The interpretation that the Secretary of State put on the two main mechanisms underpinning the Bill was, in my view, disingenuous at best and seriously misleading at worst. Under the contracts for difference, the Government will agree a strike price with an electricity generator, offering a guaranteed payment per megawatt-hour of electricity. That means that nuclear generators will have a built-in certainty that, come what may, they will get whatever they demand as a necessary return on their investment—and nuclear plants do not come cheap at £8 billion a time—courtesy of the taxpayer.
Today the Secretary of State repeated again the fake promise that there will be no public subsidy. Parliamentary answers of 8 March 2011 showed that the cost of generating new electricity will be up to £98 per MWh, yet even EDF’s chief executive, Vincent de Rivaz, has estimated that the strike price will be at least £140 per MWh. That implies a public subsidy of £4 billion or more. However, Citigroup analysts have estimated that it is likely to be £166 per MWh. That would require a public subsidy of £5 billion—so much for there being no public subsidy.
Then there is the issue that nuclear costs are on an ever-rising spiral, while renewable costs are set to fall dramatically. For example, large-scale solar will reach grid parity prices this coming year, so feed-in tariff payments to renewable technologies have falling digression rates attached to them, requiring ever lower annual payments for their electricity. Nuclear, however, is a technology requiring an internal subsidy on a rising cost curve. Contracts for difference are therefore in this Bill the mechanism to lock the UK into an ever rising cost spiral for uncompetitive nuclear.
Then there are the so-called capacity mechanisms, which bail out the old fossil fuels. Wind, waves and sun are, of course, free, unlike gas. The obvious policy is to give them priority in meeting grid requirements, leaving the more expensive and polluting fossil fuels to fill in the gaps. That is exactly what happens in Germany, which has reduced the price of electricity at peak demand by between 25% and 40%. If that were done in the UK, it is estimated that it would generate another 77,000 jobs and remove nine out of 10 families from fuel poverty. But that is not what is going to happen in this country under the Bill. Experience in the US of the first six rounds of capacity payments showed that existing fossil fuels took over 70% of the payments under such auctions. It is really tragic that this Government are squeezing renewables in this way, even though they are the most cost-effective methods.
There is one further absurdity. DECC’s own demand-reduction project, published in July this year, found the following:
“We have identified…155 TWh of demand reduction potential…across all…sectors, of which current policy is estimated to capture…54 TWh”.
Frankly, that undermines the whole case for building any nuclear power stations at all, since the 100 or so TWh of savings that remain to be captured are almost exactly the same as the total quantity of electricity that the eight new nuclear power stations are expected to generate.