Jeremy in Nuclear Wonderland

MPs on the Commons’ science and technology select committee heard yesterday that the establishment of Great British Nuclear has been delayed due to friction between the business department and the Treasury over the budget for new projects. Given we know that all of the UK’s eight nuclear power plants are due to shut by 2028, apart from Sizewell B, which is closing in 2035, the need for new nuclear power is imperative. Especially when five of these are still providing about 13% of the UK’s electricity.

A new one (Hinkley Point C) is under construction but “reports surfaced this week suggesting that the nuclear power station in Somerset will not be operational until 2036, 11 years after its original 2025 completion date.” The other new one (Sizewell C) is a replica of Hinkley Point C and has been under consideration for 12 years and the government hopes to make a final decision by 2025. Being a replica should make Sizewell C easier and cheaper to build but, unfortunately Hinkley Point C has technical problems and duplicating Sizewell B would have been a better bet.

Britain’s chaotic approach to nuclear energy can all be laid at the door of HM Treasury. Prime Minister Johnson recognised the need to action and, in March 2022, grabbed a target of 24GW for nuclear out of the air which, he claimed, would be 25% of electricity demand – a not unreasonable baseload given the volatility of renewables. Unfortunately, then-Chancellor Sunak forgot to mention that electricity met only 20% of our energy demands and would have to supply nearly 100% by 2050.  So 25% of demand needs more like 56GW than 24GW and, furthermore, someone seems now to have cunningly inserted “up to” before the 24GW.

Johnson also announced that a new organisation would take charge of delivering this nuclear programme pronto, Great British Nuclear (GBN). Apparently GBN has a shopping list of what it needs to get going but the public are not allowed to see it. HM Treasury is concerned that GBN wants to spend money.

So the current plans are to decide (maybe) to add two more Sizewell Bs or Cs in the next Parliament, i.e. by 2030, and hope they are up and running by 2050.  So we’ll have four operational 2.3GW plants by 2050, i.e. 13.2 GW – well they only said “up to”. Note that the plans only encompass when decisions might be made – not when the plants might be generating electricity.

Of course, we could have a fleet of small or advanced modular reactors which are far better value for money but HM Treasury regards them as unfamiliar and therefore unacceptable. Never mind their being introduced today into Canada, the USA and China or that they are more welcomed by the French.

The Treasury nuclear wonderland has two stand-out features: delaying the commissioning of nuclear generators, ostensibly to save taxes, as discussed above, and ensuring users pay twice as much as the French or Americans to restrain our enthusiasm for buying electricity at all.  It does that in three ways. The first is fixing the way wholesale electricity prices are set so that everyone pays the most expensive tender price to the National Grid rather than (as other auctions work) the lowest.

Then it adds the “Green Levy” alongside other taxes so that today’s consumers pay for the electricity used by the next generation of consumers. Never mind renewables being cheaper, today’s consumers have to pay a premium for it.

The third way today’s consumers are hit with future costs is the “Regulated Asset Base” (RAB) model HM Treasury will use to finance Sizewell C and all future nuclear power plants. This is the successor to the Private Finance Initiative which financed £12 billion of English hospital building at a cost to the taxpayer, by the time the idea was dropped in 2018, of £79 billion in repayments. Only it is worse. The idea, like the Green Levy, is that today’s electricity user pays for tomorrow’s consumption inflated by City profits. Someone seems to have conceived the idea that if we all pay a lot more for our electricity today, it won’t hurt when the zero carbon costs hit us in 2050.

The bottom line of all this is that the Treasury’s ducking and diving is hugely damaging for today’s and future electricity users and preventing any sane nuclear policy being implemented.