Sunday, May 30, 2010

Nuclear New Build and subsidy

It was the policy of both the last Labour government and the incoming Conservative government that nuclear new build could be delivered by the market "without public subsidy."

The words in itallics could be interpreted in more than one way.

If you have a policy of complete laissez-faire on energy policy, you will get the cheapest forms of energy which are also some of the dirtiest ones and those with least long term security, e.g. fossil fuels, especially from Russia.

Some of the anti-subsidy comments from people like Chris Huhne, combined with arguments from people like Zac Goldsmith that nuclear new build will not be delivered if the government sticks to the promise to provide no subsidy, has produced understandable concern about the risk of power cuts.

When Greg Clarke was shadow secretary of state for Energy, he pointed out that the failure of the last government to move quickly enough on provision of new power plants meant that whatever the incoming government did there is a serious risk of power cuts by about 2017.

I agree with that assessment, and articles like the one this week from Max Hastings in the Mail, "Why I fear the lights will go out in Britain," make some very cogent points.

But not providing a direct subsidy does not necessarily mean doing nothing. An appropriate price on carbon (effectively a tax on pollution) makes all low carbon power generation - including nuclear - far more cost effective. The Conservative election promise to provide a guaranteed floor price for carbon has, as I pointed out in a blogpost a few days ago, become the policy of the new government.

And as Chris Huhne recognised in his Sunday Times interview today, if carbon is more expensive, then investors will see the advanges of putting money into nuclear power.

It would have been much easier to get nuclear new build if either the Conservatives or Labour had won an outright majority, but the presence of Lib/Dems in the government is not going to stop it happening.

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