Gordon Morgan explores the Hinkley Point C nuclear plant deal between the UK and China, and finds on almost every score - cost, safety, consumer price, design, legality - the deal is an irrational one, which leaves just one possible rational kernel - that it is connected to the Tories other mad nuclear policy; Trident renewal
FOR a Government avowedly committed to "balancing the books", supporting business and maintaining national security, the Tories have a knack for indulging in policies which undermine all three of these goals.
Trident renewal is the most bizarre of these policies. Real cuts to defence spending have been made resulting in equipment and personnel shortages and death and injury to UK troops. Why then persist in spending PS160 billion on something which has no defence utility, can never be used and is probably illegal under the non-proliferation treaties the UK has signed?
But now George Osborne's energy policy, and particularly the announcement of the deal with China over nuclear reactors, is matching Trident in the bizarre stakes, committing up to PS45 billion of taxpayers cash to an unnecessary project.
In one stroke he has divided the Tory party, antagonised huge sectors of UK business and financial institutions, guaranteed that consumer electricity prices will rise not fall in future, breached EU rules on state aid and is arguably placing England's energy security and safety from nuclear contamination in the hands of a foreign power.
Scotland is also affected by this decision.
Although new nuclear plants will not be built in Scotland, energy prices across the UK will be higher than otherwise if they go ahead and it is unclear whether any subsidy will be paid from general taxation which could affect us all.
"The Tories seem determined to curb on-shore wind developments and cut subsidies to other emergent renewables to fund their nuclear delusions."
Moreover, the Tories seem determined to curb on-shore wind developments and cut subsidies to other emergent renewables to fund their nuclear delusions. As most new wind generation is situated in Scotland, this would have a direct effect on Scottish jobs.
Energy policy remains a reserved power and this will not change under the Scotland Bill as newly amended by Scottish Secretary David Mundell.
The Tories seem determined to break the unity of the UK energy market and damage Scotland, something the SNP government thought unthinkable during the referendum campaign even had the Yes vote prevailed.
Scotland must have the powers to set its own energy policy to protect and grow our economy. Further amendments to the Scotland Act should be tabled.
If this doesn't happen, energy policy will be added to tax credits, Trident and other recent Tory policies that prove Scottish independence is essential.
"In this piece, I will analyse the Hinkley Point C deal, and show that on almost every possible indicator of what makes a good agreement, this is a very bad one."
In this piece, I will analyse the Hinkley Point C deal, and show that on almost every possible indicator of what makes a good agreement, this is a very bad one, and is premised on shunning wind and solar energy which could provide much cheaper and more sustainable energy. The only rational explanation is part of a wider irrational nuclear plan: they want to use the reactor to produce weapons grade fuel for the new Trident, with 16 nuclear reactors set for decommissioning by 2023, thus squaring the circle of two mad Tory nuclear policies.
Hinkley Point C - The Agreement
The approval by the Tories for a new nuclear power station, Hinkley Point C, was expected, however, the terms of the deal announced on 21 October are astounding.
The Chinese Government has bought a one-third share of the Hinkley Point C project and two possible future nuclear UK plants from EDF energy which is 80 per cent owned by the French government. In return for UK government guarantees on price and indemnities, the Chinese will part fund the development which will cost PS24.5 billion to build and could produce 3,200 MW of electricity but is scheduled to produce electricity only in 2025, at latest 2033.
The Tories have agreed that for 35 years all electricity produced by Hinkley Point C will be paid for at PS92.50 per megawatt hour at 2012 prices , thus EDF and the Chinese will receive around PS70 billion plus inflation over 35 years assuming an 80 per cent uptime after allowing for maintenance. Not a bad guaranteed return for an investment of PS24.5 billion is it?
In addition the Tories will provide PS2 billion of credit guarantees, equivalent to cash spent to date on the project. Amazingly the Tories will also guarantee to pay up to PS22 billion in compensation i.e. the entire remaining cost of building Hinkley Point C, if the EU or a future UK government annul the contract .
The Tories have also given guarantees to limit the costs of disposal of nuclear waste.
What's wrong with the Deal?
Contrary to previous Tory pledges, the project will rely on a public subsidy which the Government estimates to be between PS4.4 billion and PS19.9 billion over 35 years. Other experts put the subsidy at up to PS45 billion.
If it is the higher figure each of the 30 million UK households would pay an extra PS1,500 in tax and electricity charges over that period, around PS43 per household a year . If as is proposed two further nuclear power stations are built, the subsidies and costs to households will be much greater.
By comparison, onshore wind generating costs in the UK have fallen from PS70 to PS55 per megawatt hour in the last year and with scale and limited Government support will continue to fall.
A report for the International Renewable Energy Association (IRENA) states that "the best wind projects around the world are consistently delivering electricity for USD 0.05/kWh without financial support". That is PS32.50 per megawatt hour.
"The Tories are trying to effectively ban new on-shore wind farms in England and although Scottish wind farms can receive planning consent from the Scottish government, proposed cuts...threatens to severely damage the industry."
In 2014 PS1.2 billion was invested in wind power (60 per cent in Scotland) and the industry supports 30,000 jobs, according to Renewables UK's annual report, more than the construction jobs expected from Hinkley Point C.
Onshore wind is now the cheapest way to generate electricity in the UK.
The Tories are trying to effectively ban new on-shore wind farms in England and although Scottish wind farms can receive planning consent from the Scottish government, proposed cuts in the support regime and lack of scale due to an English ban threatens to severely damage the industry and cost Scottish jobs.
The cost of off-shore wind is also falling and innovation continues apace.
A floating wind farm has just been approved by the Scottish Government to be stationed off Peterhead and should start delivering electricity at around PS100 per megawatt hour in 2017.
Researchers at Cambridge and elsewhere are testing an Owl inspired coating for wind turbines that as well as reducing the noise generated by turbines could significantly increase the energy generated from existing turbines.
Offshore wind costs could easily fall to PS80 per megawatt hour and do so long before Hinkley Point C starts generating electricity.
UK wind on-shore and off-shore last year produced 150 per cent of the electricity anticipated from Hinkley Point C in (at earliest) 10 years from now.
"Were the government to continue to support it, solar could generate as much electricity as Hinkley Point C within three years."
Solar costs have fallen even more dramatically. IRENA states that Solar PV costs fell 75 per cent between 2009 and the end of 2014. They anticipate that where there is decent sun and cheap finance Solar PV will soon generate electricity at around PS39 per megawatt hour.
Solar power in the UK increased 73 per cent last year to produce 20 per cent of Hinkley Point C's output at much less cost. Were the government to continue to support it, solar could generate as much electricity as Hinkley Point C within three years.
Unfortunately the Tories seem hell bent on destroying the solar industry with over 1,000 jobs going over the last month due to uncertainty over future Government support.
On-shore wind and solar presently generate electricity far cheaper than Hinkley Point C will in 2025, and off-shore wind will be cheaper then as well.
At the price agreed for Hinkley Point C, even the Tory Government knows that electricity in 2025 from all other sources will be cheaper than PS92.50.
At the upper end of the Government's own subsidy range they anticipate paying the French and Chinese government PS570 million a year more than alternative sources of electricity which would generate far more jobs and have a speedier effect in reducing carbon emissions.
Design and Safety
Hinkley Point C will be built to an EDF design and any further reactors to Chinese designs. Most high level technical jobs will go to their existing experts. By contrast alternative renewable energy projects or energy saving projects would train or retrain skilled UK workers.
Whilst the design of future reactors is unknown, we know Hinkley Point C will be a third generation European Pressurised Reactor. This is described by HSBC Energy experts as "too big, too costly and still unproven".
Being a pressurised reactor there is also a slight risk of explosive radiation leaks as in Fukishima. The UKs nuclear inspectorate has no experience to assess these risks and there are concerns the inspectorate would be under political pressure to conceal any risks found and would succumb to those pressures.
There is also cancer risks associated with areas surrounding nuclear plants and a seeming reluctance to examine cancer clusters in these areas, particularly in the US.
"We know Hinkley Point C will be a third generation European Pressurised Reactor. This is described by HSBC Energy experts as 'too big, too costly and still unproven'."
In contrast to the EDF design which is essentially a modification of the traditional pressurised water reactors (PWR) in use for 50 years, a UK Government funded study published in July 2015 recommended a new approach, a Molten Salt Reactor (MSR).
Their recommendation was that MSR reactors rather than PWR reactors should be built in the UK. Pilot plants would be required first and there would be nuclear regulatory issues to be addressed, however, an indicative programme for dealing with these is set out. Sites for pilot plants have been identified with DECC.
The advantages of MSRs (which include Thorium reactors) over PWRs according to the report are:
- Safety - no meltdown is possible; no radioactive gases that could be released; radioactivity decreases with overheating; low working pressure.
- Less waste - radioactivity declines in hundreds of years not hundreds of thousands.
- Operation - very fuel efficient; can be built safely underground; scalable from small to large reactors; probably far cheaper to build than PWRs.
- Multi use - can burn radioactive waste and weapons stockpiles and greatly reduce their radioactivity levels ; heat produced by the reactor would be suitable for desalination and district heating.
Not being a nuclear power expert, I hesitate to assess how significant this report is, however, much of the basic science and advantages of alternatives to PWRs have been known for around 50 years.
An MSR experimental reactor operated at Oak Ridge from 1964 till 1969. In the UK MSR reactors were being designed in the 1970's.
Much of the US research in the 1960s which suggested civilian reactors should be MRS rather than uranium based was classified as the government felt it could deflect research from the military's need to generate plutonium which was required for atomic weapons during the Cold War. Uranium fuelled civil nuclear reactors were felt necessary to complete the fuel cycle for atomic bombs. This research only came to light around 40 years later, at the turn of the millenium.
"Why is there any urgency to create yet more nuclear waste and provide more opportunities for nuclear sabotage in an age of terrorism rather than embark on a programme that could clean the existing waste up?"
According to the report there are few scientific or technical issues preventing an MSR development programme beginning.
Why have the Tories not taken the time to digest this report which was produced with the assistance of experts across the world?
Why is there any urgency to create yet more nuclear waste and provide more opportunities for nuclear sabotage in an age of terrorism rather than embark on a programme that could clean the existing waste up, deliver clean energy and provide front line scientific training to engineers and nuclear scientists and potentially create a new industry with enormous potential?
Is it simply that the Government is pig-headed, as the report's authors seem to suggest by inserting a quote from John Maynard Keynes in its preface:
"When the facts change, I change my mind. What do you do, sir?"
Alternatively, do the Tories perhaps want to continue to be required to produce lowly enriched uranium for use in Hinkley Point C and reprocess the spent fuel to conceal their production of weapons grade fuel?
Is it a coincidence that all 16 nuclear reactors operating in the UK are currently due to be decommissioned by 2023 ?
Trident strangely comes to my mind!
Other Issues and Reactions
HSBC points out that the PS92.50 price was agreed in 2011, since then electricity prices have fallen over 16 per cent. They point out that electricity interconnector links to Europe will triple by 2022 and indeed in the last week David Cameron has announced a deal to construct an interconnector with Iceland to access their cheap renewable geo-thermal energy. Due to energy saving, there is a trend to reduce energy consumption and production requirements in the short term.
HSBC question why the strike price has not been renegotiated and concluded (prior to the announcement of the Chinese deal):
"With the problems encountered by France's EPR model and a strike price likely to be double the UK wholesale price at the scheduled 2023 time of opening of the proposed Hinkley C EPR, we see ample reason for the UK Government to delay or cancel the project."
The reaction outside the UK to the then proposed deal was even stronger.
"Should the Austrian Government win their case the Tories, i.e. the UK taxpayer, will have to pay billions in compensation to EDF and the Chinese Government."
The Austrian Government lodged a case against the European Commission in the European Court of Justice which demands they reverse their judgement of October 2014 that the proposed Hinkley Point C contract was legal under European Union law.
Amongst the points raise in this suit are:
- The commission believed there was a separate market in nuclear energy. This was not the case and therefore there could be no market failure.
- The Hinkley Point proposed design is not new technology.
- The contract does not merely cover investment aid, but operating aid or subsidies which are illegal.
- There was no public procurement procedure carried out which for a contract of this size is illegal.
- The guarantees provided breach EU rules.
- The Commission's consideration of the issues was totally inadequate.
- There was no opportunity for objections to the proposal to be heard.
Should the Austrian Government win their case the Tories, i.e. the UK taxpayer, will have to pay billions in compensation to EDF and the Chinese Government.
The UK seems alone in the EU in cutting its support for renewable energy whilst proposing to give subsidies to old fashioned nuclear power stations.
How do the Tories answer the criticism?
David Cameron: " Providing reliable, affordable energy for nearly six million homes and creating more than 25,000 jobs, all while working together to build a low-carbon future ."
In fact alternative energy projects including insulation would produce more jobs, reduce carbon emissions between now and possibly 2033 and reduce not raise household energy costs.
Energy Secretary Amber Rudd: " We are tackling a legacy of under-investment and building energy infrastructure fit for the 21st century as part of our plan to provide the clean, affordable and secure energy" also "Hinkley Point C will continue to meet our robust safety regulations ".
A modern energy infrastructure will require building a smart and decentralised grid involving communities rather than rely on the same grid that has taken energy from Hinkley Point A and B for decades.
As the nuclear inspectorate does not know the technology and foreign governments are involved, security guarantees will be reduced. The UK has not built a nuclear station to a foreign design before and experience has been lost.
EDF Energy CEO Vincent de Rivaz: " Nuclear power will save customers money compared with other energy options and provide a huge boost to British industrial strength, jobs and skills both in Britain and abroad ."
Simply not true. This project will rip the UK taxpayer off, provide minimal training, fewer jobs than renewable alternatives and undermine our nascent renewables industry which has already created far more jobs and generated much more electricity than will Hinkley Point C.
"Possibly the real reason this is being given the go ahead is that it may cost nothing to UK taxpayers till 2025, well after the next election and after Osborne's deficit reduction deadline of 2019."
Possibly the real reason this is being given the go ahead (other than supporting Trident) is that it may cost nothing to UK taxpayers till 2025, well after the next election and after Osborne's deficit reduction deadline of 2019.
It was also in the Tory manifesto, which promised: " To deliver secure, affordable and low-carbon energy, from the Hinkley Point nuclear power station ".
The Hinkley Point C proposal is not secure, not affordable and not necessary. Once again the Tory Government will be breaking a manifesto commitment.
The Tories only pretend to be in favour of a green future. They also pretend to be committed to supporting UK businesses and national security. Trident and Hinkley Point prove otherwise.
UK energy policy is still an "omnishambles" and is becoming hugely damaging to the Scottish economy.
We must create and control an energy policy fit for Scotland in the 21 st century based on a clean energy future with affordable energy for all.
Scotland requires the immediate devolution of energy policy to the Scottish Government. If that doesn't happen, it only heightens the neccesity of independence.