Energy Security: Is Nuclear Power the answer?

Questions surrounding our energy security are being asked more frequently, not just by the Government and energy industry, but by the public who are becoming increasingly concerned about where their energy is supplied from and its affordability.

We hear the phrase ‘keep the lights on’ repeated continuously when energy is discussed; with the idea of blackouts often being seen as an exaggerated threat more than a realistic possibility. However, UK energy production will decrease over the next decade as multiple power stations close. This means these threats will become more probable and the question of how to keep the lights on and costs down becomes more significant. Nuclear power is part of the answer.

As the UK faces this substantial loss of generating capacity energy security continues to be pushed to the forefront of the Government and energy industry’s agendas, along with cost and low carbon technology. In 2012 the UKs net energy import accounted for 43% of total energy used in the UK, showing a significant increase from 28.4% in 2010. As our dependency on other countries increases, costs increase, as does the public’s concern around these issues.

A recent study by UK Energy Research Centre showed 82% of the public were concerned that we were becoming too dependent on other countries. The Guardian’s own public opinion poll places energy security as the number one concern, more important than cutting carbon emissions and ensuring affordability of energy bills.

The current geopolitical situation has only heightened the concern felt by politicians and the public about energy security. The political crisis in the Ukraine and willingness of Russia to use energy supplies as a weapon potentially puts increasing pressure on energy markets. In turn this is putting pressure on the Government and energy industry to develop home-grown solutions to power our future.

Whilst we can continue to burn through our coal supplies, this is not the answer and is not in keeping with Government and EU decarbonisation targets. What we need, is the building of a diverse and reliable low carbon energy mix, with nuclear taking one of the leading roles.

This is the Government’s approach, and has cross party support. This party partnership is especially important as the industry’s proposed new build programme, as well as current decommissioning projects take place over many years, and potentially many administrations.

In the 2008 Nuclear White Paper Labour stated that nuclear power should play a vital role in a future energy mix. This has been built upon by the coalition Government; agreeing that nuclear on its own was not the only answer, but a key part of it along with renewables.

Nuclear will play a key part in meeting the Government’s 20% low carbon target. Unlike intermittent energy sources nuclear power can provide electricity 90% of the time, generating around 20-25% of the energy used to power homes and businesses.

The UK needs 60GW of new electricity generating capacity, and associated infrastructure in the next decade and a half – on current plans just under a quarter of this could come from nuclear. As part of a diverse energy mix, with renewables and clean coal, this will reduce UK carbon emission and ensure long-term security of supply.

As the new nuclear build programme starts to get underway, with the State Aid announcement for Hinkley Point C due in the autumn and other proposed power stations at the beginning of the planning process, public support is crucial and is increasing.

Public recognition of nuclear power as a reliable source of electricity in a wider mix continues to grow, with 75% of UK adults supporting it. The Guardian’s own George Monbiot has ‘arrested himself’ for his change of stance about nuclear power, now supporting it and the important role it plays in providing a stable source of low-carbon energy.

Whilst the Government estimates £110 billion of capital investment is required over the next decade to upgrade the UKs energy infrastructure, the long-term results will see emissions cut, our energy security strengthened and consumers provided with affordable electricity. Nuclear energy has the support of Government, industry and the public; as part of a greater low carbon mix it can address the key energy concerns, ensure our lights stay on and most importantly guarantee the UKs energy security for the foreseeable future.

keithKeith Parker
Chief Executive

The Energy Act and State Aids

The big news is that, following more than a year’s debate in both Houses of Parliament, the Energy Bill has finally received Royal Assent. This means the legislation is now in place for electricity market reform to go forward.

As I write DECC, with the support of industry, are pursuing their detailed implementation plans, and are promising to bring forward secondary legislation shortly. Some important unresolved issues remain, but given the real political commitment to EMR on all sides these will surely be overcome quickly.

This is great news both for low carbon generators – nuclear; renewables; and carbon capture and storage – and for electricity consumers. Our politicians, with their short term electoral cycle, occasionally forget they also need to protect the longer term interests of their electorate.

In this case, in backing the Energy Act that will provide a framework for secure clean electricity over many years, they have done so. Because of their higher up-front costs low carbon sources such as nuclear and renewables are difficult to finance in the current electricity market. By providing stable and predictable prices over a set term, the EMR proposals will address this market failure, enabling the UK to deliver its energy security and low carbon objectives. This is crucial to all of us – no-one wants the lights to go out, and the recent floods underline the potential risks of unchecked global warming!

That said I was asked at a conference recently whether the Energy Act’s provisions would actually convince power generation and utility companies to make the necessary investment. My response was that it would – and I was able to pray in aid the Chinese interest in investing in the Hinkley project; Horizon/HGNE’s progression of the ABWR design through the Generic Design Assessment process; and Toshiba’s recent purchase of a 60% stake in NuGen. Taken together these developments, all of which involve major expenditure by the companies concerned, are a real vote of confidence.

Of course it is not all plain sailing. Two years ago Mark Higson compared the new nuclear build journey as a giant rollercoaster – with violent ups and downs along the way – and this remains very much the case. We have already had both this year, including the ‘ups’ set out above.

A current ‘down’ is the vexed question of state aids clearance for the Hinkley CfD deal – on which the European Commission published its initial view (Opening Decision) at the end of January. The Commission’s document, comprising 69 closely typed pages, raises a host of ‘legal’ issues, relating to such arcane matters as whether the UK has a ‘market failure’, and whether, if it does, the CfD arrangements are the best means of addressing this.

The British Government and nuclear industry have firmly pointed out that the EMR measures are designed to help achieve the EU’s security of supply and carbon reduction objectives, and that they are compliant with EU rules. They have a very strong case, but there is a detailed process to be gone through.

Joaquin Almunia (the EU Competition Commissioner) has indicated he wants to see the investigation concluded before the end of the current EU Commission term in October 2014, and there is ‘optimism it will be completed by summer 2014’. It is important that this timetable is kept to, not just because the current Commission will leave office at the end of the year but because we need to make progress on our new nuclear build programme and the UK supply chain is itching to get started.

In this context it is interesting that in its recent consultation on draft guidelines for environmental and energy state aid the Commission stated that for renewables (and CCS) support is justified to meet the common good of mitigating climate change. Nuclear is not mentioned, but if mitigating climate change is the objective it surely makes sense for the Commission to support a member state – such as the UK – that has developed a technology neutral approach to achieve this.

Peter Haslam, Public Policy Advisor, NIAPeter Haslam
Head of Policy

This article was first published in Industry Link magazine on 12.03.14