Riding a white elephant: Theresa May chooses a path of nuclear dependency and energy uncertainty over sustainability

 

Earlier this year, I wrote an article for ExSE making a number of connections between Laos’s Nam Theun 2 (NT2) hydropower project’s development history and that of the Hinkley Point C (HPC) nuclear power station’s proposed development in Somerset, United Kingdom. Amongst the obvious links was the involvement of the same main developer, the state-owned Électricité de France (EDF); the manner in which proponents have promoted the projects as low carbon sources of energy in an era of climate change; the willingness by the developers to externalise environmental and social costs on wider society and burden future generations; the fact that both mega-projects are presented by leaders as having no or few alternatives by the government (i.e. so-called TINA-syndrome), and the way in which spaces for public discussion are constrained or actively closed down by the respective states until the projects have become a fait accompli.

There was a further connection, linking each of these projects to China’s overseas energy sector engagement, which in the case of Hinkley Point involves China General Nuclear Power Corporation as a major investor in the consortium, while in the case of NT2 by contrast, its development was spurred on by a fear of China taking over the project by the Western backers and financiers, including the World Bank and Asian Development Bank. As things have transpired, the developers needn’t have worried, as now China is one of the main energy infrastructure developers in Laos, and one more dam in their extensive Mekong basin portfolio would have made very little difference in the overall developmental scheme of things. The only impact would have been on the already weakening influence of the Western hydraulic development industry in making a meaningful contribution to the region’s sustainability debates, which have subsequently become a race to the bottom.

But the underlying geopolitics and political economy of these “Macchiavellian Megaprojects”  is what provokes most curiosity and provides tantalising insights into the mores and motivations of powerful leaders and strategic groups, apparently irrespective of whether such projects occur in one party authoritarian states or multi-party, liberal democratic states. This article updates the circumstances surrounding the long-running HPC saga since May, while at the same time, pays brief consideration as to what this may imply about the historical tendency for certain national leaders to readily spurn seemingly rational, broad evidence-based decision-making processes to engender the widest possible social benefit concerning sustainable energy futures, in favour of appeasing strongly vested interests within their own political clique.

While the British government has given the go-ahead for the Hinkley Point C power station to be built, many questions hang over its feasibility and the future of nuclear power in the UK

Bear in mind that HPC was originally the brainchild of Margaret Thatcher, who thought a new generation of nuclear power stations would be the perfect solution to her goal of closing down Britain’s coal industry and privatizing just about every state utility and corporation. She dreamed of a fully-privatized nuclear industry that would stand on its own two feet, without continual government subsidies or recourse to the public purse.

However, Maggie’s vision was brought back down to earth by two events – the first was the disastrous 1986 Chernobyl nuclear accident that led to a plume of radioactivity spreading across Europe from east to west, even contaminating the upland sheep pastures of Britain for a generation[i], and the second was the bankruptcy and subsequent government bailout of the privatised British Energy in 2002, exposing further the hidden costs of maintaining a nuclear power regime. These wake up calls were enough to take some of the becquerels out of the industry’s more outlandish claims and lead to a temporary dampening in government enthusiasm over UK nuclear capacity expansion, but did nothing to dim the headlong rush to nuclear dependency of neighbouring France, who did not have the luxury of North Sea oil and gas to fall back on, but were content to let the state carry the main cost burden.

It is significant that nuclear power came back on to the UK government’s agenda under Tony Blair in 2006, who announced the best way to meet carbon-free national energy needs was to build new nuclear power plants and that failure to act would “fuel global warming, endanger Britain’s energy security and represent a dereliction of duty to the country”. Blair’s evangelism for nuclear power occurred despite strong reservations from members of his own cabinet and warnings from the government-sponsored Sustainable Development Commission that there was “no justification” for a new nuclear programme. In 2008, EDF bought British Energy in a deal worth £12.4 billion, which produced 15 % of the UK’s power from eight nuclear sites and paved the way for a new generation of nuclear plants to be built, including the one at HPC.

The following year, The Guardian newspaper learned of secret government plans to tax consumers to pay for the construction of the nuclear power stations, despite earlier assurances that the industry would not benefit from public subsidies. EDF would be one of the main beneficiaries of this planned levy on bills. By 2010, the Energy Minister announced that there was a huge black hole in financing unavoidable nuclear decommissioning of existing plants and waste management overheads, which would have to be covered by the tax payer. In other words, it is a myth that nuclear power can ever be independent of state subsidies and development and operational costs are only likely to inflate in future.

Theresa May, whose own rise to power came out of the unexpected Brexit result which led to David Cameron’s resignation as Prime Minister, surprised analysts soon after arriving in Number 10 Downing Street by calling for a full and thorough review of the HPC project. This decision stunned EDF and their Chinese investment partners, who had been fully expecting to toast the project’s future success at an on-site celebration on 29 July, the day after the board of EDF had voted ten votes to seven to approve the investment decision on HPC. The cooled champagne and canapés had to be rapidly cleared away, when it was discovered at the eleventh hour that May wanted to delay the UK government’s decision on whether to proceed with construction for a few months more, sending political reverberations from Somerset to Paris and Beijing.

British Prime Minister Theresa May meets Chinese premier Xi Xingping at the G20 Summit in Hangzhou, China on 4 May, when the delayed Hinkley Point decision threatened to overshadow her first major foreign summit

One of the major concerns, according to insiders including the new joint chief of staff, were the economic fundamentals of the project and national security considerations, given the involvement of Chinese state-run nuclear corporations holding a third equity share in the project. However, it was the insanely high electricity wholesale generation price being offered to the development consortium that mostly grabbed the headlines. At a guaranteed strike price of £92.50 per megawatt hour, it was calculated that electricity consumers could end up paying £30 billion in subsidies for the project over its 35 year lifetime. This cost compares unfavourably with renewable energy options, which have been rapidly falling in price over the last few years, and is over double the present UK wholesale price. It seemed to wilfully ignore the economic affordability trends for renewable sources, and cynically could be seen as merely a politically strategy for keeping the UK at the top table of the global nuclear club. In September, the executive director of Greenpeace, John Sauven, called on May to “stop this radioactive white elephant in its tracks”, claiming the deal would be a “monumental disaster for taxpayers and bill payers”.

Cartoon from The Guardian (16 September 2016) spoofing May upon her trusty nuclear pachyderm steed, taking a swipe at cheaper renewable energy sources through the controversial HPC decision. Steve Bell

Independent analysts in the City of London were of the same opinion as Greenpeace, Friends of the Earth and other environmental groups concerning the project’s exceedingly shaky economic credibility[ii], while even EDF board members were divided on the level of existential threat it posed to the future of EDF itself, given the unproven nature of the design and rising economic risks and liabilities to EDF’s nuclear business model at home in France. While the project was seen as crucial to keeping EDF afloat and safeguarding tens of thousands of jobs, The only people in Britain left firmly backing the project seemed to be a core group of construction contractors who stood to benefit financially from the project, some labour unions, a significant rump of Tory MP’s ideologically wedded to nuclear power and the Chinese state, which increasingly became more anxious and threatening about the consequences of cancelling HPC in the following months.

In the days following May’s decision to review the HPC, the Chinese government started to issue veiled threats about the future of UK-China relations, if the HPC project was not approved. Liu Xiaoming, China’s ambassador to the UK, wrote a letter to the Financial Times, warning that bilateral ties stood at a “crucial historical juncture” and hoped the British government would continue to support Hinkley Point – and come to a decision as soon as possible so the project can proceed smoothly.” At May’s first major international summit, ironically the G20 summit in Hangzhou in early September, she was at pains to point out that Britain’s relationship with China were “more than about Hinkley” and that UK had built “a global strategic partnership with China”, claiming it was “a golden era of relations between China and the UK.” Indeed, China’s interests are not solely focused on becoming involved as a partner in the HPC project, but extend to future planned investments in Bradwell B and Sizewell C nuclear power plants on the east coast, where China General Nuclear hopes to employ its own reactor designs and eventually run Bradwell. Majority Chinese involvement in such a sensitive sector as nuclear power generation have understandably raised a number of concerns in numerous quarters over national security which are unlikely to die down in a hurry.

As matters transpired, on 15 September May capitulated to pressure to appease both the Chinese investors and the strident pro-nuclear lobby within her own cabinet, and the £18 billion deal to build HPC was subsequently signed in late September at a “low-key ceremony” in London, attended by Greg Clark, the UK business secretary, Jean-Bernard Levy the CEO of EDF, and He Yu, chairman of China General Nuclear. He Yu noted that, “CGN’s commitment to the UK as one of the world’s leading developers and operators of nuclear power. This flagship program is a triple win for China, Britain, and France and is a culmination of years of cooperation between the three countries. CGN looks forward to providing UK consumers with safe, reliable and sustainable energy and maximizing opportunities for UK suppliers and the UK workforce.”

While engineering unions and contractors welcomed the deal, it was widely criticized by many across the spectrum of media, civil society, business analysts and opposition political parties, who believe that it will lock British energy consumers into an unnecessarily expensive electricity source for two generations, just at the moment when renewable energy sources such as solar, wind and tidal power are rapidly falling in price. Furthermore, it will create a massive radioactive material waste problem that is estimated to equate to 80% of all the material produced thus far in the UK in terms of radioactivity. And all this depends upon whether or not the European Pressurised Reactor (EPR) design chosen by EDF functions or not, given its unproven record and the fact that the only two other nuclear plants adopting the same design have suffered massive technical problems, delays and cost overruns. As EDF’s former chief finance officer who resigned in March 2016 warned, the EPR design represented a “major construction risk” and rhetorically asked, “Who would bet 60 to 70 per cent of his equity on a technology that has not yet been proven that it can work and takes ten years to build?”

As with hydropower development in the Lower Mekong Basin, there appears to be a grim inevitability to the prospect of a tranche of new nuclear plants progressing in the United Kingdom, once HPC construction gets fully underway, as occurred in Laos after the decision to fund NT2 sparked a boom in new hydropower development. While some analysts consider HPC still not a done deal, as there remain many regulatory hurdles to overcome,plus an ongoing challenge by the Austrian and Luxembourg governments in the European Court of Justice over subsidies provided by the UK government to EDF, supposedly breaching European law on distortion of energy markets, the argument that one new nuclear plant will trigger permission for many more is a persuasive one, due to path dependency.

On the other hand, Vietnam recently demonstrated that a nuclear development pathway is in no sense pre-ordained and can be averted through sensible and far-sighted leadership decisions. In early November, the government officially suspended its nuclear development programme, after a series of technical setbacks and delays in its earlier plans to generate 10 % of the nation’s power needs or 15,000 MW from nuclear by 2030. It recently announced that due to a dwindling rate of energy demand expansion and nuclear power’s lack of price competitiveness, the government would postpone its plans indefinitely, a decision that was subsequently endorsed by the national legislature.

An artist’s impression of the proposed nuclear power plant in south-central Ninh Tuan province, Vietnam, that has now been cancelled.

This move came against a background of growing unease about the over-hyped promise of nuclear power’s benefits, general environmental and cost concerns around waste management, and worries about the safety and environmental risks of Chinese nuclear power plants near the Vietnamese border. The government’s decision may temporarily damage, albeit not seriously, economic relations with large investors from Japan and Russia that were seeking to develop the nuclear plants, but at the same time it should open up new space for informed discussion and debate about national and regional energy development futures, not only in Vietnam but more widely, across the Mekong Region. The decision also de-escalates the probability of other regional states wanting to rapidly develop their own nuclear generation capability, with potential implications to weapons manufacturing designs. The challenge for Vietnam now will be to wean itself off fossil fuels, particularly imported oil and gas, while the UK seems to be heading down a road of new nuclear addiction, just at the moment when long-term renewable energy investments have never made more sense.

[i] It took 26 years after the Chernobyl accident for restrictions on the sale and movement of livestock from affected farms in England and Wales. In total, some 10,000 farms were affected due to the contamination of grass by radioactive caesium and iodine isotopes. The Food Standards Agency (FSA) finally lifted farm restrictions on 1 June, 2012

[ii] Critics of the HPC deal from the financial and  business sector have included Legal and General, HSBC, the Institute of Directors, RBC Capital Markets and Moody’s Credit Rating Agency

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