New Times Editor: Only Shale Can Save Britain’s Energy Policy
Plans for a new generation of nuclear plants can be rescued, but only by encouraging alternatives such as fracking.
Fifty years ago Harold Wilson promised a new Britain “forged in the white heat” of a technological revolution that would send supersonic airliners round the world and put nuclear reactors at the heart of the National Grid. His words struck a chord. The technologies he had in mind have stumbled.
Concorde is a museum piece and nuclear power, while still a marvel, is an investor’s nightmare. Wilsonian visions for Britain’s energy supply has been elbowed aside by the free market, and market-based alternatives are pulled in opposite directions by long planning horizons and the swift march of science.
The withdrawal of Centrica from its proposed nuclear joint venture with EDF leaves a serious hole in the Government’s energy plans. Surging shale gas production offers ways to fill it, and should strengthen ministers’ hands as they consider how to hold an already fragile nuclear energy policy together. In a complex and fast-moving negotiation, this much is clear: Britain’s obligations under the Climate Change Act cannot be held to ransom by a single French contractor and its shareholders, and nor can Britain’s consumers.
Vincent de Rivaz, EDF’s chief executive, has said since Centrica’s announcement that the Government knows perfectly well what it has to do to keep its nuclear policy on track — namely, to agree a preferential price for nuclear-generated power in future decades that is high enough to tempt a new investor to take Centrica’s place.
If only it were that easy. The price commonly discussed for power generated from future nuclear plants is nearly twice the current wholesale electricity price of £55-60 per megawatt-hour. That difference is only likely to increase as US shale gas production holds down world energy prices, and consumers would ultimately be forced to pay it in the form of a clean energy levy. This newspaper supported the concept of such a levy when it was introduced in last year’s Energy Bill, but it must be affordable and politically feasible. As currently conceived, it is neither.
As the last investor left in the project to build new nuclear plants at Hinckley Point and Sizewell, EDF’s position is strong, but not as strong as it would like. It can point to the scarcity of interested investors, and threaten to withdraw if the price of nuclear power is not set high enough. Indeed, the company is so over budget at a French plant similar to the one planned for Hinckley Point that it cannot afford a loss leader in Britain. But EDF has already invested £800 million here that it can ill afford to write off, and the Government’s position is by no means desperate.
Nuclear power is clean, reliable and remains an essential part of Britain’s energy supply. Its up-front costs remain daunting, which is why Mr de Rivaz and any future partners are entitled to reasonable returns on their investment. But they cannot name their price. The Government must negotiate hard for a fair deal for hard-pressed consumers. It must also think hard about the tectonic shifts upending global energy supply, and it must be ready to react to them far faster than has been the norm for such a capital-intensive sector.
Just as the Fukushima disaster drastically raised planning and safety costs for the nuclear industry, so breakthroughs in our ability to find energy in deep shale strata have rewritten the case for gas. Large-scale “fracking” in Texas and North Dakota has confounded most environmentalists’ fears and brought energy to American consumers at a quarter the price paid in Europe. Britain’s shale gas reserves could dwarf those left under the North Sea but have scarcely begun to be tapped since fracking was made legal here last year. That has to change.
Britain needs new nuclear power stations, but the case for natural gas has never been stronger.