With the Government due to announce new measures to encourage investment in low carbon power generation as part of its Electricity Market Reform (EMR), it is time for Liberal Democrats to speak out against public subsidies for nuclear energy. Why? Because among the Government’s proposals is the so-called Feed-in Tariff with Contract for Difference (FiT CfD) which will offer a price guarantee and revenue certainty for investors in low-carbon electricity generation – including nuclear. Such a public subsidy to help build new nuclear power stations in the UK would go completely against the Coalition Government Agreement and prolong “the most expensive failure of post-war British policy-making” as Chris Huhne only recently calledBritain’s nuclear energy policy.
FiTs were designed to assist new renewable technologies such as wind or marine energy in expanding their deployment and reducing costs through economies of scale, thereby helping them reach market maturity. It is therefore rather puzzling that the Government wants to apply this mechanism to a technology that has existed for over 70 years but has never achieved any cost reductions. The story of nuclear is indeed the story of constantly rising prices: at the end of the 1970s an average French nuclear reactor cost around 1 billion EUR, but by 2010 its cost had risen to 6 billion EUR, a six-fold in 30 years – almost double the increase from inflation.
On top of high capital costs, nuclear power has a hugely expensive legacy in the form of decommissioning of its reactors and disposal of nuclear waste. The current UK bill for the clean-up of UK’s existing nuclear industry and its waste has been estimated to be roughly £100 billion or two thirds of the budget of the Department for Energy and Climate Change (DECC). On average, such indirect costs add up to 35% to the overall capital costs of building a nuclear reactor, according to the Swiss Federal Energy Office, which has undertaken an in-depth analysis concluding that decommissioning costs continue to rise.
Renewable energy sources, on the contrary, have only been around for a couple of decades but prices have come down considerably. While the level of research and development for renewables runs at less than one third that of the nuclear R&D budget in OECD countries, capital costs for technologies such as wind and solar photovoltaics have nevertheless dropped dramatically in the last decade, with onshore wind projected to become competitive with gas and coal in Western Europe by 2020 at the latest.
By contrast, the continuing unprofitability of nuclear technology recently led two German energy utilities, RWE and E.ON, to pull out of plans to build new nuclear in the UK. However, if a FiT CfD goes ahead British consumers may find themselves subsidising nuclear technology for over 40 years, the average lifespan of a nuclear reactor, solely to keep in profit the one remaining interested power company,France’s EDF. Billions of pounds will be diverted from the wind and marine energy sectors where theUK’s natural advantage lies, hampering British industrial leadership in these sectors and risking a major loss of business opportunities and new jobs.
Fortunately, there is a European dimension to energy policy, not least because of single market rules, and the UK is already being challenged in Brussels on the grounds that a nuclear FiT CfD conflicts with EU state aid rules, which only allow state support for new technologies. However, the UK government is rumoured to be trying to push its own agenda inBrusselsby arguing for a broader subsidy framework for mature nuclear technology. This would be an extraordinary volte-face for a liberalising nation which led the fight for reform of the European electricity market – and for a Coalition Government based on an agreement not to build any nuclear power stations with public subsidy.
* Fiona Hall is Leader of the UK Liberal Democrat Delegation in the European Parliament and MEP for the North East of England.