Liberal Democrats were at pains in the negotiations for the coalition to insist that if nuclear power stations were to be built in the UK that there should be no public subsidy. This position was reiterated by Chris Huhne in a statement to the House of Commons on October 18th 2010 as reported in his article on Lib Dem Voice. So I would like to allay Fiona Hall concerns expressed on Lib Dem Voice yesterday by clarifying that there has been absolutely no change in this position.
As Chris Huhne outlined in October 2010 this means that “there will be no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation.”
One of the characteristics of low carbon generation of electricity is that there tend to be high upfront capital costs of building the generator capacity and then low marginal costs of producing the electricity. Currently there is much caution from investors and considerable competition worldwide for investment in the power sector. This is at a time when there is a huge demand for new investment – some estimates are of a £110 billion investment requirement in the UK in electricity generation and transmission by 2020, which is double the current rate. So a high value is placed by investors on a degree of price certainty. That is as true for renewable generation such as onshore and offshore wind as it is for nuclear generation.
The purpose of the Contracts for Differences which Fiona refers to in her article are to provide that greater price certainty in the period of transition towards a low carbon energy future, when investment requirements are so high. I want to make clear, just as Chris Huhne did, that this means that nuclear will not receive a higher price than comparable generation technologies whether they be renewables or indeed gas generation once its emissions have been abated by carbon capture and storage. There will be no public subsidy of nuclear generation.
The Liberal Democrats have always been greenest of the main parties in Britain. Indeed it was that which first led me to join the party. We face many challenges in securing our goal of an 80% reduction in our carbon emissions by 2050. Liberal Democrats should be under no illusion that there are some climate change sceptics who are campaigning vigorously through the media and in Parliament to knock us from this path. Liberal Democrats can be assured that I will be working my hardest to ensure that that does not happen.
* Ed Davey was the MP for Kingston and Surbiton and Secretary of State for Energy and Climate Change.