The Chinese nuclear fairy gets set to wave her wand…..?

According to the papers, we are finally going to get financial sign off for the first of what are supposed to be a new fleet of nuclear power stations in the autumn – albeit laced with a huge slug of state funded finance from the Chinese government: so to sum up, Hinkley C power plant, which will of course be built, it is claimed without any public subsidy or state finance (except the credibility busting sum of  EDF being awarded £92.5 per megawatt hour of electricity produced  for the next 35 years– about twice the current price of electricity currently) will be constructed largely with state finance from China and run by a state financed French energy company.

Amber Rudd, our new Energy Secretary of State, appears to be rather more openly on the side of the ‘subsidy admitters’ than her predecessors were  – she told me two weeks ago in In an energy Select committee hearing that

‘We have to have secure baseload, so you should not be surprised…that we are prepared to pay more for that in order to make sure nuclear is part of the mix’

An admission that sounds to me very like confirming a conscious decision to subsidise new nuclear, which is of course the subject of a challenge to the EU from the Austrian Government – that the UKs nuclear programme contravenes EU state Aid rules. It quite flagrantly does, I think we will quietly have to agree, and it really now depends on whether there is a ‘policy fix’ on state aid shortly, or whether the challenge, which is by no means ‘weak’ as the Government dismissively tells us (see here for an appraisal of the Austrian challenge) is allowed to run through a proper process of examination.

So to sum up (2) – the Chinese and French state sponsored new nuclear reactor propelled towards financial close by lavish state underwriting of its eventual output may well go ahead providing it is deemed not to contravene EU state aid rules: and will simply collapse if the challenge succeeds.

So that’s our new nuclear programme sorted out, subject to these small matters? Well not really, because it is worth remembering that Hinkley C is supposed to be a part – the first part- of that new nuclear programme, the importance of which was underlined very recently in a largely unnoticed update of the Government’s ‘Low Carbon Technologies’ plans.

According to this document, ‘most nuclear power stations are due to close by 2023’, so a new fleet is needed to maintain the nuclear mix (nuclear currently supplies about 19% of electricity) It is going to be OK, however, because, as the document says, ‘Industry plans 16Gw of new nuclear power’, on five of the eight sites agreed to be suitable, and effectively given free up front planning permission, by the 2011 Nuclear National Planning document. Those would be the sites that were appraised by the planning statement as being able to be developed by 2025 –because, as we were sternly warned by the report ‘failure to develop new nuclear power stations significantly earlier than the end of 2025 would increase the risk of the UK being locked into a higher carbon energy mix for a longer period of time than is consistent with the governments ambitions to decarbonise electricity supply’.

Right then: we’ve got to get a new fleet built by 2025 to have any chance of keeping nuclear in the mix and replacing those that will inevitably close before then- and the next question, is how are we doing?

Well here’s something else worth remembering: Hinkley C was, when the nuclear policy Paper was written, supposed to be producing electricity by the spring of 2018 – planned, permissioned financed and constructed by that date. The new planning document staunchly stands by that fairytale date, more or less – ‘the aim’ it says, ‘is to have the first new nuclear power stations generating electricity from around 2019’ . That is not what ministers now say, however – in DECC questions three weeks ago, Andrea Leadson the new energy minister, told us all that ‘ we are committed to the next wave of new nuclear projects…and we hope to be able to be able to meet 35% of power needs from nuclear by 2028’  That’ll be the ‘plans’ the  industry has coming to fruition by then, I would imagine –  but  not quite what I received as a written answer from DECC a week later when I asked about the new nuclear timetable – ‘ we expect ..these new power stations to come into operation during the 20’s and early 30’s’ signed off as answered, I might add by one Andrea Leadsom.

So to sum up (3) Hinkley C is now delayed by more than five years, and will probably be delayed further. Even assuming everything on the remaining permissions and the build goes very speedily, it is probably asking a lot for power to come out of the plant before 2025. – the date by which all the new fleet was supposed to be in place. And then, if 35% of power is to be supplied from nuclear by 2028, magically, all the other sites will have to be completed  by then (which means all will have to be approved, financially closed, and commenced with building by about 2017).

So I guess we will need to hold tight and wait for the flurry of announcements about definite build programmes on Wylfa, Sizewell, Oldbury etc. over the next eighteen months.

And then finally summing up (4) not a snowballs chance in hell that all this will happen. Instead of a complete nuclear programme by 2025, the likelihood is that there will be one plant, or maybe not even that operational at that point. (The estimable  Prof. Catherine Mitchell, from Exeter University has produced a highly recommended blog piece on this and other energy planning issues by the way.)

Time, you might think, for a plan B. what about filling in now almost certain low carbon generation gap, at the very least, with much more easily deployable, speedily buildable, better financeable, lower subsdisable real renewables? Oh, we’ve just taken most of those programmes out and shot them. Bit of a mess then, really.

So…..how safe is that Husky?

Huskies

Well it’s not going very well on the renewables and low carbon front is it.? Ed Davey, until recently in charge of the whole business, doesn’t think it is, asking recently in a tweet:

‘does Cameron plan to strangle a husky given green deal cuts after wind and solar hits, end to Ccl exemption and zero homes abolition’

Must have been a titanic feat of character editing to get all that in 140 characters, I must say, but it does perhaps encapsulate the central question: why is all this suddenly happening? As Ed says, we have had in very short order, the apparent termination of support for onshore wind, a radical deflation of support for solar (both the cheapest renewables currently around by the way) the rug pulled smartly under the whole zero carbon homes programme, in that ..er.. there won’t be one anymore, and the clever juggling of the climate change levy so that it is now quite simply a levy, with the involvement in climate change abruptly terminated. Oh and to add to that, we have the prospect of the levy control framework being bust and quite possibly (Amber Rudd, Ed’s successor as DECC  SOS was conspicuously coy when I asked her about it this week) no more auctions for the award of contracts for difference for renewable technologies until after 2020.

So is it just about strangling a husky, or to put it another way, getting on with ‘cutting the green crap’ now that Conservatives can make the decisions all by themselves and without those pesky coalition partners to think about? I’m not sure it is as simple as that, because what is clear at the same time, is that the new government remains, it says, fully signed up to Britains ‘leading role at the Paris climate change summit in December’, and apparently committed to the achievement of the carbon budgets that go along with Britain’s offer (40% reduction greenhouse gas levels over 1990 by 2030, or effectively, the achievement of the fourth carbon budget, presently on its own admission, difficult to do on the basis of present measures). So you might expect some new measures, or at least an indication of which measures will get top billing over the next period.

Well as we know, despite the explicit indications that ‘ action is needed in this parliament to ensure that the pace of emission reductions accelerates whilst supporting economic growth’ from the committee on climate change in its 2015 progress report to parliament, the initial actions of the new government have been to take a machete to a number of support schemes, ostensibly on the grounds that they are too expensive to support and will impact adversely on customers bills.

And the striking thing about the machete-ed measures is that each of them represent, essentially, a different way of changing behaviour in a green and lower carbon direction. You might expect a government reviewing what direction it best wants to take in meeting carbon budgets to refine what kind of measures it wants to support – and in effect which measures it believes are most compatible with its philosophy of government and which are not. Measures to change behaviour , we might schematically represent as follows (in descending order of intervention).

  1. Put a tax on ‘ bads ‘ and exempt ‘goods’ so that behaviour changes towards the ‘goods’
  2. Put an obligation on companies to do greener things as part of their operating codes.
  3. Encourage people to invest to save using their own bills by greening their environment or energy use.
  4. Introduce regulations that at minimal cost introduce a largely unnoticed ‘green shift’ in the ways people live.

We can fit each of the machete-ed measures  into this:

  • we are no longer going to tax ‘bads’ (1) since the collapse of the climate change levy doesn’t perversely save any consumers money: it merely equalises payments across the board into treasury: it is just free money for government, with no behavioural purpose behind it.
  • We aren’t going to place obligations on companies (2) with the constraint on the levy control framework and the end of renewable obligation to advantage renewables.
  • We are not going to encourage people anymore to invest in their own energy savings by using the power of their present bills (3) with the ending of the Green deal.
  • And finally, we are not even going to introduce relatively mild and cost effective regulation (4) that moves the market in a more energy efficient and lower carbon direction by requiring a general framework for building homes that are increasingly energy mean in their operation.

So that leaves a rather frightening conclusion. If we believe that the government is sincere in maintaining its carbon change objectives and it’s willingness to address the consequences of its own carbon budget commitments, then at some stage it will have to introduce measures to change behaviour or investment patterns that look rather like the measures they have just abandoned. Alternatively it may now be that the single and sole mechanism they think will bring is change about is….the market. And since Lord Stern, as I remember notably described climate change as ‘ the worlds biggest market failure’ I’ m not sure right now that it is a strategy that will reliably deliver.

On warm homes and warm words

(First published in Business Green 16th June 2015)

There is a ballot for Prime ministers questions among backbenchers, and if you are lucky, you will be allocated a slot for one the first ten or so questions that will be called after the opposition leader has had his or her turn. I came up with a slot this week, and decided to raise the issue of support for home energy efficiency programmes. There have been some press reports recently suggesting that these programmes could be chopped as part of the next phase of Government spending retrenchment: so I asked the PM if he could assure me that the reports were not true, and that he would be continuing instead to support energy efficiency underwriting. Present programmes such as Green Deal, ECO and Warm Homes discount are , in truth, not very well funded, but are in my view essential to continue over the next period for what one might call immediate and long-term reasons.

The immediate reason is, of course that right now insulating homes and making them more energy efficient represents the best path in combatting fuel poverty, and ensuring that older and more vulnerable householders have warm homes to live in: cost effective for the future both in terms of fuel bills paid out by residents, and costs of support or intervention where a cold home for an elderly person might be the end of living in it independently.

The longer term reason was waiting to be discussed later on the same day in a debate on Climate change, and followed what the Prime minister himself had said immediately after Prime minister’s questions about the G7 summit. The summit had come out with a strong statement about the need to produce an ambitious and binding agreement on Climate change at the Paris Climate change meeting in December: quite right, and the UK along with its EU partners has committed to place an offer on the table for the talks of a 2030 target of at least a of 40% reduction in greenhouse gas emissions from 1990 levels. We can do that (we think ) in the UK because our Carbon Budgets, the fourth one of which covering the period bang in the middle of achieving those commitments, has recently been accepted by the government, projects something like a 50% saving in emissions over the same period. Achieve the budget, in short and you have easily discharged the UK’s commitment to the Paris talks.

Well, yes, but as I always tell myself to do, look at the small print. And in the case of the fourth carbon budget, a starting assumption by the Committee on Climate Change in drawing the budget up is that, by the early 2020s we will have made the substantial commitment to reducing emissions that will come from far greater energy efficiency in homes, and in fact they project some 2 million solid wall homes treated, together with 80-90% of possible loft and cavity wall treatments. So if we are nowhere near those levels by that date, something else big will have to go into the carbon budget to save it. I would like to see a substantial increase in retrofitting homes so that we can come close to that ambition as a contribution to carbon budgets, but even a partial achievement will make a big difference on whether we can meet budget requirements or not. So a strong commitment to the Paris talks, (which the Prime minister endorsed) has consequences for what we do about it over the next few years if we really mean what we say.

I wasn’t sure that I would get all this in the answer that the Prime minister would give me to my question: but a general acknowledgement of the importance of energy efficiency in homes, and a generalised commitment to keep funding on track would have been good enough.

What I actually got was a smirking riposte congratulating me on being returned to Parliament because there weren’t many Labour MPs on the South Coast….which I sort of knew already. My fault, I guess for thinking that a pertinent question to the Prime minister in the bear pit of PMQs might get anything other than a joke response