Last week in Brux I went to a dinner debate and briefing organised on behalf of Fennovoima, a new nuclear project in Finland which looks set to build the first new green-field nuclear plant in Europe for decades. The project is backed by a long list of Finnish companies — utility companies, energy-intensive businesses, even some retailers — demonstrating that it is possible to build new nuclear capacity without state funding.
Here in the UK, though, we’re struggling. Sir Bernard Ingham asks “Do we want nuclear at any price?”. Jeremy Warner in the Telegraph points out that only the state-controlled French company EDF is still interested in new-build nuclear in the UK , and they are asking for a high guaranteed electricity price through the life of the plant before they’ll commit. Warner says that this amounts to “paying an annuity for decades to the French tax-payer”.
This poses a dilemma for free-market politicians. I hate and detest nationalisation. I hate and detest direct government intervention in industry. But what about a situation where, in effect, the free market looks at a project, and simply says: “We don’t like what we see, so we’re not going to bid”? Right now, we seem to be facing a choice between a French nationalised company, or (whisper it quietly) direct UK government investment. And the very low rates at which the government can currently borrow strengthen the case for a nationalised nuclear industry.
So let’s recast Sir Bernard’s question. Not so much nuclear at any price. More a choice between nationalised nuclear and no nuclear.
Let’s step back a moment and ask why no commercial operator is ready to engage. It’s not the fault of the industry. Let’s say it out loud: it’s the fault of government. If we’re looking at a multi-billion pound investment with a 60 year time horizon, we are entitled to ask for at least one thing from government: regulatory certainty. Suppose we make the investment, and ten years later, a new Angela Merkel, spooked by a new Fukushima, decides to pull the plug? What if the EU decides on some new madcap regulatory régime? What if George Osborne or some future Chancellor wants to tamper with the green subsidy régime? OK, so I hate green subsidies as much as I hate nationalisation, but they make the weather for nuclear investors, so we can’t ignore them.
There’s nothing wrong with nuclear economics. But there’s an awful lot wrong with the constant turmoil of ETS, carbon price floors, subsidies, incentives. How are investors supposed to take a rational 60-year decision when circumstances change month to month and year to year? It seems absolutely clear that regulatory uncertainty is the primary obstacle to nuclear investment.
If the government were to invest in nuclear, they would be both investor and regulator. Clearly that creates a potential conflict of interests. But at least it would force them to take a realistic and practical view of regulatory impact.
Of course I’d prefer regulatory certainty and private, free-market investment. But if it’s a choice between government nuclear and no nuclear, I’d be forced to take what was on offer.