ARE WE GOVERNED BY A BRAINWASHED BUNCH OF PSEUDO-GREENS?

The time has come to face facts. After two months we can reasonably say we have the measure of our coalition Government. In many ways it has made a remarkably good start, but that cannot hide the fact that its energy policy is no more rational, consistent and effective than the previous Government's.

On nuclear we have, if anything, taken a few steps back at least in time, even if Charles Hendry, the Energy Minister, regularly sounds a welcome note of urgency. Its early decisions on the planning system and Labour's £80m loan to Sheffield Forgemasters for a large bottleneck-breaking press to cast containment vessels for nuclear power stations have created uncertainty and delay.

There will always be doubts about the coalition's commitment to nuclear with Chris Huhne as Secretary of State. Certainly the coalition's mantra (also preached by Labour) that nuclear should not be subsidised when, through the consumer, the Government is massively subsidising expensive and ineffective renewables is inexplicable, not to say absurd when nuclear is not seeking hand-outs.

There is no rhyme nor reason behind a policy aimed at reducing greenhouse gas emissions - which seems imperative when you are signed up wholesale to legally binding targets - that does not wholeheartedly embrace the only fuel - uranium - that can do the job cheaply. For all the rhetoric, the coalition is frankly lukewarm about nuclear.

But what makes current energy policy really a laughing stock is its approach to value for money when we have a budget deficit of £156bn and mountainous national debt. It is certainly totally inconsistent with hypocritical concerns about "fuel poverty". We can only conclude that, mong other things, our political class are a bunch of brainwashed, imprudent pseudo-Greens.

NUCLEAR CRUCIAL, BUT IT NEEDS CONSISTENCY

Our long-standing central complaint of a lack of consistency in energy/environmental policy has now been taken up by the accountants, KPMG, in a study commissioned by RWE, a member of the Horizon partnership seeking to build nuclear power stations in Britain.

KPMG says large-scale private investment in nuclear power is needed if Britain is to meet its ambitious carbon emission reduction targets. A transition plan is required and this would likely show the need for significant nuclear investment. But that would be unlikely within the present framework, though a carbon price floor, while not effective on its own, might help.

Emphasising that it is not advocating Government subsidies, it says: "The current approach to low carbon generation relies on Government interventions which are inconsistent with one another. The creation of a more consistent market designed to reward low carbon energy or capacity could enable investment in new nuclear - and other low carbon investment - to proceed. The key issue is whether there should be a single market for all low carbon electricity or multiple markets for different technologies.

"A large-scale and rapid expansion of nuclear generation in the UK would stretch on-balance sheet financing by the current consortium partners. If such expansion is deemed desirable, a more radical change may be needed to de-risk the investments and attract new sources of finance".

KPMG consulted the seven potential nuclear project sponsors in the UK - Centrica, EdF, Eon, GDF-Suez, Iberdrola, RWE and Scottish and Southern Energy - as well as policymakers, rating agencies and potential sources of finance. Richard Noble, its European power and utilities partner, says there is no simple answer but a more consistent framework through price mechanisms is needed to reward low carbon generation. Any modifications will depend on the desired scale of nuclear build to secure Government objectives.

Over to you, Secretary Huhne.What do you want?

ANNUAL COST €210bn; ANNUAL BENEFIT €7bn

As for value for money, the Copenhagen Consensus Centre has just delivered a damning verdict on Europe's 20/20/20 policy so enthusiastically supported by Secretary Huhne. By the way, 20/20/20 means cutting EU greenhouse gas emissions by 20% (on 1990 levels) by 2020 and ensuring it gets 20% of its energy from renewables by then.

In a cost-benefit analysis, the climate change economist, Professor Richard Tol, concludes that the EU estimate of the programme's cost at €48bn a year is wildly optimistic. He claims the net cost to Europe will be €210bn a year (or 1.3% of EU GDP). The return on this massive outlay of capital - calculated on the basis of the damage done by one tonne of CO2 - would be €7bn.

Put another way, the EU is gaily embracing a programme that will deliver only 3cents worth of benefits for every euro invested. Clearly the lunatics are in charge of the asylum. But not all are as lunatic as some. Most EU Governments - though not Secretary Huhne - blanched at the idea of raising the CO2 reduction target from 20 to 30 per cent by 2020 at a cost, according to Professor Jol, of £450bn a year.

Bjorn Lomberg, director of the Centre, who is not a climate change "denier", says the EU must not continue to "barrel" down a path that makes no economic sense, yet it seems committed to this reckless course. Therein lies a problem for all of us. Already, according to uSwitch, the price comparisons service, EU "greenery" costs families £84 a year on their energy bills. It could be £176 by 2020.

NB - In last month's Newsletter a failure of communication resulted in our reporting that raising the EU target to 30 per cent would have added £33bn on top of the £48bn required by a 20 per cent cut in CO2 emissions. It should have read £33bn a year on top of £48bn a year.

SEIZE THE MOMENT AFTER 15 YEARS -TURN POLICY UPSIDE DOWN

There is, of course, no evidence whatsoever that our - or Europe's - political class is contemplating any change of course in combating global warming, however reckless it may be. Yet that is precisely the advice it has been offered in a new international report by 14 academics from the UK, USA, Canada, Finland, Germany and Japan and co-ordinated by the LSE.

The Hartwell Paper, as it is called and available on the internet, makes no bones about the opportunity. For the first time in 15 years it says rapid advance in addressing climate change is now possible because global climate policy crashed in Copenhagen last December and the Kyoto policy framework has failed to secure any real discernible reduction in CO2.

It was the Copenhagen event - or non-event - which led the LSE Mackinder programme for the Study of Long Wave Events and the Institute for Science, Innovation and Society at Oxford to be commissioned by an international consortium to find a new way forward. Essentially, they want to turn policy on its head - from the generation of guilt about responsibility for global warming and associated penalties to a popular, positive programme to shift the global economy away from its dependence on fossil fuels.

People first

They propose three primary goals in tune with public aspirations: expanding energy access - that is, ensuring the basic needs of the world's population are met, giving access to electricity for the first time to 1.5bn people - achieving this sustainably, taking account of looking at longer term consequences; and ensuring society's resilience to extreme weather and other events.While their alternative approach may sound somewhat vague, it would favour nuclear power and advocates a flat carbon tax.

The Scientific Alliance in Cambridge had this to say about it: "This is a refreshing take on the issue and one which sensible politicians will think long and hard about. It puts the needs of people - particularly the poorest - first, it shows confidence in human innovative capacity, and it proposes a simple and transparent way to fund the efforts and signals the need to move away from fossil fuel use longer term. It will, of course, produce howls of protest from those hitched to the global emissions reduction juggernaut and philosophically wedded to the ‘polluter pays' concept.

"Translating this into action would mean, in the short term, no more investments in expensive, intermittent offshore wind around the UK, no repeat of Germany's costly encouragement of solar power and a further step away from Spain's highly subsidised boom in renewables. Instead, the focus would be on developing generation systems which would compete directly with fossil fuels".

HOW LONG CAN IT GO ON?

As we say, we see no evidence of any re-think by governments of their approach to global warming. But we have detected increasing concern in political circles over the failure of Kyoto policy and individual governmental responses to it, not to mention the expense involved. One of the questions being asked is how much longer can we go on pouring good money after bad into renewables (and notably wind) without much effect on carbon emissions while nothing much happens - at least in the UK - on nuclear.

It may well be there is much furious paddling below the UK's serene surface of nuclear preparation, but there are not many positive ripples. Take the following events over the past month:

Nuclear industry twitchy

16 that new nuclear plans would come on line in the UK in a "timely manner", it urged the Government to "maintain momentum". This was after the coalition announced a second period of consultation this autumn on National Policy Statements on energy projects. These statements provide the basis for the approval of major developments, including nuclear power stations, under the new planning system, (see below).

This followed distinct twitchiness on the part of RWE nPower on July 11 when Volker Beckers, chief executive, told the Sunday Telegraph that putting a floor under the price of carbon was not the solution to nuclear power's development. Britain would not get the cash needed to build new nuclear stations without incentivising investment. He called for a level playing field between low carbon technologies.

Unfortunately, Mr Beckers did not make clear exactly what he wanted. He cannot surely be advocating that the ludicrously high subsidies for renewables are extended to all low carbon sources. If so, we are on the road to bankruptcy. If, on the other hand, he is advocating an end to renewables subsidies, he might be in business if value for money counted any more in Government in relation to energy investment.

UK lights will stay on without new nuclear - Huhne

All this twitchiness followed a Reuters' story on June 24 reporting Secretary Huhne saying that Britain‘s lights would stay on without new nuclear plants to replace those that close in the next decade. In extremis, if there were a supply problem, he said "we can put up a gas generation plant in 18 months". Conveniently for him, the last Government approved 20,000MWor new gas plant - regardless of its carbon reduction targets - before it left office.

None of this is calculated to encourage nuclear investors however often Huhne says he will not get in the way of new nuclear build if that is where they want to put their money. It is difficult to believe that he heads an Energy and Climate Change Department committed by law to cutting greenhouse gas emissions by 80 per cent by 2050 at a cost on present plans of up to £700bn.

Lack of design detail hampers UK reactor assessment

This was another headline (on June 24) that induced another Victor Meldrew moment in us. It was about a progress report from the joint regulators, the Health and Safety Executive and the Environment Agency for the first quarter of this year on the assessment of the Areva-EdF EPR and Westinghouse AP1000 reactors for licensing in the UK.

"In a significant number of technical areas", they said "the detailed evidence we would require to resolve all our technical issues does not yet exist and this may result in issues that will not be fully closed out by June 2011" when the generic design assessment (GDA) is due to end.

We are as much in favour of rigour in licensing as in the maintenance of operational standards. But are we expected to believe that the French and the Finns (in relation to the EPR) or others who have taken up the Westinghouse reactor have overlooked safety detail?

Meanwhile, Lord Marland, Government energy spokesman in the Lords, told Lord Jenkin on June 30 that the regulators had assured him that June 2011 would mark the end of the GDA. If they were satisfied with the design safety and environmental submissions, they would issue certificates. If, however, some significant issues remained unresolved, they could provide interim certificates, pending their resolution.

Sheffield Forgemasters setback

As we were going to press, the Government's decision to cancel Labour's £80m loan to Sheffield Forgemasters to build a £140m new 15,000-tonne press to cast containment vessels for nuclear plants - a likely bottleneck - had become embroiled in a party political row. It seems that a Tory donor - but not a Forgemasters competitor - raised questions with the coalition over whether the loan offended EU law.

Worse still, Forgemasters put the project on hold after a meeting with Government officials and financial advisers to consider options. It said its board had concluded that, without support on the lines of the withdrawn loan, there was "no easily available private sector alternative funding structure which is both economically viable for the company and fair to existing shareholders". Chief Executive Graham Honeyman said they were still keen to build the 15,000-tonne press but felt the company's best interests would be served by suspending work on the project for the time being.

And so we bumble on in Britain.

BRIGHTER OUTLOOK ON THE PLANNING FRONT

One of the problems in producing a Newsletter is that we are sometimes overtaken by events or, in the case of the UK's new planning system, by clarification. We are therefore delighted to report that on June 29 it was made clear that we are not quite back to square one on the planning front.

In a Commons statement, Greg Clark, Local Government Minister, announced that the recently established unelected Infrastructure Planning Unit (IPC) was not after all to be abolished as such. Instead, it is to be incorporated as a major infrastructure planning unit within the Planning Inspectorate. Until the necessary legislation is in place, the IPC will continue its work. If it completes it within the framework of a national policy statement, it will determine the application. If there is no national policy statement, it will make a recommendation to the Secretary of State who will take the decision. The new legislation will seek to ensure that the system is robust democratically and will require national policy statements to be ratified by Parliament.

Sir Michael Pitt, chairman of the IPC, says developers can be assured that examination of their proposals will not be delayed by the changes. It has 43 proposals before it.

THE ALSO RAN

Nothing underlines more the de-industrialisation of Britain than preparing this Newsletter.Whereas we led the world into nuclear power over 50 years ago, now we trail miserably behind, judging from the enormous amount of international activity reported daily by the NucNet and World Nuclear Association news lines.

It is true that over the past month there has been a rush of three UK developments:

• The Nuclear Decommissioning Authority published proposals for a deep depository for nuclear waste by 2040 (cost £4bn);
• An Areva/Amec/Balfour Beatty partnership is to build at Sellafield a new store for radioactive elements arising from nuclear reprocessing
• Areva is to design, supply and install a new manufacturing line at the Sellafield MOX plant

We seldom hear of the UK forging links with other countries. Elsewhere, over the past month there have been reports of Turkey/South Korea, Canada/India, Germany/China, US/Pakistan, US-Japan/Saudi Arabia, Russia/Kazakhstan and USA/Poland tie ups.

Japan has opened an office to co-ordinate nuclear orders from abroad and plans to add 14 new reactors to its present tally of 55. The Finnish Parliament has approved two more reactors; Nigeria hopes to be in the nuclear power business by 2019; Sweden has opened the way for new reactors; four Westinghouse reactors are under construction in China; Vietnam has a masterplan for 14 reactors by 2030; the United Arab Emirates has granted two licences along the road to its first new nuclear plant; and New Brunswick province of Canada is proposing to include a nuclear plant in a clean energy park.

It's all go. If only Britain was, too.

NO SHORTAGE OF URANIUM

Uranium resources, production and demand are all rising, according to the 23rd Red Book from the OECD's Nuclear Energy Agency and the IAEA. The total identified resources at the beginning of 2009 of 6.3m tonnes - a 15 per cent rise on 2007 - are sufficient for more than 100 years in present circumstances. But the NEA points out that the development of advanced reactors and fuel cycle technologies could extend availability to 1,000 years.

POINTS FOR USE

• Every 1p increase in the price of a unit of electricity costs consumers a total of £4bn (Brian Catt CEng)
• Latest projections indicate fuel poverty that is, where energy takes more than 10 per cent of income, rose to around 4.6m households last year (ParliamentaryAnswer)
• Estimated capital cost of reinforcements to the national grid to accommodate growth of renewables to 2020 is £4.7bn, including £2.7bn in Scotland to convey power to where the consumers are, resulting in 1-1.5% increase in consumer bills (Parliamentary Answer).

OBITUARY

We regret to record the deaths this month of LordWalker of Worcester, a former Energy Secretary and a strongly supportive patron of SONE; Professor Sir Frederick (Ned)Warner, a long-standing SONE member, aged 100, a truly pioneering chemical engineer who led the first international team of experts to visit Chernobyl after the disaster; and Rupert Blum who did much active work for SONE from his Herefordshire base.

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