European Commission critique of UK nuclear strategy – the potential for a Hinkley-shaped hole in UK energy infrastructure

HINKLEY

Nuclear power returns and so does the state. The energy policy that spans England and Wales, unlike those of most European nations, includes strong commitments to construct new nuclear power, with 16GW of new capacity planned by 2030 (BIS, 2013). As nuclear has crept back onto the policy agenda, increasingly a state-apparatus that does not want to be seen – given ideological preferences for policy based around its apparent absence and the market’s presence – has also become visible. There has been controversial consultations abandoned by NGOs and declared ‘deeply flawed’ and ‘unlawful’ by the High Court – a decision which then Prime Minister Tony Blair declared would “not affect [pro-nuclear] policy at all” (BBC News, 2006); speeding up of the licensing procedures for new reactors, removal of the public inquiry, and a more general overhaul of the planning system, which has ‘streamlined’ the development process in order to remove the perceived ‘barriers’ to nuclear power (Hutton, 2008).

In short, government activity has been extensive. However despite these policies, it was increasingly clear that nuclear was still not competitive in a liberalised energy market. The latest intervention on the part of the hidden state to address this problem, is the establishment of a Contract for Difference (CfD) entailing an agreement between Government and EDF over a ‘strike price’ for electricity produced from Hinkley C – a deal that in a recently published initial assessment of the policy, the European Commission declared could be “illegal” under EU state aid law (European Commission 2013).

A strike price of £92.50/MWh for a 35-year period was agreed between Government and EDF in October 2013. The Strike Price works on the basis that if the wholesale price of electricity is below the strike price when the proposed Hinkley C reactor in Somerset starts producing electricity (thought to be in 2023), then the state will pay the difference, and if higher, EDF will pay back the difference. The deal also contains additional credit guarantees, the details of which are uncertain given the behind-closed-doors nature of the negotiations. When agreed, the Coalition government set about dawning hard hats, gracing turbine rooms and nodding seriously whilst pouring over maps declaring the deal to be a fantastic one for British consumers, contributing to the goals of energy security and climate change mitigation. This view is seemingly not one that is shared by the European Commission.

The highly critical 68-page initial assessment, led by EU competition chief Joaquín Almunia, inspects many aspects of the CfD. Using previous UK Government projections and EDF’s own cost scenarios, it is questioned whether any support is required given that nuclear could be competitive in several years without additional support mechanisms to already established carbon pricing.  The report raises concerns that the vast expense of Hinkley point may ‘crowd out’ renewables and disrupt European energy supply through reducing funds towards new interconnectors. It also queries why Hinkley should be given the extra support of a CfD on top of carbon pricing measures given that the two reactors of the same design currently under construction – Olkiluito in Finland, and Flamanville in France – were built without such measures.

COOLING TOWERS NUKES

Of course, those two reactors are billions of pounds over budget, and at least five years behind schedule. The European Pressurised Reactor (EPR) Generation III+ design, has essentially now been abandoned by the French government that funded its development, indicated by the cancellation of plans to construct another EPR reactor at Penly. Indeed, no new build aims presently exist in France, despite a looming energy gap due to old nuclear power stations closing. The European Commission intervention and current fate of the EPRs under construction in Finland and France, point towards a central problem with regards to the construction of new nuclear power in the contemporary landscape of energy policy.

As George Monbiot (2013) notes to his apparent surprise, current costs of nuclear power are double or triple most government and industry projections made several years ago – projections that formed the justificatory basis for new nuclear. This is a familiar story: previous rounds of nuclear power construction have seen government and industry projections consistently underestimate the costs and timings of nuclear new build (Hultman and Koomey, 2013). So far, the EU new build programme does not seem to be contradicting this pattern.

Since the transformation of energy into a privatised and liberalised system, one of the key challenges has been whether nuclear can be considered an ‘ordinary asset’ (MacKerron, 2004; Kahn, 1997), entailing that the technology is not given special treatment by the state but exposed to the same market conditions as other technological choices. The British revival of nuclear power is predicated on their being ‘no public subsidy’ (BERR, 2008), where Government ‘facilitates’ but crucially, does not ‘pick’ the technology over others, thus enacting ‘technological neutrality’ with regards to decision-making on energy policy. This does not just relate to the UK’s ideological preference established since the late 1980s for ‘the market’ to be the key decision-maker in relation to energy choices, but is also a matter of European legislation: the creation of a common European-wide energy market encapsulates regulation against ‘illegal state aid’ – understood broadly as the artificial distortion of markets through subsidization of particular technologies.

The problem for nuclear, of course, is that, historically the technology has been reliant on unchallenged state protection and nurturing for its development. Take the prime example: France, with 75% of electricity supplied by nuclear entailed,

“…a unique institutional framework that allowed for centralised decision-making, a high degree of standardisation and regulatory stability, epitomised by comparatively short reactor construction times” (Grubler, 2010: 5174).

Given the historic political framework that surrounds nuclear energy, the economics of the technology have been notoriously difficult to assess. However, the move towards liberalised energy markets has illuminated some of nuclear’s ‘extraordinary’ elements which make it potentially prohibitively expensive. Nuclear costs can rise based on several factors including construction, reprocessing, storage, decommissioning, fuel, security, and research costs (Sovacool and Valentine, 2011). Studies have concluded that between 1966 to 1977, nuclear plants cost at least twice as much as expected (Ramana, 2009). Hultman (2011: 403) concludes that the period of 1960-1990 shows significant general escalations in costs, defined as a “negative learning experience”. The general slowing construction rates of nuclear power over the past decade (Schneider and Froggatt, 2013), are in part likely to be a consequence of nuclear’s ‘exposure’ to market forces.

Nuclear proves to be a highly risky investment given the capital-intensive nature and long-lead times required, where electricity price fluctuations can inflict heavy profit losses if there is no stability and certainty with regards to energy prices. Nuclear is a fascinating point of contradiction within the age of rampant and largely unchallenged neoliberalism; something which seemingly cannot be built without notable state intervention, and cannot survive in the free market, is at the same time, the solution and an essential technology that must be built. A delightful ‘third way’ object: “I want it because it is right”.

NUCLEAR PROTEST

Which brings us back to Hinkley C and UK energy futures. There does seem to be a form of collective memory loss with regards to nuclear power and the justificatory basis originally set out by the UK Government. ‘There-is-no-alternative’ (TINA) was the message. There was a need for nuclear power “significantly before” 2025 (DECC, 2011). The rhetoric was strong enough to depict a picture of future British households scrabbling in the darkness for candles if this target was not met. Some people didn’t buy it; they were generally North of Hadrian’s Wall, but elsewhere, public opinion was changing.  If EDF were not granted early planning permission for ‘preliminary works’ at Hinkley point – the first of its kind in UK planning history, then “twelve million tonnes of CO2” would not be saved (EDF, 2010). All would be OK however, if the policy was accepted: There was “no Plan B” declared Vincent de Rivaz of EDF (McGhie, 2012), elsewhere hubristically stating that people would be cooking their Christmas turkeys using power from Hinkley C by Winter 2017 (Webb, 2013).  Why are these statements of ‘need’ forgotten? Would they be so easily forgotten in Germany, or even, France? There is an incredible lack of scrutiny regarding the nuclear industry in the UK that represents more general political transformations underway – but I digress.

The earliest estimate for power produced from Hinkley C is now 2023, so already we are 5 years behind schedule and this is assuming that time scales are kept to. Indeed the 16GW target has been set back from 2025 to 2030 –this target again assumes the highly unlikely scenario that all reactors are built, and are built on time.  Thus the justificatory basis – the ‘need’ for nuclear is already fundamentally out of kilter with what is actually happening, which must automatically lead to a questioning on the nature of ‘need’. But words mean exactly what the enunciator wants them to mean, so, ‘need’ it is. As the European Commission Report illustrates, the ‘energy gap’ is occurring before 2020, and thus the justificatory basis for new nuclear has changed.

The judgement of the European Commission leaves the real possibility that Hinkley C will be staggered, stalled, or abandoned and a Hinkley-shaped hole will emerge in the UK policy landscape. If Hinkley fails it is likely that other proposed sites will also not be constructed. Given this real possibility, it is perhaps no wonder that DECC are so enthusiastic concerning ‘Fracking’ – which fulfils the similar justificatory remit that nuclear does with regards to energy independence.

Whether or not the deal between EDF and Government is deemed to be ‘illegal state aid’, like it or not, the state has already engaged in considerable effort to encourage nuclear: as the report also addresses,  questions must be asked about what the state was not doing, what alternatives or ‘plan Bs’ were not being explored, and what wasn’t being ‘facilitated’ whilst so much energy was being expended on the promotion of new nuclear?

Dr Phillip Johnstone is a Research Fellow at  the Sussex Energy Group in SPRU at the University of Sussex.

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