Nuclear energy: Foreign Finance Initiative | Editorial | Comment is ...

Npower stuck prices up by 10% on Monday, Ed Davey went for something more like 100%. That is a crude simplification of events in the electricity market – the energy secretary's price hike is wholesale rather than retail, affects just one nuclear plant, and does not kick in for a decade. But with heating bills becoming the hottest of political issues, there is enough in the caricature to make it uncomfortable. Guaranteeing a price of £92.50 for a megawatt hour for 35 years, roughly twice today's market rate, was evidently the least Mr Davey felt he had to do to entice French and Chinese money into British atomic power. He claims, rather improbably, that it will mean cheaper bills in the end; however things play out, new nuclear could have been done more cheaply if the government had simply borrowed the money and got on with rebuilding Hinkley Point itself.

Monday also brought news that the hinterland of Fukushima, scene of Japan's radioactive disaster in 2011, would take three years longer than claimed to decontaminate. This slippage is in keeping with tradition. Costs and clean-up liabilities often loom larger as time goes by, while a satisfactory way of dealing with waste has always remained the same distant speck on the horizon. Many environmentalists look at the record, and conclude it would be better to throw everything at renewables and efficiency.

Until very recently, Mr Davey's party was in this camp. "Liberal Democrats will," the manifesto pledged, "reject a new generation of nuclear power stations; based on the evidence nuclear is a far more expensive way of reducing carbon emissions than promoting energy conservation and renewable energy." The tortuous words and Lib Dem right-to-abstain in the coalition agreement are reminiscent of university fees. The difference this time is that Mr Davey, who also did much to remove the sting from Royal Mail privatisation, took the time to make the argument and win over enough activists to duck the betrayal charge.

His case at the party conference, which is embraced by an influential minority within the green movement, is that climate changes everything. That it is, in sum, better to accept the ugly known unknowns of nuclear power than to sleepwalk into the half-knowable consequences of climatic chaos. Like it or not, this is a serious argument. Within Mr Davey's energy department, however, there will have been at least as much fretting about keeping the lights on, after the fifth of UK electricity generated by old nuclear stations gets switched off.

Plugging the gap entirely through turbines – generation that comes and goes with the wind – would be tricky in the extreme. There ought to be scope to do far more through efficiency and investment in other renewables, but a Tory-dominated administration in which the chancellor boasts about making sure Britain is not a world leader in fixing climate isn't heading that way. Thus it was that the energy secretary came to conclude that he had no alternative but to go nuclear – at any price.

Desperation is never a good state of mind for negotiation, and so it is especially unfortunate the Hinkley Point overhaul is being done in a manner that demanded so much haggling. The spin is that "the private sector is doing the job" but, in practice, regulation of price and rates of return, not to mention international treaty obligations regarding safety, mean that a government stands behind every nuclear plant in the world. In this case, Whitehall is getting state-owned corporations in Paris and Beijing to do the borrowing, which it will then partially underwrite before handing the bills on to British customers into the distant future.

The contractual small print gives too much security to the investors, and too little power to the customer when the inevitable contingencies crop up. New nuclear power is coming to Britain through a variant of the PFI, which we might call the Foreign Finance Initiative. It will be decades before we can judge whether the financial waste left behind is any less radioactive.

Source: http://www.theguardian.com/commentisfree/2013/oct/21/nuclear-energy-editorial-hinkley-point
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