His friends might call it a coincidence; no one else would be deceived. A chancellor who never tires of declaring his faith in private-sector solutions has waded into the energy supply market with the enthusiasm of a Chinese state planner. Only the Chinese, perhaps lacking a translation for “a pig in a poke”, are pretending to be impressed.
It goes like this. In July, George Osborne announced the end of renewable electricity’s exemption from the climate change levy. A tax that was supposed to help curb emissions has instead become a tax, to the tune of £3.9 billion, on the production of clean energy. In other words, wind, solar and bio gas, with no net carbon emissions, face a tax designed for carbon polluters.
Meanwhile, the Chancellor has cut subsidies for renewables. Aid for onshore wind energy production, in which Scotland is a world leader, will end next April. This comes amid unquestioning government enthusiasm for fracking, but with warnings from the European Commission that the United Kingdom as a whole will miss its 2020 renewable energy target.
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Tory ministers would argue that they mean only to keep bills down and the lights on. ScottishPower, for one, says the windfarm decision will have precisely the opposite effect on prices but, to be strictly fair, it would say that. The Confederation of British Industry (CBI), equally predictably, argues that apparently indiscriminate cuts to renewable energy subsidies are “worrying” investors.
Those who might back green technology want to know where policy stands. That is, right now, a very good question. As John Cridland, director general of the CBI, has put it recently: “The green economy is an emerging market in its own right, brimming with opportunity.” The Scottish Government has pursued much the same line for long enough. Yet London, says Mr Cridland, is guilty of “mixed messages”.
A cynic might respond that those who benefit most from subsidies are not the best guides to the value of subsidies. A cynic wedded to free markets would surely add that state aid should always be avoided. On a good day, Mr Osborne could muse on that philosophical point with the best of them. In reality, he takes a different view: relatively trivial energy subsidies can be cut at home, vast subsidies to foreign interests can be doled out at will.
This week, winning friends and influencing people, the Chancellor has offered to underwrite Chinese investment in “our” nuclear power industry. Specifically, he has put up a £2 billion loan guarantee for any investor in China prepared to risk money on the Hinkley Point C nuclear power station project. The intervention is designed to help the EDF company – which happens to be French – to raise the backing needed to get a troubled enterprise up and running.
This is only the latest episode in a bizarre story. For one thing, the £2bn is not the first piece of state aid. Overall, the government has now “guaranteed” around £16bn of the project’s £25bn cost. It has certainly guaranteed EDF an eye-watering price for the electricity generated (if any) and a profit to match. With wholesale electricity prices at £44 per megawatt hour, the French firm has been promised £89.50. Annual profits, come the day, are therefore estimated at around £5bn.
Why is the Government doing this? No benefit will be derived by British investors, whether friends to the Tory Party or otherwise. No value to the consumer can be identified, especially since any electricity produced by Hinkley Point C will count as the most expensive on the planet. No decent argument for an energy “mix”, with nuclear playing its part, can be advanced: even friends of the industry accept that there are better, cheaper power station designs available.
By any reasonable standard, the EDF project in Somerset is a white elephant even before it comes on stream. It is supposed to meet seven per cent of the UK’s energy needs by 2023, yet the French are still struggling to find backers. The reactor is supposed to represent a new age in nuclear power in these islands, but EDF’s sister plant at Flamanville on the Cherbourg Peninsula is £5 billion over budget and over five years behind schedule.
The Scottish Government is opposed to nuclear power, as is Germany, where the last of 17 reactors is due to close by 2022. Others, Tory ministers among them, argue that nuclear is as clean as it gets – barring an accident of the Fukushima variety – and vastly more reliable than wind power. If we are to wean ourselves from carbon fuels, in other words, nuclear has to be among the available options. Some environmentalists, former opponents of the industry, have been moved reluctantly to agree.
None of that explains Hinkley Point C. That it has failed to attract investors thus far, despite vast state aid, is surely telling. That the technology – the Areva European Pressurised Reactor – has been plagued with problems is evident from the history of Flamanville 3 (as it is properly known). These are strange days when a free market devotee such as Mr Osborne is offering guaranteed profits – in theory – and finding so few takers.
The overtures to the Chinese are odd in themselves. China’s economy has recently suffered some well-publicised difficulties that have led to questions about its stability, far less its prospects. The UK Government would nevertheless like its new friends to “take the lead” in developing nuclear plants here, initially by replacing the Bradwell reactor in Essex. Yet until Mr Osborne produced his £2bn, the Chinese were less than keen to back EDF at Hinkley Point.
China’s nuclear safety record is meanwhile as poor as its human record. Had Mr Osborne flown off to Moscow to woo the representatives of Vladimir Putin there would have been hell to pay, and rightly so. But where China is concerned, even with billions and the UK’s energy security at stake, even given Beijing’s despotism, British Government ears are closed. The fact is as peculiar as anything in this story.
There is no single path to the post-carbon world: on that fact, if no other, all can agree. One problem is that every version of “the mix” has proponents and detractors. Some have a rare loathing for windfarms; some contemplate nuclear and persist in asking about waste, decommissioning costs, and Fukushima. Underground coal gasification, of which we read in these pages yesterday, is a panacea in one telling, an unmitigated horror in others. All “novel technologies” have their cheerleaders and critics.
There is a sense, nevertheless, that choices will have to be made, and soon. Choices over energy conservation and loss from buildings, for one example, are still not being taken seriously in Britain. But a government putting up £2bn for a troubled nuclear plant while cutting subsidies for renewables and genuflecting to China represents the worst of all possible worlds. It has no energy policy worth the name.