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Government wide open to subsidy blackmail from EDF over new nuclear build

The government’s announcement yesterday that it is granting planning consent to the French firm EDF to build 2 new nuclear power stations at Hinckley Point in Somerset is a sign of panic. The price of these reactors has risen inexorably to £14bn apiece, and it is this exorbitant capital cost together with market uncertainties over dithering government energy policy that has frightened off a whole stream of potential partners making any bid themselves or collaborating with EDF – including both Chinese and British (Centrica) partners.

The government now finds itself in the extremely uncomfortable, not to say desperate, position where it is utterly dependent on new nuclear because it has failed to promote the only real long-term answer of renewables on anything like the scale and speed required, but it is now held hostage by two forces it cannot control and which work strongly against each other – the demand by the in effect monopoly provide EDF for vastly extended subsidies and the requirement to get approval from the EU Competition Directorate which is seeking to lower or eliminate subsidies.

The irony underlying all this is that the government has repeatedly sworn blind that there will be no public subsidy at all for new nuclear build. In confirmation of the almost universal view that you can’t believe a word ministers say, not only will there now be a subsidy, but it will be colossal. EDF, which have the government in a stranglehold, is demanding a guarantee (the so-called ‘strike price’) of £100 for each megawatt-hour of electricity produced over the next 30-40 years.

This is almost double what might be assessed as a fair and reasonable price, and the loot which EDF will collect over this huge timescale, thanks to the battered British taxpayer, is positively gigantic. And to put it into context further, this new nuclear programme will produce a very big increase to the existing enormous stockpile of nuclear waste already costing (the British taxpayer again) an extra £65bn to manage and decommission.

Then there’s the EU determined to bear down on distortions to the market. The UK will have to pass 2 tests in the investigation into these subsidies: is it in the common interest of member states? and will the benefits outweigh the distortion of competition? The answers are anyone’s guess, and the EU inquiries will probably take 12-18 months.

Either way, government’s unforgiveable failure to address long-term energy needs till far too late means the lights will very likely go out in the ‘energy gap’ around 2017-8, if not before. Tragically this government will never draw the obvious conclusion that the only way to secure certainty of energy supply and certainty of the long-term investment needed is through public ownership, or at least part-ownership, of the energy sector. Is Labour listening?

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