The Low Carbon Kid: Why the Labour Party needs a new policy on Hinkley C nuclear power station

Thursday, March 10, 2016

Why the Labour Party needs a new policy on Hinkley C nuclear power station

Hinkley B nuclear power station. C doesn't necessarily follow B.

The resignation of Electricite de France's Chief Financial Officer Thomas Piquemal – after opposing the announcement next month of an investment decision on the building of a new nuclear reactor at Hinkley Point C in the UK – is the latest in a long line of expert denunciations of this project.

The Labour Party has always supported this project. It has been championed by the British government since the days of Tony Blair, despite expert criticism over the years.

The mystery is not just why the Conservative Party stubbornly remains so wedded to it, but why the Labour Party does too. It should distance itself and come up with a new strategy – and below I outline why.

Hinkley C would be the first new nuclear power station to be built in the UK in two decades. Originally planned for completion in 2017, it is now unlikely to be built until at least 2025 – if ever.

Bloomberg quoted sources close to EDF as observing that the finance officer was forced to quit because he believed that proceeding with construction would be disastrous for the company, while the French and British governments are putting pressure on EDF to proceed anyway. EDF is 85% owned by the French state.

The French company is at the heart of electricity generation in Britain and been the most committed supporter of new nuclear build here.

If EDF and the French and British governments do announce next month that construction will proceed, it will be at a massive cost to the British taxpayer [see below for how much].

The British government faces serious questions as to why it is persisting with Hinkley C. To understand the seriousness of these questions we need to look at the history of Britain's enthusiasm for this particular plant and technology.

The proposal

NNB GenCo, a subsidiary created by EDF Energy to build and operate two new nuclear power stations at Hinkley Point C and Sizewell, proposes to build a twin reactor power station at Hinkley Point C using an EDF / Areva UK European Pressurised Water Reactor (EPR) design.

Each of the EPR reactors would generate 1600MW of electricity, enough to power about five million homes together. Regulatory and planning hurdles were surmounted in 2013, and yet the project still has not been given the go-ahead. Hinckley Point B was supposed to come to the end of its life cycle this year, but is likely to be extended for another four years.

It began with Tony Blair

In 2010, Hinkley Point was one of eight sites identified by the Government for new nuclear power stations. This followed a new enthusiasm by Tony Blair's Labour government for new nuclear power following almost two decades of disinterest in the subject following the Chernobyl disaster. Commentators at the time credited Tony Blair's conversion to lobbying by the nuclear industry using the argument that nuclear power could help to fight global warming.

David Kennedy, the watchdog Climate Change Commission's chief executive, went on to talk of the country's carbon emission reduction target of a 90% cut in power sector emissions being delivered by 40GW of new nuclear, wind and clean coal and gas power – equivalent to 25 large power stations.

At the same time, the government put its faith in carbon capture and storage (CCS), technology. CCS from the start was condemned by environmentalists as being too expensive to work and was also dubbed a white elephant. It was finally abandoned late last year by the Chancellor George Osborne when he withdrew £1 billion of public support for this technology.

In July of the following year EDF received permission from West Somerset district council to carry out new preparatory groundwork for Hinckley C, and the company lent its support to the local Bridgwater College’s new Energy Skills Centre in order to develop the skills necessary to build the power station.

The government received surprising support from a group of environmentalists led by Mark Lynas and George Monbiot, who broke ranks to back nuclear power. This shocked many other environmentalists such as Jonathan Porritt and Jeremy Leggett. But even these supporters later came out and said that the Hinkley C deal with EDF was a disaster for the taxpayer and should be scrapped.

Targeting women

In 2012 EDF began a publicity campaign in the UK to soften up the public, which was predominantly anti-nuclear, including paying for editorial in women's magazines because its market research found that women were more like to oppose nuclear power than men.

A complaint I made to the Advertising Standards Authority was upheld, about the use of advertising from EDF that was not labelled as advertising and looked like editorial, in Marie Claire, the "magazine for women who want to think smart and look amazing". The articles were provided by EDF, under the headline “Nuclear power: the facts" but contained inaccuracies.

Even after the ASA ruled in my favour, EDF still continued making dubious claims in the pages of the magazine, such as that in the 2030s “nuclear reactors in Somerset and Suffolk could supply around 40% of the country's energy needs".

In its dreams, maybe. because even while this was going on the French National Audit Office had recommended abandonment of the EPR as too complex and expensive. As Tom Burke, founder director of E3G, commented at the time: "The French National Audit Office recently recommended dropping the EPR as too expensive. This repeated a recommendation made to (French President) Sarkozy two years ago by the former head of EDF, François Roussely, who saw no future for it."

So: as long ago as 2010 the French government was told by EDF's own chief that they shouldn't go ahead with Hinkley C.

"The decision to extend the life of EDF’s existing fleet of reactors in France will put huge pressure on its capital budget over the next decade," the NAO went on to say, and it could support no further expenditure on its balance sheets. This budget, to repair existing nuclear power stations, is now estimated at 50 billion euros, and that work clearly takes precedence over new build.

Six years after Roussely, Piquemal came to the same conclusion, and realised that EDF could not afford to build Hinkley C and repair its old reactors. Now he's gone too.

Anyway, back then, heedless of this 2012 report, British Prime Minister David Cameron made an agreement with the then French President Nicolas Sarkozy to boost nuclear co-operation, which Charles Secrett, co-founder of The Robertsbridge Group and ex-leader of Friends of the Earth labelled "a massive rip-off for the the British taxpayer". In that letter, he and many other environmentalists warned the government that "EDF will have us over a barrel".

Last month Cameron made the same commitment he made to President Sarkozy to his successor, François Hollande.

Centrica jumps ship

Originally, Centrica, owner of British Gas, was part of a consortium with EDF and Areva to build the plant, but in 2013 it pulled out, citing "uncertainty about overall costs and the construction schedule". Centrica wrote off £200 million and launched a share buy-back scheme to return another £500 million of unused capital to its investors.

Other energy companies such as RWE and E.ON had already decided not to get involved with new nuclear build.

At the time the MP Martin Horwood, said, "like any sane investor in my view, Centrica has decided that it is not going to touch these new nuclear plans with a bargepole".

The British Government would have been wise to heed this comment, but instead continued to persist, opening negotiations with China over financing of Hinkley C which handed the 20% stake formally taken by Centrica to the state-owned Chinese group China Guangdong Nuclear Power Corp., along with access to state secrets concerned with nuclear power, which raised a few eyebrows connected to national security.

The government also awarded Hinkley C a Government Infrastructure Loan Guarantee, a type of financial support that is available to a large infrastructure project.

The plant was then expected to cost around £14 billion. Latest estimates are £18 billion. The Treasury agreed to guarantee some of the cost, reducing the impacts on EDF's balance sheet and allowing a low strike price for the electricity generated – despite a Coalition Government commitment at the time not to subsidise nuclear power.

The wrong technology

Part of the problem is that the UK government backed the wrong technology: the European Pressurised Water Reactor (PWR). Not a single one of these has been completed.

The first, the 1,600 megawatt Olkiluoto 3 plant in Finland, was begun in 2005 and should have gone on line in 2009. It is still not generating power. The initial cost estimate was €3.7 billion; this has now risen to €8 billion.

A prominent factor in Centrica's decision to pull out was EDF's progress in construction a second plant at Flamanville, France. When construction began in 2007 it was to have cost €3.3 billion, according to Le Monde. The price tag is now €10.5 billion and it is seven years late.
Martin Horwood, a British MP, in a debate in the UK Parliament [Hansards 7 Feb 2013 : Column 471] about subsidies for nuclear power in 2013 said: "The Energy Fair group of energy consultants and academics has stripped out all subsidies and says that the real cost of nuclear power is at least £200 per MWh, which is much more than the cost of offshore wind power at £140 per MWh or that of onshore wind power at less than £90 MWh."

British taxpayers will pay the French £45 billion for Hinkley C

The strike price was eventually settled at £92.5/MWh over 35 years.

Professor Tom Burke, who was an adviser to a previous Government, commented that: "this would require a subsidy of £1 billion/year above today’s wholesale price for electricity. This would lead to a transfer of £30 billion to EDF”. He's recently upgraded this estimate to £45 billion.

In order to continue to back the project EDF's costs will be underwritten by the French government as well, which announced last month that it would take this dividend in shares to help conserve cash for the company. [See link at the top of the article.]

EDF's stake in Britain

EDF has a key role to play in keeping the lights on in Britain with low carbon electricity. It already manages eight existing nuclear power stations at sites across the country.

It is also coming to the end, on March 31, of what is believed to be the UK’s largest ever electricity supply contract by annual volume ever awarded by the Government Procurement Service, to supply an annual electricity consumption of about 7.6TWh over four-years to a "a vast range" of public buildings across England and Wales, from inner city academies to museums, from central Government departments to major hospitals, from defence sites, courts, to the British Museum, equivalent to powering 2.3 million typical households.

Because it was supplied from nuclear power, this contract helped the Government meet its Greening Government Commitments of a 25 per cent reduction in greenhouse gas emissions by 2015 from a September 2010 baseline. Even so, the government failed to meet its own targets for cutting the environmental impact of the state’s operations, according to its last annual report.

What to do with the waste?

Meanwhile, there remains the problem of the storage of nuclear waste. The UK doesn't know what to do with its existing nuclear waste, let alone any future waste. The UK's Public Accounts Committee has published a damning report on the subject. Its Chair, Margaret Hodge, noted that: "a solution to the problem of long-term storage of the waste is as far away as ever. Taxpayers will have to foot the bill" and they "are not getting a good deal".

Questions to answer

Given all of this, the British and French governments have two questions to answer.

Firstly: why do they persist in pursuing EPR technology when, for as long as they have been doing so, they have been warned against it on cost and technical grounds?

This is hugely important, especially in the context of the UK government's widely criticised energy policy, which includes many government U-turns on support for renewable energy in the last six months, an increase in support for fossil fuels, persistent backing of shale gas, leading to criticism by many investors, such as asset manger Schroders, that confidence in the UK energy plans has “evaporated”. As a result of policy inconsistency and unpredictability Schroders said last week it would no longer recommend clients invest in the energy sector.

At least the British government realised the folly of continuing to pursue unproven and over-expensive carbon capture and storage. With this precedent it should now abandon EPR.

The second question is: why does the British government instead not aggressively pursue energy efficiency, when it is proven to be far more cost-effective than investing in new generating plant, especially nuclear power?

Only last week the government's own National Infrastructure Commission issued a report, Smart Power, arguing that a smarter use of power built around three innovations, interconnection, storage, and demand flexibility, could save consumers up to £8 billion a year by 2030, help the UK meet its 2050 carbon targets, and secure the UK’s energy supply for generations.

In the same week, a report from UNEP shows that the potential for energy policy to increase energy efficiency in industry alone is massive. [Disclosure: I am one of the authors.]

In a webinar to promote the report's release, co-author Kit Oung made the overwhelming case, based on research: "A report from the University of Cambridge has said that 73% of energy used in industry can be saved using currently available technical know-how and technology. This could result in 22 power stations not needing to be built in 2020 if just between 21 and 47% of those savings were to be achieved in the UK. And yet, according to the International Energy Agency less than 1% of global average energy savings are achieved by industrial energy efficiency around the world," he said.

The above statistics, taken together, point to a complete failure to use economic and scientific evidence in the design and implementation of a sensible UK energy policy that would put security, efficiency, emission reductions and value for money at its heart.

It's unlikely that we will get a proper answer to either of these questions from the British Government. So we must supply our own. As another of the report's authors, Stephen Fawkes, puts it: "The problem is, politicians like big projects. By contrast, energy efficiency, although much more beneficial, is almost invisible, and is certainly lots of small projects."

And energy projects don't come much bigger than nuclear power. As Jimmy Cliff might have put it: "the bigger they come, the harder they fall."

Labour must now choose

All of this shows why Labour finally see the folly of its continuing support for Hinkley C.

It must condemn the deal. It must use this stance to attack the folly of Tory policy.

And it must come up with a clean, green, nucelar-free low carbon energy policy based on demand reduction and demand management, renewable energy, community energy and energy storage – as Germany is doing – which would save everyone money: industry, consumers and the taxpayer.