First published in Industry Link – 30.06.15
This is not the column I was expecting to write. Like nearly all the pundits and pollsters I was anticipating a close election result, a hung parliament, and protracted negotiations on a potential coalition. I thought these might even still be underway, and that this column might therefore be a vehicle for considering, from a nuclear perspective, all the possible permutations resulting from the various ‘red lines’.
The election of a majority Conservative government has denied us this opportunity. It is nonetheless probably the best outcome for nuclear, particularly so far as new build is concerned. This is because – as explained below – there should now be continuity in nuclear policy, avoiding the delays that could be expected of a new Government reconsidering its approach.
Contrary to all the speculation in the media, there has been no wholesale Whitehall restructuring, and the Department of Energy and Climate Change remains in place, at least pending the Comprehensive Spending Review.
DECC’s retention, and the appointment of Amber Rudd – who is seen as committed to fighting Climate Change – as its Secretary of State, implies no major change to the existing approach to carbon reduction. Given the Conservative manifesto support for the Climate Change Act, and to supporting an international climate deal in Paris this Christmas, this is not altogether surprising.
Similarly the current approach to energy security looks likely to be maintained, with the Conservative manifesto committing to ‘ensuring reliable energy supplies’ through ‘a significant expansion in new nuclear and gas’.
The manifesto also includes a commitment to ‘halt the spread of subsidised onshore wind’, which as noted elsewhere has been followed up in the Queen’s Speech. Whilst this may disappoint some of our more partisan readers, this is not something the NIA necessarily welcomes. Our view has always been that to effectively meet our energy objectives we need to make the most of all our viable low carbon options – and this means both nuclear and renewables.
What this decision does illustrate however is that there is no blank cheque. Energy prices are still very much a political issue and the Government is committed to keeping bills as low as possible. This means there will be growing attention to striking the right balance between costs and carbon reduction, and therefore growing pressure on all low carbon projects, including nuclear, to demonstrate value for money. We ignore this at our peril. The successful delivery of the new nuclear build projects, starting with Hinkley, will be crucial.
Widening the picture out beyond energy, the new Government’s overriding priority is of course to balance the books, by reducing public spending more sharply than envisaged by Labour, and this may have less beneficial implications for our industry. When the NDA’s spending plans – which are largely Government funded – were reviewed in the last
Comprehensive Spending Review (CSR) the Government accepted, albeit after prolonged negotiations, that there should be no significant cuts.
The arguments for maintaining the programme are no less strong this time, but the pressure will be even more intense. We should get some indication of the prospects when George Osbourne delivers his ‘stability’ budget on 8 July setting out the likely content of this Autumn’s 2016-19 CSR.
Of course the Government does not act alone but in a parliamentary system, and this looks very different from just three weeks ago.The nuclear industry has enjoyed cross party support over the past few years, but it would be complacent to take this for granted.
Labour has long been supportive, and in fact initiated the current energy and climate change policies in its energy and nuclear white papers. Although there is currently a leadership election underway there are no obvious grounds to foresee this changing – although like any opposition they can be expected to latch onto specifics, and again costs could be an issue.
Moreover the shadow energy team under Caroline Flint is broadly unchanged although I should note, with great regret, that it no longer includes Tom Greatrex who lost his Scottish seat. He was a great friend to the industry and we wish him well.
The position with the Lib Dems is less propitious. Following the general election we have lost some of our key advocates in the party, not least the former Energy Secretary Ed Davey. Like Labour there is now a leadership election underway, and both the current contenders, Tim Farron and Norman Lamb, have a history of opposition to nuclear.
That said it should be remembered that both Ed Davey and his predecessor as Energy Secretary Chris Huhne began from an anti-nuclear perspective and changed their minds when immersed in the arguments. It was as a result of this, and Davey’s strong advocacy, that the party conference came to its decision two years ago to support new build.
Of course it is the SNP, not the LibDems, that are now the third largest Westminster party with 56 MPs. Opposition to nuclear power has long been an article of faith for the party, although in Scotland this has been laced with pragmatism which has enabled them to support the continued generation, and even life extension, at Hunterston B and Torness.
The key message here has been support for ambitious carbon reduction and renewables and the party can be expected to reflect this stance in Parliament. One vehicle for doing this will be through chairing the Energy and Climate Change Committee (ECCC) they were awarded in the recent inter-party negotiations.
Through their inquiries and reports Select Committees can be an important influence on Government thinking and until the last election the ECCC, under the chairmanship of the pro-nuclear Tim Yeo, was broadly supportive of nuclear power. Whilst the committee will broadly reflect the views of its Conservative and Labour members, a change at the top
could have an impact on its direction which might now be more focussed on issues important to the SNP, including renewables and North Sea oil.
So what can we draw from all this? It is clearly early days, but at this stage we can expect continued commitment to nuclear energy and the new build programme, although the costs of carbon reduction could become an issue. More generally there will be huge pressure on public spending, and the nuclear industry will need to explain very clearly why continued progress in decommissioning is very much in the national interest.