling fast and will continue to do so as air and road transport attenuates with the rising oil price, which now that peak oil has passed will ramp up fast.
As to an imposition of drastic emission standards on nuclear’s competitors, by the time nuclear electricity is available its fossil fuel competitors will be bankrupt and unable to purchase allowances. Coal CCS is not viable as retrofitting is impractical and even if it was, it would reduce the revenue by a third while adding to costs.
As far as assisting investment in nuclear the “incentives” are too obscure to be of value. In a background of a failing nuclear sector in France, where the tariffs are suppressed by government and EdF’s debt is doubling every two years, only state funding as in the past will suffice. EdF’s revenue has worsened as it has had to sell its profitable UK distribution subsidiary and half of its shares in RTE, the French national grid with consequent loss of income.
Nuclear power is not an economic activity and measures to make it so artificially will fail. When anti-nuclear Huhne stated that nuclear would get no subsidy he knew that he would never see it arrive in the UK!

See http://www.after-oil.co.uk/edf_financial.htm “Edf’s financial meltdown”
http://twitter.com/annalujz/status/37201696656588800 Anna-Lujz Gilbert

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power: http://bit.ly/edHmd9 reveals @JossGarman
http://twitter.com/christinamac1/status/37313661030629376 christinamac1

RT @leftfootfwd: UK Ministers are breaking their promise on subsidies for nuclear power http://bit.ly/dWnw82
http://nuclear-news.net/2011/02/15/uk-coalition-govt-betraying-promises-on-nuclear-power/ UK coalition govt betraying promises on nuclear power « nuclear-news

[...] Ministers are breaking their promise on subsidies for nuclear power | Left Foot Forward [...]
http://www.suffolkcane.org.uk Pete Rowberry

Nuclear power has never been cheap (is spite of claims that it would prodcue power too cheap to meter) it has never been safe (studies clearly show that living near a nuclear power station can damage your health) and produces a waste stream which needs to be managed for ten thousand years. It is not even necessary as studies have shown that realistic energy conservation measures and renewable sources could meet all of our energy needs.

If Minsiters wish to “come clean” and stop supporting out of date polluting technologies, then coal and oil are not the only targets. Nuclear must also go.
Mr. Sensible

Joss, I think nuclear can play its role in working towards a more sustainable economy, but this looks like another broken promice by the Lib Dems.
http://twitter.com/ynniadnewydd/status/37486869700808704 ynniadnewydd

RT @leftfootfwd: Ministers are breaking their promise on subsidies for nuclear power http://bit.ly/dWnw82
http://climatedilemma.com Peter Wood

A carbon price floor is a highly cost-effective to reduce the UK’s greenhouse gas emissions. As well as increasing the carbon price (and therefore driving down emissions), in will increase certainty about the level of the carbon price, which will drive investment in low-emissions technology – such as renewable energy.

Generators of low- or zero-emissions electricity will profit from a price floor – just like they will from any carbon price. But this includes renewables just as much as nuclear power. For environmental groups to oppose climate policy because it might affect the profits of nuclear generators is ridiculous. If there are safety or proliferation concerns with nuclear power, then by all means apply scrutiny there – but don’t oppose good climate policy because it rewards them for generating low-emission electricity. I am very disappointed by the stance taken by WWF and Greenpeace.
http://www.after-oil.co.uk/edf_financial.htm John Busby

An explanation as to how a carbon “floor” will work is overdue. Is this how it works?

Emitters of carbon dioxide are given a progressively reducing package of allowances, so that to continue without modification of their plant they have to buy progressively more allowances from carbon exchanges set up in Europe. The lower emitters of carbon dioxide have spare allowances which they can sell. These are then traded in the exchanges.

The price is currently viewed as being too low, especially to give a comparative advantage to nuclear power, which otherwise can’t compete with its fossil fuel competitors, hence the idea of an auction “floor” price. If the “floor” or “reserve” price is not reached in a UK auction, then there is “no sale”.

Do the emitters then go to another European exchange where they can purchse their allowances at a lower price? A “floor” price can only work if it is universally set in the European ETS or if the trading is exclusively worked in the UK. Presumably it would then be possible to top up the sale price with a government levy so that the penalties for the emitters would be enhanced. This would have the effect of raising the price of the emitters production – in the case of electricity the tariffs would rise – or putting them out of business. Would the “floor” price would be set to raise the price of the tariffs to a level able to make unconomic nuclear economic?

The effect on all this in the ten years while nuclear plants are undergoing their construction, would reduce demand because of rising prices, compounded by rising fuel costs, so that the market for new nuclear when it is available would be down.

Can the advocates of a carbon “floor” price explain how it would work? It seems an unlikely pursuit, just to make nuclear appear to be viable, when everyone knows it isn’t, especially as in the leading nuclear country, France, the sector is in financial disorder.
http://climatedilemma.com Peter Wood

@John Busby

For more information on how a price floor works, there are several posts on my blog ‘Climate Dilemma’, which you should be able to access by clicking on my name. You may also want to read

Wood, P.J., Jotzo, F., Price floors for emissions trading. Energy Policy (2011), doi:10.1016/j.enpol.2011.01.004

There are two ways to implement a price floor: one approach is to have a reserve price at auction, as you mention. The UK approach is a different one – as well as firms paying for EU ETS permits based on their emissions, they also pay an extra fee/tax based on their emissions. This extra tax will be based on a reformed ‘Climate Change Levy’ and applied to fossil fuels. Under this approach, the effective carbon price is the sum of the EU ETS permit price and the UK Climate Change Levy.
http://www.after-oil.co.uk/edf_financial.htm John Busby

@Peter Wood

With the passing of a global “all-oils” production peak in 2008, we are seeing the resultant price rise in oil products, which will mean that gas and coal prices will follow. Electricity generation is not the only emitter of carbon dioxide, so to add to industries costs with not just permits but an additional levy will be totally unacceptable.

Even so the concept of a “floor” price has arisen because of the demands of EdF to DECC and parliamentary committees for it as prerequisite for new nuclear build in the UK. Even so this has proved to be insufficient incentive for RWE and E.On and now there are FiTs, capacity grants and an imposition of emission standards added to the basket of subsidies.

The actual total of the “floor” price and the levy/tax needed to make nuclear an “economic” investment is so far not specified, but as nuclear generation costs three times its fossil fuel competitors, it will be astronomically high. As it usually takes ten years to build a nuclear plant, by the time it could be earning at the enhanced tariffs produced by the levies on its competitors, the same competitors will have threatened closure and to avoid the lights going out the whole system will have been suspended.

The rise in fossil fuel prices over the next ten years will reduce economic activity and the associated emissions without resorting to carbon trading, which in any case appears to be on the way out.
Daniel Elton

We originally described Dr Dieter Helm as staunchly pro-nuclear. We have withdrawn this as Dr Helm describes himself as technologically neutral.
http://www.leftfootforward.org/2011/07/caroline-lucas-coalition-subsidy-for-new-nuclear-political-fallout/ Coalition subsidy for nuclear could spark major political fallout | Left Foot Forward

[...] to say, this all makes a mockery of the coalition pledge to provide no public money for new nuclear builds – and the political implications should not be underestimated. Before the 2010 general [...]
http://twitter.com/naturiaethwr/status/110703032613863424 gareth clubb

Taliadau cudd i'r diwydiant #niwclear http://t.co/YehRRAh