THE GOVERNMENT GRAPH THAT TELLS YOU EVERYTHING

This graph, from the Department of Energy, was part of the presentation by Mark Higson, head of the Office for Nuclear Development, at SONE’s October AGM. It leads to four conclusions:

1 – Whichever way you look at it, nuclear is the cheapest source of secure, low carbon electricity.

2 – Offshore wind and carbon capture and storage (CCS) are grossly expensive – always assuming CCS is technically feasible.

3 – Energy Secretary Chris Huhne needs to explain how on earth he can maintain onshore wind is competitive.

4 – Britain’s energy policy, with wind and CCS two of its main pillars, is plainly irresponsible and wind a monumental waste of money.

CORRECTION

Before we go any further, we must correct errors we made in the October Newsletter (No 157) in reading the above graph. They occurred because the original graph rose in multiples of 20. We have tried to minimise that confusion by drawing in lines showing it rising in multiples of 10.

As a result we find nuclear generation costs range from £66MWh to £74MWh, depending on whether first of a kind or part of a series; gas CCGT £78MWh; onshore wind £90MWh; coal £95MWh; coal with CCS from £110-137MWh; and offshore wind £135MWh.

It is true that these figures are estimates and depend on a whole host of assumptions. But what is undeniable is that they confirm a series of estimates over the changing years showing that nuclear is the best buy. It is also the most secure source of the lowest carbon electricity. We really do need to ask our politicians one simple question: why is nuclear not the pillar around which energy policy is constructed?



THE TIME IS OPPORTUNE FOR BATTERING MINISTERS

As we explain extensively below, there could scarcely be a better time for battering Ministers over the head with their own graph. It is clear beyond peradventure that a tremendous tug of war is going on in Whitehall over energy policy. This is not surprising with growth uncertain, the Eurozone in danger of collapse with incalculable consequences, unemployment rising and the elimination of a £150bn budget deficit by 2015 looking unlikely. This is a nation that cannot afford expensively indulgent gestures.

The first sign of a dawning reality is Chancellor George Osborne’s decision to halve the feed in tariff for solar power If this has demonstrated anything, it is the extent to which this branch of renewables depends on subsidies since there have been agonised cries that it has crippled the solar panels market.

It has also demonstrated the CBI’s tenuous grasp of economics by calling the halving of the tariff a “wrong step”. What about the interests of its wider membership whose energy bills are soaring because of such subsidies? After all, Rio Tinto has announced the closure of the Alcan aluminium smelter at Lynemouth, Northumberland, employing 515 people, because of carbon taxes.



SMOKING WRECK

We cannot build a resurgent economy on subsidies for uneconomic renewables or by flagellating ourselves with politically correct taxes, both of which help to put people out of work. Chancellor Osborne has made it clear he does not intend to advance down the carbon suppression road faster than our competitors, though when he intends to rein in the imposts is far from clear.

All this acutely raises the question of the massive subsidies for wind power to which Chris Huhne remains deeply attached. It would also focus attention on the Government’s plans for a £1bn pilot CCS plant if only there were any takers. Scottish Power has just pulled the plug on using the Longannet site in Scotland.

In other words, the Coalition’s energy policy is a smoking wreck. Only nuclear remains viable, competitive, clean and, inevitably in this politically correct world, distant. The time has come for some serious Ministerial bashing. We shall know we have scored a hit when Huhne leads a Coalition chorus on the urgent need for nuclear power.




GAS – THE FUEL FOR ALL SEASONS

It may well be that some members of SONE think this Newsletter is unfair on the Coalition. After all, it is legally bound by European commitments entered into long before it came to office, though it has not hesitated to tie itself up in its own carbon knots over its first 18 months.

We cannot deny that a great deal of effort has been made to prepare for a nuclear future, provided private investors put their money into it. But we have not seen – and we shall be astounded if we ever do – a co-ordinated Ministerial effort to sell nuclear to the people over the heads of the anti-nuclear Green menace to our economic well-being. Don’t forget the Greens’ prescription for the future economic and moral health of the nation is “No coal, no oil, no nuclear and no biomass”.



IS SHALE GAS A THREAT?

Which brings us to gas. Apparently, Greens find this OK unless perhaps it is shale gas – and then not because it is gas but because of the supposed environmental consequences from shattering strata in the earth’s crust. True, gas emits half the CO2 of coal but 100 times more than nuclear. Certainly, it is an improvement on coal for a Government pledged to reduce carbon emissions but it is manifestly a wrong step where it substitutes for nuclear. Yet it clearly is regarded as the “default” fuel as well as the “swing” generator because of its ability fairly rapidly to compensate for vagaries in the force of the wind.

This suggests two things. First, whatever lip service governments pay to combating global warming – or the theoretically dire consequences of failing to fulfil their legal obligations - they will use gas if it is available at any foreseeable price. Don’t forget, Labour sanctioned the construction of 20,000MW of gas-fired power stations before it left office.

Second, what happens if, in spite of Green objections, the Government embraces shale gas, allows fracking (notwithstanding the minor earth tremors its earliest explorative use has caused around Blackpool) and gas comes gushing forth on an industrial scale? Whither nuclear then? Our advice is not to put your trust in politicians - and to batter them repeatedly with the case for nuclear power.



STRIKING WHILE THE IRON IS HOT

Seizing the moment, your chairman, Sir William McAlpine has written to the Chancellor in the following terms:

“My colleagues in SONE have taken much heart from the recent evidence of your concern about the costs of energy policy. In particular, we welcome your determination that Britain should not impose costs on consumers and industry that exceed those of our competitors in an effort to reduce carbon emissions and your reduction of some subsidies – e.g. in feed in tariffs for solar panels.

“We do so because we regard current energy policy as an imposition on both consumers and industry and commerce. More importantly, it does not give value for money. In fact, it is failing in all its three objectives – security (which renewables generally can never provide) of low carbon supply at affordable cost.

“We find this difficult to understand when the Government is wrestling with massive debts and the need for growth and is privy to the facts about electricity supply costs. This was demonstrated by a graph of levelised costs of electricity supply given in a recent paper to the SONE AGM on October 17 by Mark Higson, head of the Office for Nuclear Development. I attach a copy [see graph above].

“The sheer disparity between the cost of other sources – and especially offshore wind – and nuclear is startling when nuclear can reasonably be claimed to provide security of low carbon supply at affordable cost. We suggest this shows that reform of energy policy has a long way to go before it is in a position to achieve its declared objective.

“We wish you well in re-introducing the long-overdue concept of value for money into it. In our view, the evidence requires nuclear power to be at the forefront of electricity supply policy”.



PETITION TO DEPARTMENT OF ENERGY

No sooner had we drafted this letter to the Chancellor than we discovered an e-petition about electricity prices to the Department of Energy and Climate Change (DECC) – link: http://epetitions.direct.gov.uk/petitions/22704. This reads:

“Electricity bills have soared and more increases are in the pipeline. This punishes the 6m people already in fuel poverty, restricts economic growth and makes British industry less competitive. A key factor in this increase is the Renewables Obligation, which indirectly provides more than 40% of the income of wind farms. These complex and covert subsidies (most of which go to foreign companies) are paid not by the government but instead are ENTIRELY financed by increasing the price of our electricity bills.

“Climate change policies have already increased household electricity by at least 14% and the electricity bills of business by at least 20%. Even worse, these tariffs are forecast to escalate. By reducing or ending the subsidies for wind farms we would benefit the poorest members of society, boost our manufacturing exports and, while doing so, would help protect what remains of our precious countryside”.

And so say all of us.



LORD YOUNG CALLS FOR COMMON SENSE

The revolt did not stop there and it will be interesting to see how the Chancellor Osborne handles it all in his Autumn Statement on November 29, which came too late for this edition of the Newsletter.

The uprising of common sense was fuelled by the Government’s very own business adviser, Lord Young of Graffham, better known as David Young, Margaret Thatcher’s Secretary for Trade and Industry, the man whom she is reputed to have said brought her solutions not problems. In fact, most people brought her problems and solutions, otherwise you were liable to be handbagged. But that is by the way.

Lord Young, a climate change sceptic, wrote in The Times on October 11: “The West is on the brink of descending from recession into depression, unemployment is high and business confidence is low, and the EU has a debt crisis that threatens its very foundation. Is this the time to continue additional taxes on transport, to bring in carbon credits that add to costs, to construct forests of notoriously inefficient windmills, and to increase all our energy costs, all in the name of a scientific theory?



PROFESSOR McKAY PUTS NUMBERS TO IT

About the same time that Lord Young intervened, Professor David McKay, chief scientific adviser to DECC and the intelligent man’s interpreter of the implications of energy policy, took his calculations to the Royal Society. There, the Sunday Times told us, he said: “Whatever mix of renewables you take, they all deliver about 2.5watts per square metre. It means the total land area occupied by renewable energy sources to supply today’s lifestyle would be about half the UK”. A nuclear power station produces about 1,000 watts per square metre - 400 times more.

For good measure Professor McKay pointed out that renewables’ diffuseness meant that, even if we covered 10% of the country with wind turbines, they would generate only a sixth of the nation’s needs. For solar power to “dominate” energy supply, a country would have to cover a third of its land in solar panels. And to run a single car on biofuels for a year would require a strip of land 80metres wide and 8kilometres long.

Apparently the professor’s aim was not scupper current energy policy’s target of meeting 20% of our energy (as distinct from electricity) demands from renewables by 2020 but to clarify the scale of the engineering challenge and environmental impact. He has made a very good case for a rethink, even before you add in the subsidies required.



KPMG FOLLOWS UP WITH A HUMDINGER

As if all this were not enough, KPMG, the accountants who advise the Government on energy policy - how many more advisers do they need? – claimed this mo nth that Britain could reach its 2020 carbon reduction target of 20% on 1990 emissions by scrapping wind and going for gas and nuclear power stations with a potential saving of £34bn. That, it claimed, could save each member of the population £550 within nine years.

Mark Powell, author of the report, said: “Taking a clinical economist’s view of hitting our carbon reduction targets for the least cost shows that we can reach our goal for a lot less. To do this the most expensive forms of renewable energies - particularly offshore wind – need to be scaled back in the generation mix. Trying to meet our carbon targets with a heavy reliance on renewable energy was a laudable vision, but surely it’s time to face the facts on how the huge level of investment may translate into fuel poverty”.

In other words, renewables targets – which were away with the fairies at the moment of conception in Brussels – were set in a different era and we cannot now afford the nonsense.



TWO SOCKS IN THE EYE FOR ALEX SALMOND

At the same time, Alex Salmond, SNP First Minister for Scotland, who fondly believes he can generate all Scotland’s electricity from renewable sources by 2020 and won’t touch nuclear with a bargepole, was hit by two sidewinders. These may have made English politicians feel good but they did nothing for their own energy policy either.

First, Professor Ian Arbon, of the Institution of Mechanical Engineers, cast doubt on the ability of the Scottish Executive’s energy policy to deliver and warned that it could force Scots into fuel poverty. Then Citygroup said that to meet Salmond’s plans green energy plants would have to more than quadruple their output within the decade at a cost to each Scottish household of £875 a year on top of a current average bill of £650.

The Citygroup also warned companies to exercise “extreme caution” over investing in Scotland before the SNP’s intended referendum on independence. English and Welsh taxpayers would be highly unlikely to agree to continue paying subsidies to a “foreign country” post-independence, leaving green energy investors with “stranded” assets.



THE DUKE’S HAYMAKER

Life is such in Britain today that a chap can’t have a private conversation at a reception without its ending up splashed all over the press. Anybody who is anybody is in dire peril if he speaks his mind. If we aren’t careful cocktail parties – or networking as it is now curiously described – will be as silent as the grave. Unless, of course, the Duke of Edinburgh is present. On November 20 he was well and truly shopped by the recipient of his remarks – a wind farm operator called Esbjorn Wilmar, of Infinergy, who reported him saying wind farms were “absolutely useless, “completely reliant on subsidies and an absolute disgrace” and would “never work”.

This seems pretty reasonable to us, if not to the Energy Secretary or Mr Wilmar. It perhaps puts the tin hat on this month’s evidence of immense dissatisfaction with a failing energy policy.



THE MORAL OF THIS TALE

If all this does not persuade you that energy policy is a shambles the length and breadth of Britain – and in Wales they are rowing mightily over the politicians’ zeal for renewables and their associated power lines - nothing will. Unless it is perhaps Energy Secretary Huhne calling critics of energy policy “curmudgeonly fault finders”. There is much fault to be found and be curmudgeonly about. We shall not cease to find fault or become our normal sweet reasonable selves again until nuclear power is where it should be: at the centre of any sensible energy policy for the UK.

This wonderful prospect seems unattainable at present. On November 9 Huhne, in an article in the Daily Telegraph, said wind turbines were here to stay and the nearest he got to commending nuclear was with these two sentences: “Just as with our gas supply, diversity of sources increases our energy security: Renewables, fossil fuels and nuclear are not mutually exclusive. They work together to make our energy system more resilient”.

But with what security at what price and how low carbon? There is nothing resilient or particularly clean about unpredictable renewables. Over to you Chancellor Osborne.



PATRONS MEET TIM YEO MP

And so the argument will go on unless, of course, the Chancellor can persuade the Coalition to heed the call from one of our patrons, Lord Parkinson, former Conservative Energy Minister. He made a ringing call for political leadership over energy policy at a lunch given by Damon de Laszlo for his fellow SONE patrons on November 1. The speaker was Tim Yeo MP, chairman of the Energy Select Committee, who saw the overall situation as good news for nuclear.

Lord Parkinson said that what the country needed was leadership. In the end the Government had to take decisions and to sell its policy to the people. Energy policy needed a driving force now. Decisions could not be delayed if the national interest were to be served.



GLOBAL COOLING ABOUT GLOBAL WARMING

Meanwhile, the world approached the next, the 17th climate change jamboree in Durban (November 28-December 9) in subdued mood. Of course, there were the usual scare stories.

The chief economist at the International Energy Agency made 2017 the year in which the door would close on containing global warming if nothing were done in the meantime. Professor Phil Jones, reinstated after the hoo-haa over climate change statistics at East Anglia University, says a major re-analysis of his unit’s global climate records strengthens the evidence of warming since industrialisation. And the UN’s Intergovernmental Panel on Climate Change predicted more extreme weather events but perhaps not as much warming as previously suggested, perhaps reflecting the planet’s failure to warm up since 1998.

Then on on November 21 The Guardian claimed that the world’s richest nations had given up on forging a successor to the Kyoto Treaty. Privately, it said, they were admitting that no new global agreement would be reached before 2016 and that even if it were they would not countenance it coming into operation before 2020.

This eight year delay, if The Guardian is right, perhaps reflects the global economic slowdown. If so, this casts doubt on whether global warming is now seen by politicians as quite the threat it seemed, especially as last year global carbon emissions rose by 5% during the worst global recession for 80 years. It also reinforces Chancellor Osborne’s hand in reintroducing value for money into energy policy. We shall see how he plays it.