Which means governments always have to step in – including the U.K. government. For the time being, ministers in Dept. of Energy and Climate Change (DECC) are sticking to the wording of the Coalition Agreement that a new nuclear program can only proceed "provided that they receive no public subsidy". This is now so transparently dishonest that it will not be possible to maintain that fiction for much longer, especially when the details of the electricity market reform (EMR) proposals are published.
Here's their dilemma. Ministers wanted to have lots of companies competing to build the ten reactors. Three of the most significant players, (RWEEnpower, Eon UK and Southern Electricity), have already dropped out. Both GDF Suez and Centrica have been giving out very strong signals to investors that they are about to drop out. Most of the rest of the companies left in are too small or incapable to bother about. That leaves EDF, a nuclear giant, 85% owned by the French government.
Just three years ago, EDF's chief executive could be heard crowing about the fact that EDF would need no public subsidy to build its EPRs (European pressurized reactors) here in the U.K. Today, his senior directors are pretty much permanently camped out in the Department of Energy and Climate Change (DECC) demanding eye-watering levels of financial support for the four reactors they hope to build at Hinkley Point and Sizewell.
The going wholesale price for electricity at the moment is around £45/MWh. Under the EMR, the government is offering "contracts for difference" to cover the extra cost of nuclear – the so-called "strike price". Calculating the scale of those extra costs is tricky, not least because it is impossible to believe anything the industry says about future costs. Estimates vary between £60/MWh and £90/MWh, with most independent commentators veering towards the high end rather than the low end.
The amount of subsidy required for just four reactors, £90/MWh, would be £2 billion a year for 30 years. £60 billion. For 10 reactors, it would be £5 billion a year for 30 years. £150 billion
And you need to understand that this figure doesn't take into account any of the other forms of subsidy on offer (be it in the form of a carbon price floor or massively subsidized insurance arrangements to cover the possibility of nuclear accidents), let alone the massive liabilities for cleaning up our existing nuclear power program, which come in at about £7 billion a year.
From a taxpayers' point of view, that's a minimum of £12 billion a year to support an industry that is meant to be receiving "no public subsidy". The implications of all this for an already shambolic government are enormous. George Osborne is deeply concerned about the costs of "the green agenda". How could he possibly wave this through in the name of a low-carbon economy, when he could get infinitely better value for our money by investing in energy efficiency and renewables?
And as for the Lib Dems, either they renege on the Coalition Agreement, and come out firmly against these proposals, or they go into the next election as liars to a man and woman.
Intellpuke: This environmentblog was written by Jonathon Porritt and posted on the Guardian's online edition for Friday, May 4, 2012; you can read it in context here: www.guardian.co.uk/environment/blog/2012/may/04/expense-nuclear-power-energy-coalition?intcmp=122
Note: Jonathon Porritt, Tom Burke, Charles Secrett and Tony Juniper have produced a series of six briefings (www.jonathonporritt.com/Campaigns/nuclear ) to help inform the public debate about nuclear power. On March 12, they wrote to the prime minister to warn him that his current proposals will end in failure. As yet, they have not received a reply.