Reducing carbon emissions should underpin the new Governments energy policy

Following the recent article in the Telegraph: Russia, China and South Korea ‘should be invited to build UK nuclear plants’, this blog gives further views on the future of the UK nuclear sector and the need for a comprehensive analysis of all alternative nuclear technologies in order to get the best deal for consumers as we seek to meet our emission and carbon targets, outlined in the 2008 Climate Act. 

 

Prime Minister Theresa May’s sweeping Cabinet reshuffle and reshaping of Whitehall departments has changed the landscape in which policy on energy and climate change is made. This presents both a challenge and an opportunity.

The challenge is to deal with the layers of uncertainty created by Brexit, the abolition of the Department of Energy and Climate Change and the appointment of a completely new Ministerial team.

Resolving all these upheavals will take considerable time, probably years in the case of Brexit. But both Greg Clark and Nick Hurd are able Ministers and they now have an opportunity to seize the initiative to reassure investors, consumers and green campaigners alike.

The immediate first step should be an unequivocal confirmation that honouring Britain’s climate change commitments is their top priority. This will dispel suspicions that the abolition of DECC, just months after the Paris Agreement called for more urgent global action to tackle climate change, heralds a policy switch.

The last positive act of David Cameron’s government was its acceptance of the Fifth Carbon Budget. Making clear that implementation of this Budget is the main driver of energy policy will eliminate fears that Brexit could lead to a downgrading of Britain’s carbon emission reduction targets.

This will reassure existing and potential future investors. It will also throw a welcome crumb of comfort to the scientific and academic communities whose prospects have been significantly damaged by Brexit.

At the same time Ministers should prioritise technologies which deliver value for money and economic benefits. An evidence based approach to policy is overdue in the renewables industry where former Energy Secretary Ed Davey’s misplaced enthusiasm for offshore wind and recent government resistance to onshore wind have raised costs unnecessarily.

One benefit of Brexit may be a level playing field for all forms of low carbon electricity. Releasing Britain from adherence to artificial EU targets for renewable energy will enable us instead to focus exclusively on cutting carbon emissions. This will create an opportunity for the nuclear industry.

Before the shock of the Brexit vote faint but worrying rumours were circulating that DECC was contemplating a new dash for gas in response to the danger that delays at Hinkley Point might jeopardise Britain’s nuclear new build programme.

Some new investment in gas, which until the likely advent of global carbon pricing may continue to look cheap, is justified in the short term to maintain an adequate margin of generating capacity. But too much reliance on gas is incompatible with our climate targets and Ministers should explicitly rule it out now

Instead the new team can quickly make its mark on nuclear policy. Its predecessors in DECC were coy about setting out a clear strategy for nuclear, preferring a Micawber like approach of waiting for something to turn up.

Hopefully the EDF board will finally give the go-ahead for Hinkley Point C on Thursday. Ministers should greet this good news by confirming that regardless of criticisms of the high strike price Britain will stand by this contract. This is important to maintain the trust of investors in this and future projects.

At the same time they clarify whether, subject to completing the GDA process, CGN can proceed with developing Bradwell. Logic suggests that it should be allowed to do so. This could be important if the technical challenges which EDF and Areva are still addressing at Flamanville affect the construction timetable at Hinkley.

The government should now commission and publish an analysis of the alternative nuclear new build options, focusing on how to cut costs while simultaneously maximising the economic benefits to Britain of building new capacity.

This study should examine the progress being made towards much cheaper nuclear generated electricity by China, Russia and Korea to see what lessons can be learned for the benefit of British consumers and taxpayers.

It could also explore how public concern about introducing into the UK nuclear technology developed outside the EU and North America might be allayed if their operation in Britain was undertaken by consortia controlled by British investors

The new Prime Minister is an advocate of an industrial strategy and of the use of infrastructure bonds. These concepts are highly relevant to capital intensive industries and particularly those whose investment cycle is extremely long like nuclear.

Recognition that including nuclear in Britain’s energy mix is essential to keep the cost of delivering low carbon baseload power down should be a cornerstone of policy. Using government backed infrastructure bonds to finance nuclear new plant can then cut borrowing costs and lead to lower electricity prices.