Hinkley Point is a bad deal for Britain. Investment should focus on renewable and strategic nuclear projects, as well as smarter use of energy.
Cynics might think the green light for Hinkley Point C, a new nuclear power station partly financed by China, has something to do with Mrs May being forced to sit on the naughty step at the G20 summit in China. After numerous delays, and a pause in the approval of the project in July, construction of the project was finally given the all clear on September 15th. Concerns that circulated around British security in stake in what it considers ‘critical infrastructure’, lead to new safeguards on the project being constructed by Électricité de France (EDF), a French state-owned firm, (using £6 billion in Chinese money). Britain now has a share in all future nuclear projects, and a promise to change it’s approach to control of critical infrastructure. EDF also cannot pull out of the project before completion without British consent. In doing this, Mrs May has likely eased tensions with China – a cash pot of future investments – and France; who she needs to appease to make looming Brexit negotiations easier.
The deal sounds like good news for manufacturers. 60% of the cost of Hinkley will be spent in Britain. Unions, too, are happy. UNITE, Britain’s largest trade union, liked that at any time the project will employ some 5000 people in construction; and 25,000 over the lifetime of construction. Businesses in Somerset are also looking forward to a Hinkley boom. It may also help settle the nerves of those who are worried about a potential energy gap the UK faces as old power plants come offline. When the power plant becomes operational, it will supply around 7% of UK electricity needs – enough to power some 6 million homes. Since nuclear doesn’t produce much carbon dioxide, it’s also a central part of the UK’s commitment to cleaner energy.
Of course, this doesn’t detract from the larger issues that hang over the project. To attract the investment, the cost of energy is being guaranteed at £92.50, or double the current wholesale price of £43. This amounts to a taxpayer subsidy of between £10-£25, according to BBC Reality Check. With advances in renewables and battery storage technology, their costs are only falling – wind and solar prices are projected to fall between 41% and 60% by 2040, according to Bloomberg. This makes the Hinkley deal seem even worse over time. In fact, as Simon Taylor, at Cambridge University’s Judge Business School points out in his book ‘The Fall and Rise of Nuclear Power in Britain’, Hinkley Point C will be one of the most expensive power plants in history. Energy analyst Peter Atheron called it ones of the worst deals signed by a British government. Number crunchers at HSBC agree. Costs at Hinkley point have risen from £14 billion to £24.5 billion, and could reach as high as £34 billion.
The design at Hinkley Point, known as a pressurised water reactor (PWR), uses water as both the moderator and coolant. It’s an as yet unproven technology that, according to reporting by Reuters, is already being redesigned. Other similar projects are already billions over budget, and years overdue. China’s PWR projects were delayed by two years. EDF themselves have admitted that the project won’t come online by 2023 as scheduled. This means the first new power station to come online in the UK may instead be an advanced boiling water reactor (ABWR), a Japanese design used in nuclear power stations since the 1990s.
ABWRs are smaller and more straightforward to manufacture than PWRs, as they allow the water to boil in the reactor directly, so steam is created directly. ABWRs are also self compensating, because they can maintain stable core temperatures simply through normal operation. Ed Davey, former Liberal Democrat Secretary of State for Energy and Climate Change, argued this makes ABWR projects cheaper. Other simplified versions of the PWR, such as the NuGen proposal, backed by Toshiba, has far fewer components to go wrong. This too, is more promising than Hinkley Point.
Following Brexit, whether or not the UK is still bound to the EU’s Industrial Emissions Directive, which likely would have overseen the closure of 12,000 MW worth of capacity (or 20% of the UK’s current peak electrical demand) is unclear. But the UK is still bound to strict climate change agreements – even if Mrs May delays in ratifying them. Nuclear is likely going to play a key role in a heavily decarbonised UK energy sector by 2030; many have argued it is a cornerstone to successful efforts to decarbonise. Nuclear power shouldn’t be shunned in the race to reduce global emissions to zero by 2050. However, it’s worth remembering the growth of renewables has been able to deliver substantial capacity at prices and speeds which put nuclear to shame. At present, the capacity of large scale renewable projects still pale in comparison to those of nuclear. When it is operating, Hinkley Point C will produce 3200MW of power. By comparison, the London Array, currently the UK’s largest offshore windfarm project, will produce 630MW. However, the attitude shown to renewable energy subsidies by Mr Cameron’s government, and green policies in general, should not be encouraged by Mrs May. It will cost investment and itself form a risk to UK energy security.
Hinkley speaks to a wider issue in UK energy policy, which The Economist phrases as
The inability to build large power plants of any kind at a time when many coal-fired ones are closing and existing nuclear ones are on their last legs.
Supply gaps in British energy are an issue. The Economist points to a 6000MW fall in power generation in 2016 – one of the largest shortfalls in decades, and one that dwarfs Hinkley’s output. A lot of this is due to the current glut in prices of oil and gas. The industry saw a halving in returns between 2008 and 2013, according to the Guiness Funds 2014 report. Data from the Office of National Statistics (ONS) show companies invested in North Sea Oil and gas with profitability measures at all time lows.
With this fossil fuel glut, now is the time for strategic investments in renewables and small scale modular reactors. A National Audit Report for July 2016 noted that solar and wind would be much cheaper than grand nuclear and gas projects the government wants to embark on; where nuclear power could compensate for the land requirements and intermittent nature of renewable energy. A Committee on Climate Change report noted that it would only cost £10/MWh to balance the intermittent nature of renewables; a bargain compared to what taxpayers are expected to fork out. Especially when the Solar Trade Association, an industrial body, argue solar would only require half the subsidy of Hinkley.
This is also at a time where companies are increasingly making more efficient cars, factories and houses. According to the World Energy Outlook, a think tank, 32% of energy investment went into efficiency measures in 2015 – up from 17% in 2014. Other measures to reduce demand are often chastised by tabloids, but are smart approaches to the problem of supply and demand in energy. Yet Britain remains transfixed on fossil fuels, large power projects, and a focus on the supply side of power. It’s time Britain breaks its love of the grand, and embraces the practical side of energy security.