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.

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Further Reading: Books by David Thorpe

• Best Practices and Case Studies for Industrial Energy Efficiency Improvement (with Oung, K. and Fawkes, S. UNEP, 2016)
• Passive Solar Architecture Pocket Reference (ISES/Routledge, DUE LATER IN 2016)
• Solar Energy Pocket Reference (ISES/Routledge, DUE LATER IN 2016)
• A London Conversation: Business Briefing on Green Bonds (Fifth Estate, 2015) [FREE DOWNLOAD]
• The 'One Planet' Life (Routledge, 2015)
• Earthscan Expert Guide to Energy Management in Buildings (Earthscan, 2013)
• Earthscan Expert Guide to Energy Management in Industry (Earthscan, 2013)
• Investors’ Guide to Photovoltaics (Do Sustainability e-short, 2012)
• Investors’ Guide to Low Carbon Vehicle Fuels (Do Sustainability e-short, 2012)
• Earthscan Expert Guide to Solar Technology (Earthscan, 2011)
• Earthscan Expert Guide to Sustainable Home Refurbishment (Earthscan, 2010)

The UK Government's new nuclear dreams & the reality of EPR delays and costs

Last week the British Chancellor of the Exchequer, George Osborne, was in China. Despite the economic woes facing that country he still thinks that is possible to obtain further inward investment into the UK and he went carrying a £2 billion sweetener: a guarantee underwritten by public funds for investment in a new nuclear power station Hinkley Point C in Somerset, England.

Osborne is hoping to do a deal with the China General Nuclear Corporation and China National Nuclear Corporation. China is building half of the 60 new nuclear power stations being constructed in the world. Its expertise would be invaluable were the project ever to go ahead... but this is still a remote prospect. The persistence of the government in pursuing this is perplexing.

While Vincent de Rivaz, chief executive of EDF Energy, welcomed the announcement of the infrastructure guarantee as a “clear sign” of the government’s commitment to Hinkley Point C, everybody but the UK government has doubts about it.

This even applies to the leading environmentalists George Monbiot, Mark Lynas and Chris Goodall, who had previously argued the case for nuclear power, earning the wrath of many of the colleagues in the green movement. They have now committed another U-turn and are saying that because the project will be so expensive and so late in delivery, it is better to spend the estimated £24.5bn investment on other low-carbon technologies.

Greenpeace UK’s chief scientist, Dr Doug Parr, issued a statement calling the announcement “a PR smokescreen to give the impression that this project is moving forward when it’s actually bogged down in a swamp of troubles. Hinkley hasn’t got funding or safety clearance, and everyone outside the nuclear industry and our blinkered government thinks it’s absurd, yet the Chancellor is ignoring them all to plough ahead with this overpriced, overrated, and overtime project.”

The proposals have passed all the regulatory hurdles so far set by the Office for Nuclear Regulation.

Amber Rudd, the Secretary of State for the Department of Energy and Climate Change (or should that be Nuclear Waste? See my prrevious article) went on the radio to make the point that since the future has to be low carbon and nuclear power provides that reliably, although expensive the plant is worth the money.

Part of the problem is that the government is backing the wrong technology.

European Pressurised Reactor delays and costs

Hinkley Point C is a European Pressurised Reactor. There are no completed examples of this model and the four under construction have suffered huge delays and cost overruns:

Name	Start of work	Original completion date	Currently expected completion date	Initial cost	Current estimated cost	Budget over-run
Olkiluoto 3 in Finland	2005	2009	2018	€3.7bn	€8.5bn	230%*
Flamanville 3 in France	2007	2013	End 2018	€3.3bn	€10.5bn	318%
Taishan 1 in China	2009	2013	2016	€7bn	unknown
Taishan 2 in China	2010	2014	2016	€7bn	unknown

* Since Areva guaranteed a price at the start of €3 billion and is now locked in legal dispute with operator TVO, the actual costs to both companies are secret and likely to be above €8.5bn if we consider that the plant was the first of its kind to be attempted and the extent of the budget overrun for Flamanville 3.

How this compares to Hinkley C: Hinkley C was granted planning permission in 2013. The estimated cost has risen from €7.71bn to €33.75 billion in 2015 (450% increase) – over three times the final estimated cost of Flamanville 3. And building hasn't begun yet.

Originally planned to start generating electricity by the end of 2017 it looks likely as though, if it ever does start generating, it will be after 2024 (7 year delay – & building hasn't begun yet.

An investigation into Hinkley Point C by HSBC bank saw “ample reason for the UK Government to delay or cancel the project”. Austria has launched a legal challenge to the European Commission’s ruling that the guaranteed price for the new Hinkley reactors amounts to legal state aid and the case is expected to last over two years.

But none of this seems to bother the British government.

It is significant that France itself does not plan to build another EPR, but it is quite happy to build them elsewhere, and this is why it welcomes Osborne's announcement of the investment guarantee: EPRs are built by two French state-owned companies, Areva and EDF.

The French government owns 86.52% of Areva and needs foreign cash to bail out the company, which is in deep financial trouble; it posted a €4.8 billion loss for 2014. A rescue plan is under consideration, which may include some form of bailout from EDF, itself owned 85% by the state.

Part of the rationale of the Blair Labour government, which began the Hinkley C project, was that it should replace coal and other power stations that will be ending their life in the next two years in the UK. This rationale no longer holds water.

What's a better design for a modern nuclear power plant than the EPR? Well, a Japanese company, Hitachi, is interested in building a new nuclear power station of a different type on an island off the north-west coast of Wales in the UK: Anglesey. A previous old nuclear power station on the site is being decommissioned. The new plant would be an Advanced Boiling Water Reactor: ABWR, said to be safer and cheaper.

Even so, a telephone survey of local residents being conducted by Natural Resources Wales, the Welsh Environment Agency, is uncovering significant local opposition to the nuclear new-build despite the project being favoured by the local MP and council.

Safety

The Chinese EPR reactors may not be subject to the same degree of safety scrutiny as those in Europe.

Safety tests at the Flamanville EPR nuclear power plant were only carried out in 2014 after France tightened its nuclear safety regulations, France’s Nuclear Safety Authority (ASN) told the South China Morning Post in April this year, adding that no such tests were conducted on the two Taishan reactors before French nuclear manufacturer Areva shipped them to China.

Since shipping, the Chinese authorities have been alerted and Areva has said that the Taishan reactors meet Chinese nuclear standards.

“The reactor vessel heads for the Taishan reactors were evaluated as being in compliance with the Chinese regulations. The French and Chinese safety authorities are in contact following the information provided by the French watchdog,” the company told the South China Morning Post.

Nuclear waste

One thing that Amber Rudd has not quizzed about by the media today was what to do with the nuclear waste that would be generated by any new nuclear power stations.

I mentioned last week the problems the UK persists in having with its existing high-level nuclear waste stockpile, which nobody wants to have buried in their backyard.

The French have the same problem, having been struggling to overcome public opposition and legislative obstacles to a plan to bury hundreds of thousands of cubic metres of high-level, long-lived nuclear waste 500 metres below the rural village of Bure.

The CIGEO project, managed by l’Agence nationale pour la gestion des déchets radioactifs (ANDRA), was estimated to cost €16.5bn in 2005, but an estimate in 2009 set the figure at €36bn. The final cost is unknowable, and work has not yet begun.

Of course, China, not being a democracy, can bury nuclear waste wherever it wants.

Perhaps we should ship all of Britain and France's to China, as part of the deal.

Community bribes to host nuclear are one fifth those for wind farms

Ecotricity founder Dale Vince said: “This is a further move by the Government to rig the energy market against renewables in favour of nuclear and gas". 

The Government is rigging the energy market after its announced nuclear power would pay five times less than wind energy in community benefit.

Ministers announced yesterday that communities around eight sites (Hinkley Point, Sizewell, Wylfa, Oldbury, Sellafield, Bradwell, Heysham, and Hartlepool) in England and Wales could be in line to receive benefits - otherwise known as bribes - worth up to £1000/MW over 40 years from when and if nuclear power stations sited there begin operating. 

The founder of leading renewable energy supplier Ecotricity, Dale Vince, said: “This is a further move by the Government to rig the energy market against renewables in favour of nuclear and gas. Nuclear power is already being fast-tracked through the planning system and today they’ve announced nuclear will pay a fraction of the community benefit paid by wind power.”

On July 6 the Government announced that onshore wind farms should pay £5,000/MW in community benefit – an increase of five fold. At that time Mr Vince said: “Will we see the same logic being applied to the new generation of gas plants and nuclear power stations? This is a slippery slope.”

Dr Doug Parr, Chief Scientist at Greenpeace UK, commented: “Whilst wind farms and even shale gas developers have to pay community benefits, only nuclear stations will get a fat taxpayer subsidy to fund them. 

"Our entire energy policy is now absurdly distorted by the desperation to prop up EDF’s faltering Hinkley C project, with the government piling the costs onto the taxpayer to avoid the embarrassment of admitting they backed the wrong technology. We can’t go on like this.”

Dale Vince added: “This shows the Government’s approach to energy policy. Firstly, to fast-track planning for nuclear and gas; secondly, allowing nuclear to pay community benefit that’s one fifth the cost burden of wind power; and thirdly, the new mechanism of financial support (Contracts for Difference), which it’s widely believed will be two to three times higher for nuclear when compared to onshore wind.

“When you put those three parts together it shows an energy market being rigged. The Government shouldn’t be picking winners in the energy industry, they should be providing a level playing field for competition. Are they really saying the impact of nuclear power in one fifth that of wind power?

“After 25 years, windmills are removed and the land returned to nature. The impact of nuclear power remains for hundreds of years and those sites will stay radioactive and never be safe."

The Government is clearly only thinking short term. What happens after 40 years is up and the site is radioactive?

Its motivation is the expected creation of employment, which it estimates as "up to 40,000 jobs in the sector" but crucially "at its peak", ie during the construction phase.  

Its nuclear industrial strategy sets out the basis for a long-term partnership between government and industry to exploit those opportunities.

But communities hosting nuclear sites will be left with the toxic legacy long after these benefits have been forgotten.

Now we know: £155bn: the cost of new nuclear power to consumers

It has been a bad week for nuclear power and the prospects of building new power stations.

Last week, Cumbria County Council voted against the area being used as a deep geological dump for existing nuclear waste, sending the whole process of looking for something to do with the country's stockpile back to the drawing board.

Looking after this existing waste takes up more than half of the annual budget of the Department for Energy and Climate Change. That's £1.6bn of public money every year.

On Monday, the House of Commons Public Accounts Committee published a damning report on the management of this waste, which said that "deadlines for cleaning up Sellafield have been missed, while total lifetime costs for decommissioning the site continue to rise and now stand at £67.5bn".

Margaret Hodge, its Chair, noted that: "taxpayers will have to foot the bill" and they "are not getting a good deal". Last year the consortium tasked with sorting out the mess, was rewarded with £54m in fees, despite only two out of 14 major projects being on track.

Also on Monday, Centrica announced it was ending its partnership with EDF, writing off a massive £200m and launching a share buy-back scheme to return another £500m of unused capital to its investors. As with RWE and E.ON last year, and, as Martin Horwood, MP, put it, "like any sane investor in my view, it has decided that it is not going to touch these new nuclear plans with a bargepole".

Finally, yesterday, MPs on the House of Commons Backbench Business Committee debated the question of the subsidy-by-another-name for new nuclear build in this country, contracts for difference, floated in the Energy Bill, but lacking detail of any sort.

The energy chief executive of Electricité de France, Vincent de Rivaz, told the Financial Times that the last thing stopping them going ahead with building a new nuclear plant at Hinckley and Sizewell “is the contract for difference. Once we have that, we’ll have a compelling investment case to attract partners into the project”.

In other words, as Martin Horwood told MPs, “If you don’t subsidise us, there is no business case.”

How much is EDF asking for? The negotiations have so far been shrouded in secrecy, but for the first time, some figures came out in yesterday's debate.

According to the Energy Fair group of energy consultants and academics, the real cost of nuclear power is at least £200 per MWh. This is much more than the cost of offshore wind power (140 per MWh) or that of onshore wind power (£90 MWh).

Based on this, EDF might be asking for something as high as £165 per MWh for the strike price. A similar figure comes from Steve Thomas of Greenwich University and Peter Atherton of Citi: a strike cost price of £161 per megawatt.

This compares to today’s wholesale price for electricity of around £51 per megawatt.

The government would have to enter into a 30-year contract life for the two proposed plants at Hinkley and Sizewell.

Over this period, then, the total cost to householders and businesses or taxpayers would be £155bn by 2050. That is without any of the additional costs, such as insurance and accident protection, dealing with waste, etc.

As Mike Weatherley MP said yesterday: "Imagine the renewable energy industry if we had invested over £155bn in it".

Much of this cash would leave the country as EDF is based in France.

We are talking about not some new technology like tidal power, but a mature and not very competitive industry started in 1956.

MPs were asking for the Public Accounts Committee to scrutinise the economic case for nuclear new build and contracts for difference. Unfortunately, its chair, Margaret Hodge told them that, much as she would like to do this, she couldn't, because the committee can only examine contracts after they have been signed. In this case, that would be too late.

MPs bewailed the lack of information that Parliament had been given about the negotiations with the EDF. Joan Walley said: "It is impossible to understand how Government policy is being taken forward in this area, because of the complete lack of transparency and of an evidence base."

This led Ed Davey to come before MPs and pledge that the House would be told the nature of any contract agreed with EDF before it were signed. Then why haven't they done that already?

Let's be clear, the Treasury’s levy control framework, which caps the costs that can be added to consumers’ bills, currently specifies a figure of £2.6bn a year. There are estimates that the cap would have to rise to £12.5bn or more to provide 16 GW of nuclear power by 2025.

I don't think the Treasury is going to agree to this.

EDF's Olkiluoto plant in Finland was begun in 2005 and should have gone on line in 2009. It is six years overdue and €4.3bn over budget. Its Flamanville facility is now four years late and and €4.8bn over budget.

Clearly, new nuclear cannot be built without a subsidy. Therefore, it should not go ahead at all. Instead, it should yield to other forms of energy, particularly renewable energy.

Ed Davey promised yesterday that "each contract will need to deliver value for money for the consumer and be compatible with state-aid rules". On present evidence, EDF is a not going to deliver this.

Waiting in the wings are Chinese companies. And do we really want state-owned Chinese companies entering into the British energy market and being privy to our nuclear secrets?

Hitachi's ABWR reactor, intended for Britain, has terrible operational record

The Longmen ABWR plant in Taiwan, built by GE-Hitachi, nearing completion,

Hitachi has agreed to buy the Horizon nuclear company for around £700 million from RWE and E.ON, and begin a programme of building new ABWR reactors in Britain. But the four operational ABWR plants in Japan have a history of being off-line over 40% of the time.

The Japanese company, leading a consortium which contains Canadian engineering and construction group SNC-Lavalin, is to work with two leading British engineering companies, Rolls-Royce and Babcock International, intending to build two or three 1.3GW plants at each of the two sites owned by Horizon: Wylfa on Anglesey and Oldbury in Gloucestershire.

Hiroaki Nakanishi, president of Hitachi, said: “Today starts our 100-year commitment to the UK and its vision to achieve a long-term, secure, low-carbon, and affordable energy supply”.

Between 5,000 and 6,000 jobs are hoped to be created at each site during construction, with 1,000 permanent jobs per side following.

Government ministers welcomed the announcement, which comes after a series of talks at Whitehall with the potential buyers. The other contender was Westinghouse, but Hitachi beat them on price, offering twice what the owners of Horizon were expecting.

Hitachi is to use the Advanced Boiling Water Reactor (ABWR) design, which it has employed on four plants in Japan. Other plants based on this design are being constructed in Taiwan. All have been delivered on time and on budget.

The design has not yet been submitted to the Health and Safety Executive for approval, a process which can take up to four years. The first plant is therefore not expected to be operational until the middle of the 2020s.

However, the four Japanese ABWRs in operation have often shut down due to technical problems. According to the International Atomic Energy Agency, they have an operating factor below 60%, meaning that on average, 41.2% of the time they have not been producing electricity.

The Shika 2 ABWR reactor was unavailable 57.5% of the time; the 46.8 %">Hamaoka-5 reactor 46.8% of the time, the Kashiwazaki Kariwa-7 plant was unavailable 32.4% of the time; and the the Kashiwazaki Kariwa-6 plant 28.1% of the time.

Another ABWR planned to be built in Texas was cancelled in March 2011, and earlier this month almost two-thirds of Lithuanians voted against such a plant being built in their country.

Energy and Climate Change Secretary Edward Davey said: “Hitachi bring with them decades of expertise, and are responsible for building some of the most advanced nuclear reactors on time and on budget, so I welcome their commitment to helping build a low carbon secure energy future for the UK. I particularly welcome Hitachi’s firm commitment to involve the UK supply chain and local workforce."

Around 60% of the value of the first plant is expected to be sourced from within the UK, with more from subsequent plants.

Speaking on Radio 4 this morning, Ed Davey repeatedly denied that there had been any discussion of the price that might be paid for the electricity any of the plans might produce. He insisted that it was purely a commercial arrangement.

EDF Energy is negotiating with the government over the strike price for the electricity it is hoping to generate at Hinkley.

Mr Davey also announced the setting up of a new arms-length body, the Nuclear Industry Council. It will attempt to promote the UK's commitment to new nuclear power abroad and will be chaired jointly by government and industry representatives: Edward Davey (or Energy Minister John Hayes) and Business Minister Michael Fallon, and Lord Hutton, Chairman of the Nuclear Industry Association.

John Hutton said that the council “symbolises the long-term strategic partnership developing between the UK nuclear industry and the Government".

Also today, the Department for Business, Innovation and Skills announced that Sheffield University has been selected to go forward to final contracting and due diligence for a £37 million project involving continuing support for the Nuclear Advanced Manufacturing Research Centre.

This will be responsible for improving the skills base in the nuclear industry in the UK.

ABWRs have a design life of around 60 years, and take four years to construct. Unlike Areva's EPR design, they have a single not a double containment shell. They do not use steam generators.

Greenpeace Energy Campaigner Leila Deen commented on the news that: "It speaks volumes about the UK’s struggling nuclear programme that the Government is promoting a reactor that's years from being granted UK safety approval and is designed by the company that helped build Fukushima.

"Instead of waiting years to find out how much bill payers will end up subsidising this project, the Government should join Japan and Germany, abandon nuclear, and invest instead in clean, renewable energy."

The safest option for nuclear waste is to leave it where it is and not make any more

It is morally wrong to commission more nuclear power stations and create more nuclear waste until we know what to do with our existing waste. And we don't.

The subject of what to do with Britain's existing nuclear waste has reared its hot head again.

Last Thursday, DECC's new minister Baroness Verma was dispatched to Sellafield and the communities of Copeland and Allerdale, where the majority of the nuclear power station and the nuclear waste reprocessing plant's workers live, in the wake of the decision taken by local councillors at the end of September not to be rushed into having all of Britain's high-level nuclear waste buried beneath their feet.

Baroness Verma will need the wisdom of Solomon to deal with this dilemma.

High-level waste is mostly used reactor fuel and materials that have come into contact with it, as well as materials from processing nuclear weapons.

Currently all of Britain’s high-level waste is stored above ground in cooling ponds at Sellafield, and looking after it, and other nuclear waste, consumes over 60% of the Department for Energy and Climate Change's budget, or £1.69 billion a year.

The Government would love a final solution for what to do with all this waste, so that a new generation of nuclear power stations can be built that will create a whole lot more.

The problem is that only two communities in the country have stepped forward to offer themselves as candidates for storing this, the most dangerous material known to humanity.

One, Shepway District Council, voted against such a proposal on September 19.

The other area had already been ruled out as a safe site by Nirex, now the Nuclear Decommissioning Authority, in a comprehensive geological survey conducted in the 1990s.

This is because of the presence of deep faults and fractures in the underlying geological structure, and underground water flows which could transport dangerous levels of radioactivity out into the environment.

Nevertheless, the Managing Radioactive Wastes Safety Partnership (MRWS), which was set up by the Labour government with the task of re-evaluating its geology, ignored the Nirex study and conveniently produced a document, “Initial Geological Unsuitability Screening" in 2008 which identified an area of 23 square kilometres which might be a candidate. This was commissioned from the British Geological Survey with a much narrower scope.

No wonder those councillors in West Cumbria are confused.

They are attracted by the jobs and promises of community regeneration from the government, basically a bribe for taking the material. But, not being experts on the subject, they don't know what to make of the conflicting advice that they have been given.

In two weeks' time, the independent Committee on Radioactive Waste Management (CoRWM) is to examine developments in West Cumbria and make a recommendation.

They must decide, along with the MRWS, whether it is appropriate to proceed to the next stage, stage 4, of the assessment of suitable sites, which is a desk-based study.

In doing so they must be bearing in mind the advice of David Smythe, Emeritus Professor of geophysics at Glasgow University, that “by proceeding to stage 4 in West Cumbria, despite the evidently insuperable difficulties of geology and hydrogeology, the NDA and the local authorities may run the risk of legal challenge".

David Smythe is supported in his assessment that MRWS' survey is woefully inadequate, by several other leading academics, including Colin Knight and Chris McDonald, who were the technical assessor and lead inspector at the original Nirex enquiry.

A former member of CoRWM, Professor Andy Blowers also agrees. Even the International Atomic Energy Authority considers that West Cumbria is an unsuitable site.

MRWS' own stooge, Dr Jeremy Dearlove, has attempted to argue that the area has “potentially suitable sedimentary formations".

But his argument has been torn to pieces by David Smythe, who accuses him of using debating tactics and disregarding international guidelines.

Prof. Smythe also accuses the Nuclear Decommissioning Authority of “airbrushing out the history" of the previous attempt to find a nuclear waste repository in West Cumbria, by removing from its website the vast bulk of Nirex documents. He has placed them instead on his own website.

Cumbria is exceptionally well understood region geologically, he says, and it is quite obvious that it is unsuitable to be used as a dump.

In the light of this, Baroness Verma should, in all intellectual honesty, make it clear to the Cumbrian councillors that this is the most objective and complete judgment available, not the MRWS one.

The principle of choosing the location for a site is, admirably, that a community must willingly volunteer. A dump cannot be imposed on a community that does not want one.

Logically, therefore, it seems that nowhere in the country is there a place that is both geologically suitable and where the people are unequivocally in favour of hosting a dump.

We are stuck with the status quo, until a new way of dealing with nuclear waste is found, perhaps with another generation of power stations that can use this waste as a fuel source and render it harmless.

Until science comes up with such a solution, the safest option is to continue storing it overground, at Sellafield, where at least it can be monitored.

Meanwhile, it would be morally wrong to approve the construction of any further nuclear power stations in this country, until a lasting solution of what to do with all present and future nuclear waste is found.

Not much on the Horizon for UK's nuclear programme

Horizon's Wylfa site, Anglesey, with its mothballed old reactor.

Just two bidders have emerged for Horizon, the nuclear company seeking to build two new reactors in Britain, following the expiry of a deadline last Friday for expressions of interest in purchasing the option, which saw expected partners dropping out.

In both cases it is unsure where the hundreds of millions of pounds of investment will come from, that could eventually see a new nuclear power station built on either of the company's sites, in Oldbury, Gloucestershire and Wylfa, Anglesey.

Last week, three consortiums were expected to throw their hats into the ring: France's Areva, partnered with China's Guangdong Nuclear Power Group, both state-owned; one led by Japan's Hitachi; and Japan's Westinghouse Electric Co., partnered with China’s State Nuclear Power Technology Corp and Exelon, the US power generator.

Areva failed to submit a bid. Hitachi did, and Westinghouse did, but without its Chinese partner, who would have provided substantial experience of delivering nuclear power stations on time and within budget.

Areva's European Pressurised Reactor (EPR) design is further ahead than Westinghouse's in the UK's generic design assessment approval process. Westinghouse' put their process on hold last December.

Its AP1000 nuclear reactor design is, in turn, further on than Hitachi's Advanced Boiling Water Reactor, which has yet to be submitted to the Health and Safety Executive (HSE), although it is licensed in the US, Japan and Taiwan.

Four ABWRs are already operating in Japan, with a fifth 94% completed.

No AP1000 reactor has yet been completed, although four are under construction in China, and two proposals have been given approval in the US.

Two builds of Areva's EPR design, in France and Finland, have experienced massive hold-ups and budgetary excesses.

EDF has yet to decide whether to proceed with construction of an EPR plant at Hinkley Point.

The process of approval of the EPR design issues by the Health and Safety Executive can be followed online here, where it can be seen that the majority of issues have yet to be resolved.

The only other contender for new nuclear power station building in the UK is NuGen, which is owned by GDF SUEZ and IBERDROLA. Their plans to implement 3.6GW of electricity generation at the Moorside site adjacent to Sellafield are also on hold.

Any potential backers for building new nuclear power stations, which would undoubtedly include Chinese money, are waiting for clarity on the level of government support that will be available following the passing of the Energy Bill, currently winding its way through Parliament.

Government told: use social media to allay public's nuclear fears

It's not just nuclear: Greenpeace and others have effectively campaigned against carbon capture and storage in Germany using new media, and MPs want the Government to take them on using Facebook and Twitter. Can you see this happening?

The Government is being advised to use independent regulators and social media to provide public information on the risks associated with nuclear power and other energy technologies.

A group of MPs is recommending that officials and regulators use the same communication strategies as employed by campaigning organisations such as Greenpeace and Friends of the Earth to allay public fears on nuclear power, fracking and carbon capture and storage.

Would you ‘like’ a Facebook message from the Treasury telling you that it's okay for the taxpayer to subsidise nuclear power?

Because the public knows that the Government backs nuclear power, it regards official messages on the subject as biased, says the Science and Technology Committee, which has been looking into the public perception of risk.

Therefore, technically competent public bodies that are independent of Government are in a much better position to engender public trust and influence risk perceptions, the MPs say, citing the Health & Safety Executive and Office for Nuclear Regulation as examples.

"The public must be able to trust the information it receives on the risks of nuclear power and other energy technologies – such as fracking or carbon capture and storage," said Andrew Miller MP.

"Developing the public profile of independent regulators as trusted and authoritative sources may be one way of increasing public trust and understanding of such risks."

The MPs say in the report that "the evidence shows that around half of the population support [nuclear power], even though it may be a reluctant support for the least worst option. The Government's position as an advocate for nuclear power makes it difficult for the public to trust it as an impartial source of information."

Carbon capture and storage

Although most of the inquiry looked at nuclear power, the MPs also considered other technologies such as carbon capture and storage (CCS). As one witness who gave evidence, Professor Nick Pidgeon, Director of the Understanding Risk Programme at Cardiff University, said: "[energy] policy in the EU and UK depends very heavily upon CCS technology working".

The MPs visited a site of a pilot CCS project in Germany, where there has been almost as much opposition to the technology as there has been to nuclear power. They found the underlying reasons for this were “distrust of industry and concerns that CCS would provide a means for fossil fuel dependency to continue".

They highlighted a comment by one of the enquiry's witnesses that campaign groups like Friends of the Earth were very good at getting their message across. They "will pick a very narrow issue, go for that very strongly and throw lots of resources at it. They have embraced the internet and the new media very well," said Dr Andrew Bloodworth, Head of Science, Minerals and Waste, British Geological Survey (BGS).

"If the Government intends to rely on carbon capture and storage (CCS) as part of emissions reduction strategies, it should examine the difficulties experienced in Germany due to public concerns," concluded the MPs.

Community engagement

While in Germany, they were also impressed by the model of citizen partnership that has been developed there for wind farms. They suggest that “enabling communities to feel more ownership of local energy infrastructure by offering shares in projects could be conducive to building acceptance".

Regarding nuclear new build proposals in particular, the MPs advocate "the further use of current community engagement processes led by energy companies, working with local government and the public, for building trust".

In this regard EDF Energy has recently been sponsoring a series of editorial features in women's magazines. It seeks to portray the human side of working with nuclear power by, for example, interviewing female workers and photographing them in the same style as fashion models.

For example, the last issue of Marie Claire features an attractive photograph and an interview with Sabrina Greenberg, whose age is patronisingly noted as 25, a member of EDF Energy's Nuclear New Build team and personal assistant to the 'client construction and commercial director'.

Before taking on this job she worked, the advertorial says, at the Department of Energy and Climate Change. However, her LinkedIn profile makes no mention of this, instead saying that she worked at the Department of Justice.

The interview questions include: how much she knew about nuclear energy before starting work, what is involved in her typical day, what her family and friends think about her working for an energy company, what she likes about working at EDF Energy and what she sees as her future there.

Propaganda versus information

EDF has clearly noted the recent market research which shows that women are far more likely to oppose the new nuclear build than men, and this is their cynical response: to use senior members of their own staff as examples of how safe nuclear power is.  How stupid do they think women are?

It illustrates that the distinction between propaganda and objective information can be easily blurred.

This blurring may also explain why NGOs are trusted by the public more than energy companies and the Government. The public sees that when it comes to international efforts to save the planet such as the Rio+20 Earth Summit and UN climate change summits, it is NGOs who are pushing most strongly for the required measures, and governments that are lagging behind.

The MPs' report accepts that the public does not always understand the true nature of relative risk, even when attempts are made to explain it scientifically. It is a difficult issue to get across. This was seen most dramatically in recent times with the controversy over the MMR vaccine.

This does not mean that the public is necessarily anti-scientific, it says. While their level of scientific understanding may not be the same as a scientist, they may be influenced by “other affective (that is, feeling or emotion-based) factors" that are not accessible to rational argument.

This must make women wrong. Shame on them, for responding with their feelings.

In response, the MPs advocate the setting up of a new Risk Communication Strategy team led by a senior individual in Government.

That's all right then: I'm sure they will be completely trustworthy.

Energy bosses slam Government's energy reforms

Keith Anderson of ScottishPower, Ian Marchant of SSE and E.ON's Sara Vaughan telling MPs the Government is bungling energy policy.

The bosses of the Big Six energy companies have slammed the complexity and pace of energy reforms being proposed by the Government for slowing the rate of investment in new plant which the country so desperately needs.

You thought that it was the Big Six energy bosses who, following extensive lobbying, were getting the proposals for reform they wanted in the new Energy Bill. It turns out that instead, they think that there has been too much ideological and political interference, and far too much delay.

The bosses were speaking to MPs in the Energy and Climate Change Committee during its first evidence session on the Draft Energy Bill, which contains the Government's proposals for electricity market reform and Contracts for Difference (CFDs). MPs want to know if these financial tools are effective particularly in supporting renewable energy and carbon capture and storage (CCS).

Keith Anderson, CEO of ScottishPower, told MPs that “this country used to be a fantastic place to invest in for energy because everyone had faith and trust that it was done in an evidence-based way". But this is no longer the case, and it is causing uncertainty and a hiatus in investment.

He spoke of the “massive amount of work" that was done in providing evidence during the lengthy consultation on the banding review for the Renewables Obligation last year, that came up with a lot of recommendations for the future.

“But then, since October, what we've seen is an awful lot of noise from politicians and in the media, and speculation about arguments between government departments that there will be political influence over the outcome of that consultation that it is not evidence-based, and this damages investor confidence."

Anderson called for more clarity, speed and confidence to be given by the Government. “There's a huge opportunity now for the UK to go out and grab a huge proportion of investment for renewable energy. Given the slowdown in our economy and in other countries I think right now is the time for the UK to put in place a very clear, long-term and robust framework," which should be “used to regenerate the economy".

However, he said that there is still a lot more detail required in the Bill, particularly on Contracts for Difference, and this was prolonging uncertainty amongst investors.

John McElroy, director of policy and public affairs at RWE Npower, agreed that as it stands, the Bill will not provide the confidence that investors need and requires a lot more work. "At the very least investors need to know how the capacity mechanism will work and when it will be triggered," he said.

“What we really want to see is the timetable moving forward and the government getting on with it," added Sara Vaughan, Director of Regulation and Energy Policy at E.ON. "There is already some slippage because we expected the bill to be introduced in May and it is now not going to be introduced till probably the end of the year," which will delay the secondary legislation as well “and that causes concern".

Carbon capture and storage

On CCS, Ian Marchant, CEO of SSE, said, frankly: “We do not know that this technology will work" and so developers "crucially need capital support at this stage to move beyond the demonstration phase".

He said that Government energy policy is predicated on assuming that it will work, but this is currently unknown.

Support for wind power

Anderson said finding investment for wind farms was more difficult in the UK than abroad because planning permission takes longer, land rental is more expensive and development costs are higher than elsewhere.

On the level of support for onshore wind, Marchant agreed that this should come down as costs reduce, and said that he doesn't get involved in bilateral discussions about the level of support. He said that he didn't like the way that discussions on nuclear and renewables were being conflated. “I do not believe that the returns being made on renewables are excessive" he added.

Call for more evidence

The Energy and Climate Change Committee, which today is on a fact-finding mission to the London Array and Gunfleet Sands Windfarms, has issued a call for evidence from the public on the economics of wind power, to be submitted by 27 June; there is to be a hearing on 10 July.

Tim Yeo MP, Chair of the Committee, said: “Government policy on wind power should be based on sound economics and engineering, not political pressure from a small vocal minority – whether that be green campaigners or anti-wind protestors.

“In this session we want to cut through all the hot air talked about wind power and examine whether the economics really add up. Wind farms are over forty times less polluting than gas burning power stations - per unit of energy produced - but there are concerns about the costs to consumers.”

Contracts for Difference

All the energy bosses agreed that they were in favour of Contracts for Difference because, unlike the Renewables Obligation, although it had many advantages, they will be able to support the massive increase in investment in renewable energy that is required in the coming years.

John McElroy agreed the Electricity Market Reform was too complex, and was taking too long to understand and finalise.

Sarwjit Sambhi, Director, Finance and Strategy at Centrica, owners of British Gas, said that the capacity payment was good for gas-fired generation, which was required in the medium-term.

Government “dishonest” on nuclear power

Marchant criticised the Government for trying to disguise their support for nuclear power, in doing so coming up against state aid rules, and called for “an honest and open discussion about whether the country needs it and what is the cheapest way of doing it as opposed to disguising it in a very complex set of proposals, so it actually doesn't have negative connotations."

Marchant described investment in wind power as much more manageable than in nuclear power, and preferable because it has a period of clean construction of two or three years. “Nuclear is a completely different animal. You have billions of pounds of investment and a build time of seven to ten years."

The MPs were also questioning whether there was enough provision for reducing demand for electricity in the Bill and the level of and exemptions to the proposed Emissions Performance Standard.

The new Energy Bill is everything the UK doesn't want

The draft Energy Bill, published today, will do nothing to help energy efficiency or make it easier for new renewable energy companies to enter the market place.

It is too complicated, biased towards the Big Six, gas and nuclear, and still contains many uncertainties.

Even the Institute of Directors thinks so. Corin Taylor, its Senior Economic Adviser said:
"Businesses need clean, secure and affordable energy, but we're concerned that the draft Energy Bill may fail to deliver. We need to see a technology-neutral approach adopted as soon as possible, so that the cheapest low-carbon energy sources are prioritised, but the Bill confirms that the Government will try to pick energy winners for at least another decade.

"It looks like an overly-complex way of delivering much-needed investment in Britain's energy infrastructure."

Joss Garman, senior energy campaigner for Greenpeace, slammed the Bill for failing to do anything about energy efficiency, “the fastest and the cheapest way to bring down both bills and emissions, and said it will make it "harder to invest" in renewable energy, particularly for small generators.

“The coalition has decided to throw billions of pounds at the failing nuclear industry, which is going to send household bills even higher," he said, adding that by encouraging greater "dependence on burning expensive imported gas to generate electricity", this "will increase bills for families and businesses and see money going to countries like Qatar and Norway instead of back into the British economy.”

Dr Neil Bentley, CBI Deputy Director-General, said there are still many unknowns. “We are still some way from having a detailed picture of how the electricity market will look in the future," and that it was now up to Parliament to ensure that it "not only gets it right, but does so as a matter of urgency".

“The clock is ticking to create the market certainty that will unlock billions of pounds of private sector investment, generating many new jobs across the UK, and securing an affordable supply of energy," he added.

Which? executive director Richard Lloyd is sceptical and said he "wants to see more evidence and the small print before we can judge whether this will work for all of us who are expected to foot the bill”.

"Contracts for Difference could see potential savings for consumers but the Government must be honest about the cost that this investment will involve," he added, at the same time calling for reform of the retail market and "an effective energy efficiency strategy".

The IPPR also says that a "tax on the emissions of power companies contained in today’s Energy Bill will do nothing to reduce carbon emissions while piling more cost on to the shoulders of already hard-pressed consumers in the UK, and threatens to damage the reputation of policies aimed at tackling climate change". It says it will waste £1 billion and argues for a different approach to raising the carbon price and raising certainty for investors that would see the creation of a European Carbon Bank to manage the price at an EU-level.

The Institution of Engineering & Technology (IET), the non-profit engineering body, also expressed surprise that "no reference is made to reducing demand in the announcement made today".

The chief mechanisms for promoting low carbon generation and keeping the lights on are the feed in tariffs with contracts for difference (FIT CfD) and the creation of a capacity mechanism. But how will they work?

What is FIT CfD?

It is a type of power purchasing agreement between the generator and the purchaser that guarantees a price over a period of time, with a top up, equal to the price difference between the cost of producing the electricity and the current market price.

They are intended to help provide a guaranteed, fixed return on investment to compensate for the high initial cost of constructing low carbon generation plant.

The Bill's impact assessment admits that “only low-carbon projects that are able to secure FIT CfD contracts will be able to participate in the market".

For intermittent generation like wind and solar power, pre-selling a day ahead in the electricity market, a common practice, would give it a low price. You might think this was an advantage for renewables, but it is not if a higher price is required to repay investors.

The Bill allows for FIT CfD contracted plant to receive a top-up price to compensate for this perceived disadvantage. But as the price of constructing new plant comes down, this policy could actually prevent some types of renewable energy from being as competitive as they otherwise would be.

However, it should remove or improve the situation where wind farms are currently paid not to produce electricity, which has been seized on by anti-wind farm protesters as a reason to oppose them.

In a future Britain where a FIT CfD package is implemented, there will be savings in carbon costs as decarbonisation will be more rapid than without the package.

Generation costs would also reduce as there will be reduced output from gas plant and more from coal-with-CCS (carbon capture and storage) plant (coal is cheaper than gas).

This assumes that CCS materialises as an installed technology for coal-fired plant. This is not an inevitable outcome if gas plant becomes relatively cheaper due to the introduction of the much-criticised low Energy Performance Standard (EPS) for generation plant of 450g/kWh being proposed by the Bill, that would let gas plants be constructed without the need for expensive carbon capture and storage.

It's a gamble. The modelling used by DECC argues that by the latter half of the next decade, assuming nuclear power stations come on stream and are in budget, then consumer costs for electricity will be reduced if fossil fuel prices are high. The question is, whether anyone believes this will happen.

If this low carbon generation does not arrive, more fossil fuels will be burnt and the UK will spectacularly fail to meet its carbon emission targets of 50g CO2/kWh in 2030: it will be 190g CO2/kWh.

Under FIT CfD, consumers will be shielded from longer-term wholesale price increases, but, equally, if prices go down their bills will not.

And in the long run, prices from renewable energy installations are bound to reduce as the technologies mature, as Ed Davey admitted in a television interview with Andrew Neil on Sunday, i.e., consumers could end up paying more than they would otherwise.

More damagingly, the impact assessment says, "changes in wholesale prices only affect the amount of support paid out by Government; hence the price risk is borne by Government balance sheets."

If the price to guarantee the building of new nuclear power stations is on the Government balance sheets, then this is the very definition of a public subsidy and will not be permitted by Brussels.

Assuming it does proceed, then overall revenue expectations for generators would be based upon the agreed FiT CfD strike price.

For nuclear power, a ‘strike price’ of over £150 per MWh (assuming a 70% capacity factor), or, at the very least, £135 (assuming 80% capacity factor), would be required by a credit rating agency in order for EDF to achieve is nuclear build plans, according to Dr. David Toke, Senior Lecturer in Energy Policy at the University of Birmingham.

This is more than the figure of around £130 per MWh that offshore wind farm owners are currently being paid; which is made up of two ROCs, worth around £42 per MWh each, plus the wholesale electricity price, around £45 per MWh.

It would mean that consumers would be paying more for their electricity just to support nuclear power.

Capacity market

With the proportion of wind power expected to rise to 25% in the next 10 years, increased capacity is required to cater for days of high demand and low wind.

The capacity market is a strategy being proposed by the Government to find the cheapest way of meeting this demand for extra generation capacity.

It is based on the assumption that 19GW (around 20%) of total generation capacity is expected to go off-stream between now and 2020, compared to around 6GW that closed in the last decade.

However, EDF has announced this week that it is to ask the Office for Nuclear Regulation if it can keep open its existing eight nuclear power stations for a further 10 years.

If this were to happen, there would be plenty of time for extra gas and renewable capacity to be built, which would preclude the need for new nuclear power stations.

In particular, the capacity market strategy favours the construction of new gas plant, with the impact assessment for the capacity market containing an example of how it will benefit a typical new Combined Cycle Gas Turbine plant. It would receive the highest revenues: a total of £275 per kilowatt. This is likely to stimulate the building of new gas-fired power stations.

A capacity market is a significant intervention in the market with potentially substantial administrative costs for businesses.

This will disproportionately affect small generators and new entrants in the market, in other words favour the status quo of the Big Six.

This is not likely to go down well with anyone except the Big Six themselves.

In summary, in their current form, the proposals do not guarantee lower bills for consumers, do not support energy efficiency, and seem artificially to favour nuclear power and gas power generation with no guarantee of meeting the UK’s carbon emission reduction goals. There is also no guarantee that they will be permitted by European Union rules.