Subsidising nuclear

We know the Government wants new nuclear power. The question now is just how it intends to make us pay the tens or hundreds of billions of pounds needed to make new nuclear power happen. It will not do so by way of taxes, but by manipulating energy markets in favour of nuclear.

The main means flagged up in the July 2006 Energy Review is the carbon market, specifically the EU's Emissions Trading Scheme:

"It is vital that we progress our priorities for strengthening the EU ETS in a timely manner given the significant investment challenge currently facing the UK electricity generation sector. It is likely that we will need new electricity generation investment equivalent to around one-third of our existing capacity, and given these assets typically have lives of some 20 - 40 years, it is essential that a clear and stable carbon policy framework is in place to incentivise timely and low carbon investment."

However the ETS is a deeply flawed mechanism and the Government will have a tough time reforming it as it needs to to make it work for nuclear power. One of the main problems is the very unstable and generally low price of ETS carbon allowances, resulting from the high level of allowances handed out by Governments to their industries. Yet

"The Government is committed to there being a continuing carbon price signal which investors take into account when making decisions. This is particularly important given the scale of new investment required in UK electricity generation capacity."

So how will the Government square this circle?

"We will keep open the option of further measures to reinforce the operation of the EU ETS in the UK should this be necessary to provide greater certainty to investors."

In other words, they will fiddle it! Most likely they will provide the nuclear industry with a guaranteed carbon price that they will pay to nuclear operators for the carbon they don't emit from the electricity they generate.

And just in case that's not enough (it won't be), they will probably provide them with a price guarantee for the electricity they generate. And despite the promise that

"It will be for the private sector to initiate, fund, construct and operate new nuclear plants and to cover the full cost of decommissioning and their full share of long-term waste management costs."

we can expect that the Government will limit the nuclear industry's exposure to the costs of decommissioning and nuclear waste. Why? Because investors are not going to take on such an open-ended and potentially vast financial commitment unless it is in some way capped. And there is some leeway for this in the statement above - exactly what is meant by the term "full share"? The basis on which the cost of the "full share" of waste costs is allocated to new nuclear build is anybody's guess.

On top of that the Government is committed to reducing the duration of planning inquiries, pre-empting discussion of the need for nuclear power by providing an all-encompassing "statement of need". And it wants to pre-license nuclear reactor designs before they are complete, effectively allowing the industry to build power stations to early stage designs even if the designs subsequently turn out to be unsafe!

The Review says it all in this one sentence:

"... in view of the potential benefits for our public policy goals, the Government proposes to address potential barriers to new nuclear build."

Which means, basically, that the Government will do whatever it takes to persuade investors to pile into nuclear. And the rest of us, our children and our grandchildren, will have to foot the bill.