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23 March 2022

UK Prime Minister promises more nuclear, will totally fail to deliver

The UK Prime Minister met with representatives of the nuclear industry this week to re-assure them that they were part of the solution to the UK’s energy problems, promising companies like EDF, GE Hitachi, Rolls Royce, NuScale, and Westinghouse that the UK would get 25% of its electricity from nuclear through to 2050.

The only problem is that Boris Johnson used the expression “cost effective”  in the meeting, he said he wanted to support “a thriving pipeline of future nuclear projects in the UK in a cost-effective way.” This is basically “blather.” It’s like saying you’d like to feed everyone on caviar in a “cost effective” way. It just can’t be done.

What virtually every observer failed to notice was that the long term Conservative party strategy for UK energy has been to get 33% from renewables, 33% from nuclear and 33% from natural gas using carbon capture. So this new position represents a shrinking in nuclear, not an increase.  Rethink Energy has said in the past that this does not constitute a viable strategy, because it cannot be cost effective.  Johnson has never re-iterated those numbers, but brought out his own 10 point plan, which is similarly unworkable – See “How to announce nothing new in a 10-point plan – Boris Johnson-Style”

This plan launched in 2020 says the UK will installs 40GW of wind farms by 2030, generate 5GW of green hydrogen by 2030, get the 3.2 GW Sizewell C project built, subsidize electric vehicles, back carbon capture with research funding, and offer the same R&D to aviation and maritime fuel markets.

This meeting however has come about as European countries this week all try to put together a plan to make do without Russian oil or gas. Nuclear currently brings the UK about 17% of its electricity (54.2 TWh), and over the next 3 years there are plans to close at least 3 plants – Hinkley Point B, Hartlepool and Heysham 1 – shutting down 3.2 GW of capacity.

The first thing to note is that no help is coming rapidly from nuclear, and in fact no electricity is coming rapidly from nuclear, because long standing internationally agreed safety requirements mean that it takes ten years to build anything in nuclear, and while that timeframe may be reduced one day as Small Modular Reactors have authorized designs, that itself is not likely to happen for another 5 years. And during the time in between the UK government feels it needs a few more of the really expensive older nuclear designs.

Rethink Energy has a forecast going out to 2050 for electricity in the UK, and it ends up with nuclear falling to no more than 13% of total electricity output by that time – in part because UK electricity will grow by 53% by then – as it embraces EVs, industrial uses of hydrogen and the electrification of heating and cooling.  This is a far cry from 25%.

The debate of how to cope without Russian gas or oil has spread all over the national newspapers, and across the members of the government cabinet. Suddenly everyone is a spokesman on energy, despite knowing little about it, some endorsing more wind energy by either accelerating the offshore auctions or altering onshore planning regulations. The latter would be a move back to how they were before the Conservative government intervened and killed onshore wind ten years ago.

What the UK should be focusing on is getting natural gas out of its electricity network – currently around 27% of electricity comes from gas. If it did that this would crash the price of electricity for consumers. It would still mean that 85% of all UK homes would still be paying high prices for natural to heat their homes, but they could rapidly (over 2 to 3 years) shift to heat pumps, if the government gave them a more aggressive subsidy. If gas is chased out of the UK electricity system, then homes would not end up using “gas powered” electricity to drive those heat pumps. Each home could then escape the ballooning price of natural gas and feel good about not funding Russia’s current or any future war.

Other ideas in the newspapers include the continuous call for either a windfall tax on the oil and gas companies, which are making a fortune right now, or on renewables, which are benefiting from the high striking price in electricity due to natural gas. This has already happened in Spain and Italy, but would have to happen differently in the UK. Because of our contracts for difference schemes (CfD), that money (the increased margin in electricity) is actually being paid back to the government. So it is already in the budget of Chancellor, and can be used to offer poorer homes subsidies against the high price of heating their homes using gas.

Chancellor Rishi Sunak like everyone else is reluctant to spend this money in this way, because it all ends up back in the hands of the oil and gas companies. Instead he wants to use it to underwrite loans from banks to help people shift to heat pumps, home solar, and to install energy efficiency. Not a bad use, if tis government could react more rapidly and get this done.

Meanwhile our EV subsidies are now among the lowest in Europe but still UK buyers are buying electric cars, so much so that fuel duty revenue for the government is starting to flag. There is a rumor circulating the UK press that the shortfall will be found by using tolls on our major roads, in some kind of legislation due later this year – we shall see.

However the EU is acting more directly on natural gas than the UK and now has a plan to increase gas storage across the bloc and add a law that says they must be 90% full by the end of this year. But an immediate response came from the leaders of Italy, Spain, Portugal and Greece to say there has to be a common gas purchasing initiative, and that each country should not be forced to go it alone, so that could become law soon too.

This will see all of Europe chasing LNG supplies around the world this Summer to fill this storage, an activity which will continue to drive up the price, even as Russia offloads its spare gas capacity to parts of Asia.