UK business group tells Brussels: Let us have our nuclear renaissance

Tuesday, July 2, 2013

The EU should stop "skewing" Europe’s energy market in favour of renewables and allow the UK to build a £14 billion nuclear reactor at Hinkley C, the deputy director-general of the Confederation of British Industry (CBI) has told EurActiv.
“We would hope that the European Commission would see nuclear as being a core part of our energy mix,” said Neil Bentley. “We have to start somewhere and Hinkley C is exactly the right place.”

“Let us get on with it,” he said.

Hinkley C would be the UK’s first new nuclear plant in a generation but because of the massive and potentially market-distorting subsidies it would need, the European Commission will probably need to approve it first.

EU sources say that while the UK is yet to formally notify the Commission of its plans, “there has been a lot of contact.”

“They know exactly what could fly and has a reasonable argumentation,” one EU official said on condition of anonymity. “These issues are very difficult, at national level as well.”

EurActiv understands that capacity markets and ‘aid to generation’ are two areas which Brussels believes could potentially square the circle between the UK's energy strategy and EU subsidy rules.

Despite continental anti-nuclear trends since the Fukushima nuclear disaster in 2011, the UK is determined to plough ahead with nuclear builds.

With new capacity, “we can send out a powerful signal to overseas investors that we’re serious about a new nuclear renaissance, the decarbonisation of our electricity supply, and a huge creation of jobs in the engineering and construction supply chain,” Bentley said. “This is a massive prize.”

EDF ‘strike price’

On 26 June, Britain’s chief treasury secretary, Danny Alexander, pledged £10 billion (€11.6bn) in financial guarantees, aimed at enabling the French energy giant, EDF, to build Hinkley C.

Terms of a UK-EDF deal reportedly involve a minimum ‘strike price’ of just under £100 per megawatt hour – around double the market rate – under a 30-40-year ‘Contract for Difference,’ which the Energy Commissioner, Günther Oettinger, has dubbed ‘Soviet’.

The British government is also offering generous strike prices to new wind farms – of £155 (€181) per megawatt hour for offshore, and £100 (€116) per megawatt hour for onshore plants – but over a much-shorter five-year time frame, before these begin declining.

In 2010, onshore wind produced electricity at €64.9 per Megawatt hour, according to the European Wind Energy Association.

The CBI supports the British government’s opposition to a 2030 target for renewable sources in the energy mix, arguing that the EU’s 20% baseline for renewables in 2020 has slanted investors against nuclear power.

“A huge amount of subsidies went to developing wind in particular – onshore and offshore – and that then helped skew the economics of building new nuclear power stations [and] made it uneconomic to bring nuclear forward as we wanted,” Bentley said.

“This is why we are trying in the UK to counteract that in other ways,” he continued. “The unintended consequence of focusing on renewables in that very strong way has put out of kilter some of the other things we were trying to do.”

He called on Brussels to let member states decide their own decarbonisation plans.

EU state aid rules

Under EU state aid rules intended to create a level playing field for business, national funding for ‘market failures’ must be judged against criteria such as necessity, non-discrimination, effectiveness and proportionality.

The UK’s anticipated defence is that nuclear energy is needed to keep the country’s lights on, and/or to meet its decarbonisation objectives.

But the European Commission’s energy directorate believes that member states should first explore ways of strengthening grid interconnections before pursuing strategies which could renationalise and fragment Europe’s internal energy market.

According to Andrea Carta, legal counsel at Greenpeace, the broader case for nuclear’s decarbonisation potential was invalid on grounds of cost-effectiveness, proportionality, and the energy’s health and environmental price.

“Nuclear is a fairly ineffective and disproportionate way to achieve carbon reductions,” he said. “It comes too little, too late and at excessive cost compared to renewable energy in particular.”

Greenpeace argues that nuclear power is more expensive than renewables if accident liability guarantees, waste treatment, security and decommissioning costs are included in the math.

Decarbonisation objectives

Carta said: “You can’t isolate the decarbonisation objective from the wider context of EU environmental principles: polluter pays, the precautionary principle, prevention and addressing pollution at the source.”

“You replace carbon emissions with other environmentally harmful consequences,” he added.

Last week, local business leaders in the UK said that building Hinkley C would create 6,000 jobs over a decade in the UK’s neglected south-west.

Under Article 107 of the EU’s Treaty for the Functioning of the EU, state aid may be considered for areas with high unemployment and “abnormal” standards of living.

But Greenpeace data suggests that as well as containing design flaws – and poor safety indicators – the European Pressurised Reactor (EPR) model that EDF would build in Hinkley provides far fewer jobs than equivalent investments in onshore wind energy.

Hinkley C was given planning approval in March.

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