By Tom Burke, a visiting professor at Imperial College London and University College London, and a co-founder of E3G, Third Generation Environmentalism (THE GUARDIAN, 18/05/06):
The prime minister has a taste for pre-emptive strikes and dodgy dossiers. He pre-empted his own white paper on energy policy with the energy review. He has now pre-empted the review by declaring that Britain needs new nuclear power stations. In so doing he has confirmed the suspicion that the review will be economical with the facts.
This precipitate action has accomplished the intended headlines. Whether it has made new nuclear power stations likely is more questionable. The prime minister's views on nuclear are well known. His surrogates have been busy making them clear in the media and on the conference circuits for months. His problem has been to persuade a doubtful public and sceptical investors to share his view.
Of the two, the sceptical investors are a much more important audience. For all the appearance of decisive leadership in Tuesday's speech, the reality is that the prime minister has made no decision at all. He has simply expressed a preference. This is because neither he nor his government will actually decide whether or not to build new nuclear power stations. It will be the large generating companies and City financiers who will have to make the real decision to pay for and build the stations.
There is nothing to stop them announcing a programme of new nuclear power stations today, except for the inconvenient fact that it is not economic for them to do so. Nuclear power stations are financially very risky projects. You spend hundreds of millions of pounds for at least a decade before you start to recover any earnings. Since you have to pay for the financing as well as the direct construction costs, this makes nuclear much less attractive to investors than other forms of electricity generation.
This is especially so when you cannot be sure of the price you will get for that electricity in the 30 years or so it will take to recoup your investment. Nor can you be sure what the station might cost. The new Finnish nuclear power station often cited as the model for Britain to follow is already nine months behind schedule. Given our much-maligned inability to deliver large capital projects on time and budget, this is not a good omen.
The nuclear industry will certainly oblige the prime minister by building new nuclear power stations provided he makes it attractive for them to do so. This means paying for its higher costs. There are only two ways to do this: either the taxpayer pays or the consumer pays. The government has clearly and repeatedly ruled out the first option. The second will require a quite heroic decision from the prime minister, but he has not yet taken it.
The nuclear industry will build new power stations if the revenue from selling its electricity is guaranteed for the next 30 years or so. This means abandoning one of the government's more successful energy policies - that of driving down the cost of electricity - and setting a floor below which the electricity price cannot fall. In effect, the prime minister will commit British businesses and homeowners to paying more than they might otherwise have to for their electricity. It is hard to see how such a step would advance his social justice and competitiveness agendas.
His argument is that doing this is the price of future energy and climate security. But the facts do not support his case. Three-quarters of the gas we use, wherever it comes from, is used to heat our homes, offices and factories, and as chemical feedstock. Electricity, whatever its source, cannot easily be substituted for these uses. If we want to reduce our dependence on imported gas, the option that is fastest and offers the best value for money is to increase efficiency in our 24m energy-leaky households.
On climate security, we have perhaps 10 years to make advanced coal technologies with carbon capture and storage the global industry norm. Failure to do this will make dangerous climate change unavoidable. We cannot expect the world to do something we will not do ourselves. So we have to have carbon-free electricity from coal long before a single new nuclear power station can be operating in Britain. Thus new nuclear build is actually a distraction from the urgent task of tackling climate change.
There are many other reasons to oppose new nuclear build in Britain: the unsolved waste problem; the occupational and public-health risks; the difficulty of making uranium work for peace without making it available for war.
Those who fear a nuclear future, however, should worry less. They have an unexpected ally in the prime minister. New nuclear build in Britain requires, above all, investor confidence in a well-constructed and widely supported energy policy that will be robust over several parliaments. The newly undermined energy review will not provide such a foundation.