Nick Butler: UK Policy Implications Of Another Nuclear Delay

  • Date: 27/01/16
  • Nick Butler, Financial Times

The latest postponement of the Hinkley Point nuclear reactor project is the most serious delay of many because it shows that the plan is fundamentally uneconomic for the owners as well as for consumers.

[…] There is no prospect of the French government, its main shareholder, rescuing EDF. Thousands of employees are being laid off, alienating the French trade unions who have come out against Hinkley because of its potential negative impact on the company’s finances. It is not clear that the French government, which is ambivalent about nuclear, is about to offer the extra support requested for Hinkley. Why should French taxpayers subsidise UK consumers?

What does this mean for UK energy policy? Britain has two choices.

The first is to fund the project. The government could borrow the money more cheaply than EDF but the added debt would be unwelcome and would tie it into a project that carries enormous construction risks. If George Osborne, the chancellor, were to pursue that route he would probably have to override the formal advice of officials on the proper use of public funds.

The second alternative is to rewrite existing energy policy: substituting gas for nuclear and perhaps extending the life of coal-fired stations beyond 2025. Extra offshore wind, short of a big technical breakthrough, would surely be too expensive to meet the government’s objective of reducing electricity costs. Using more gas and coal runs counter to the rhetoric on climate change but, as the CBI, the employers’ organisation, made clear in their sharp and accurate letter to the energy secretary this week, indecision is not an acceptable energy policy.

Neither of these options is politically or economically attractive but it is hard to see what else the government can do. The fact that it faces such a harsh choice is a direct consequence of its decision to place so much reliance on a unproven source of supply that is ridiculously expensive.

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