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The Atomic Clock: How the Coalition is gambling with Britain’s energy policy

One third of all households in the UK will be in fuel poverty by 2030 unless the Coalition rapidly moves to encourage and enable building of new nuclear plants, writes noted energy analyst Tony Lodge in The Atomic Clock: How the Coalition is gambling with Britain’s energy policy, published on Tuesday 3 January by the Centre for Policy Studies.

Nuclear generating capacity is forecast to fall by 75% in the next few years. Another 12,000MW of diverse generating capacity (out of a total of 90,000MW) will close by 2016 due to EU rules. Any further delays in approving new nuclear plant will mean this plant will not make a net contribution to UK electricity supply before 2025, at the earliest. Last winter, coal plants shouldered nearly 50% of electricity demand. The Government risks filling the nuclear delay ‘gap’ with yet more gas-fired plant. The UK could be dependent on gas for over 80% of electricity generation by 2025.

There is an alternative. The Coalition must now move to approve a fair and balanced nuclear power delivery strategy which rewards all new atomic power investors. It should approve and encourage more baseload energy diversification, including early delivery of new efficient and cleaner coal plants. 

In addition, the carbon price floor should be re-examined as:

  • it only provides benefits to existing nuclear generators and will not be effective in incentivising new nuclear build from other investors;
  • it will push up bills at a time of austerity
  • it risks another ‘dash for gas’;
  • it will result in over 1 billion tonnes of economically recoverable UK coal reserves becoming ‘stranded’ as the market for indigenous coal production collapses before new clean coal plants are ready.

A carbon price floor and its trajectory should therefore be delayed until the first new nuclear power station is close to commission. In this time the Government should campaign for an EU-wide carbon price floor so that the UK does not endure higher energy prices than in the rest of the EU.

Tony Lodge concludes:

“The Coalition should be reassuring investors, not heightening investor uncertainty. Without this political clarity, Britain’s long overdue decision to embrace, support and deliver a series of large new nuclear plants on schedule will be unachievable. Instead, Britain risks becoming yet more dependent on foreign gas and unmanageable renewable energy to generate electricity. Consequently, Britain’s 26 million households, who spend around £20 billion a year on energy will face higher bills at a time of falling household income.” 

Tim Knox, Director of the Centre for Policy Studies, comments:

“Low cost, reliable and abundant energy is essential to the future competitiveness of British industry. It is incoherent to impose green taxes on manufacturers and then – as happened in the Autumn Statement – give money back in the form of subsidies. The Coalition wants to see a manufacturing-led economic recovery but this will only be forthcoming if energy prices are competitive by international standards. Unilateral energy taxes, delays to new generating plant and a lack of generation diversity will drive up costs.”

Media Impact:

“The proposed carbon price floor could close most of the UK’s coal-fired power stations by 2020, as they would become too expensive to run. Consequently, the market for coal in the UK would collapse." The “awful irony”, Mr Lodge said, was that the closure of the British mining industry would come when a renaissance could be on the horizon: the technology of carbon capture and storage, which extracts CO2 in the coal-burning process and stores it, usually in depleted undersea oilfields." - Times: Clean power tax ‘threatens to kill off coal’s comeback’

"Wind farms – funded by green taxes on homes and businesses – will not be able to cover the resulting energy shortfall, Mr Lodge warns. He says that without more nuclear power plants, the UK will be dependent on gas for over 80 per cent of its electricity by 2025. Most of this would come from Russia and the Middle East....the cost of the imported gas, and the electricity it would produce, would be so high that more than 8.5million families would be forced to choose between heating and eating as energy bills rise." - Daily Mail: Double whammy from green taxes: One in three households could face fuel poverty and flight costs set to rise

"The feared increase in fuel poverty will have a profound impact on residents across Yorkshire and the Humber where as many as 595,000 households are now projected to be living in fuel poverty, – a sharp rise from 333,000 homes in 2007.The number equates to 26 per cent of all households in the region currently suffering fuel poverty leading to more than 2,300 deaths every winter." - Yorkshire Post: - Mining industry facing biggest challenge from new tax

- Nuclear power urged to beat fuel poverty

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