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03/12/2016

Osborne ridiculed over ‘cheap nuclear’ claims

UK & Europe

Osborne ridiculed over ‘cheap nuclear’ claims

Chancellor George Osborne in Beijing in 2010. He will return to China to find investors for the Hinkley C nuclear plant.

[HM Treasury]

EXCLUSIVE/ UK Chancellor George Osborne was criticised today (9 September) after claiming that nuclear power was “substantially cheaper than any other low carbon technology,” when defending government subsidies for the controversial Hinkley Point C project.

Osborne was discussing plans for the £24.5bn (about €34 billion) project, at the House of Lords Economic Affairs Committee. The deal with EDF guarantees the French energy giant a price of £92.50 (about €127.50) per megawatt hour (MWh).

The “contract for difference” is roughly twice the current wholesale cost of power in Britain and will be paid from household energy bills.

Academics and environmental campaigners told EurActiv that the government’s own data proved many low-carbon energy sources, such as renewables, were already cheaper than than nuclear power in Britain.

Greenpeace UK executive director John Sauven said: “The Chancellor is either deliberately misleading Parliament and the public, or has a very poor grasp of the basic facts.

“If Osborne removed his ideological goggles for just one minute, he’d realise that smart and clean technologies are a far safer bet for the UK’s energy future than a nuclear project bedevilled by high costs, design flaws, delays, legal challenges, and what not.”

The subsidy was branded “incredibly expensive” and a “bottomless pit” by Lord Turnball, a member of the UK’s second parliamentary chamber, during the 90 minute hearing.

The results of the first government contract for difference auction for renewables were published in February this year. They showed: 

  • Onshore wind – average price of £82/MWh (about €113)
  • Large scale solar – £79.2/MWh (about €109)
  • Energy from waste with combined heat and power – £80/MWh (about €110).

‘Patently untrue’

Richard Black, director at the Energy & Climate Intelligence Unit, said, “Not only is onshore wind the cheapest form of low-carbon electricity, costs for renewables are coming down faster than in the nuclear industry.”

Osborne’s “substantially cheaper” claim, was branded “patently untrue” by Jonathan Gaventa, director of London-based environmental think tank E3G.

“It’s worrying that the man in charge of the UK economy is so cavalier about knowing actual costs of energy,” he said.

EurActiv contacted the UK Treasury and asked if Osborne would stand by his comments. A spokesperson said, “Nuclear energy is an important part of the UK’s energy mix as we move towards a low carbon future. It is also the cheapest low carbon technology that can reliably generate electricity at such a large scale.”

An offshore wind contract at the auction was more expensive at £117.8/MWh (€161). But Gaventa pointed to research showing that by 2025, when Hinkley is expected to go live, offshore wind costs will be between £64-104/MWh (€88 – €143).  By 2030, this will drop to £53-99/MWh (€73 – €136).

All the contracts were for 15 years, rather than Hinkley’s 35 years, making them cheaper in overall terms.

Osborne’s comments, added Greenpeace’s Sauven, were “not very reassuring for the millions of UK consumers who will be left to foot the bill for the multi-billion-pound subsidies promised to French-owned EDF and their Chinese partners”.

The Chancellor will visit China this month to try to secure a deal between EDF and potential investors.

EU state aid clearance

The contract for Britain’s first nuclear project in decades was cleared by the European Commission’s competition authority in October last year.

>>Read: Hinkley nuclear reactor project gains EU approval, leak reveals

That state aid decision is being challenged in the EU courts by the Austrian state and also by alliance of green energy providers and municipal utilities in Germany and Austria. The country argues that the Hinkley Point C project is in breach of European state aid law and risks distorting the energy market.

>>Read: Austria files EU complaint against UK nuclear plant

The energy providers argue that the subsidy is “unlawful operating aid” that should never have been approved. The claimants commissioned scientific studies which argue that guaranteed state subsidies for nuclear power from Hinkley Point C will add up to around €108 billion.

>>Read: Energy providers sue Commission over Hinkley Point subsidy

Shortly after the Conservative victory in the general election this year, the government made deep cuts in subsidies for large-scale and rooftop solar, as well as wind.

>>Read: UK moves to slash renewables subsidies

Osborne today told the Lords committee that it was a “tragedy” that the UK had stopped building nuclear power stations and that the plant, expected to generate 7% of Britain’s electricity, was needed to keep the lights on.

Last week, (3 September) Jean-Bernard Levy, EDF chief executive, admitted that Hinkley Point would miss its 2023 deadline to start generating power.

Background

Hinkley would be the first British nuclear reactor since Sizewell B in 1995. Because of the 35-year length of its operating contract, and the 10 years it would take to build, its cost and policy implications stretch far into the future.

The deal allows French-owned electricity generator EDF to be guaranteed £92.50 per megawatt hour over the 35-year life of the Hinkley plant.

This subsidy, twice the current price of electricity, will be paid out of household energy bills.

Timeline

  • 2023: Deadline for Hinkley C to start generating power