EC Sees Heavy Pricetag to UK Nukes Plan

European Commission competition czars say planned UK price supports for new nuclear generation could unnecessarily cost taxpayers £17 billion

2 min read
EC Sees Heavy Pricetag to UK Nukes Plan
Photo: EDF Energy

Government incentives for a pair of proposed nuclear reactors could cost U.K. taxpayers as much as £17.62 billion, thus exceeding the reactors' projected cost. The EC figure is a preliminary estimate included in an initial report to London published on Friday by European Commission competition czars. The letter notifies the British government that—as we predicted in December—Brussels is launching a formal investigation to assess whether the subsidies violate European state aid rules. 

The preliminary findings suggest that the U.K. and E.C. are on a collision source. As the Financial Times summed it up this weekend: "The severity of [the EC's] initial concerns will cast a shadow over government hopes to win approval for the deal."

The pair of reactors concerned are French-designed 1600-megawatt EPR reactors that Paris-based Électricité de France (EDF) wants to build at the Hinkley Point nuclear power station on England’s southwest coast. In October, the government of British prime minister David Cameron (pictured above at one of Hinkley Point's existing 1970s-era reactors) guaranteed EDF approximately £92.50 ($151) for every megawatt-hour generated at Hinkley Point. That price is nearly double the average amount paid to U.K. generators last year.

EDF insists that without the so-called contract-for-difference guarantee, U.K. power prices, as well as carbon credits that the plant would earn, are too low and uncertain to justify the £16 billion investment. And the U.K. government argues that it needs up to 16 000 MW of new nuclear to meet ambitious greenhouse-gas reduction goals that call for a near decarbonization of the electricity system by 2030. 

However, European limits on state aid forbid aid to new nuclear generation. The UK tried to add an exemption for nuclear generation during a recent rewrite of the state aid rules, but its motion failed. Hence its insistence in public statements that the price guarantee, as well as government backing for the plant's financing, do not represent subsidies. As Secretary of State for Energy Edward Davey insisted when the deal was announced in October: "For the first time, a nuclear station in this country will not have been built with money from the British taxpayer."

The EC doesn't seem to be buying that. As Commission Vice-President and competition chief Joaquín Almunia described the initial findings: "The nuclear plant operator will ultimately receive a fixed level of revenues and will therefore not be exposed to market risks...It would appear to be difficult for the UK to provide a greater degree of certainty." [emphasis added]

The EC also questions whether there is a "market failure" that requires correction. It suggests that the subsidies might therefore be unnecessary and/or that they will freeze out competitors, including developers of renewable resources such as offshore wind power. 

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Smokey the AI

Smart image analysis algorithms, fed by cameras carried by drones and ground vehicles, can help power companies prevent forest fires

7 min read
Smokey the AI

The 2021 Dixie Fire in northern California is suspected of being caused by Pacific Gas & Electric's equipment. The fire is the second-largest in California history.

Robyn Beck/AFP/Getty Images

The 2020 fire season in the United States was the worst in at least 70 years, with some 4 million hectares burned on the west coast alone. These West Coast fires killed at least 37 people, destroyed hundreds of structures, caused nearly US $20 billion in damage, and filled the air with smoke that threatened the health of millions of people. And this was on top of a 2018 fire season that burned more than 700,000 hectares of land in California, and a 2019-to-2020 wildfire season in Australia that torched nearly 18 million hectares.

While some of these fires started from human carelessness—or arson—far too many were sparked and spread by the electrical power infrastructure and power lines. The California Department of Forestry and Fire Protection (Cal Fire) calculates that nearly 100,000 burned hectares of those 2018 California fires were the fault of the electric power infrastructure, including the devastating Camp Fire, which wiped out most of the town of Paradise. And in July of this year, Pacific Gas & Electric indicated that blown fuses on one of its utility poles may have sparked the Dixie Fire, which burned nearly 400,000 hectares.

Until these recent disasters, most people, even those living in vulnerable areas, didn't give much thought to the fire risk from the electrical infrastructure. Power companies trim trees and inspect lines on a regular—if not particularly frequent—basis.

However, the frequency of these inspections has changed little over the years, even though climate change is causing drier and hotter weather conditions that lead up to more intense wildfires. In addition, many key electrical components are beyond their shelf lives, including insulators, transformers, arrestors, and splices that are more than 40 years old. Many transmission towers, most built for a 40-year lifespan, are entering their final decade.

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