REUTERS | Ina Fassbender

Keeping the lights on?

While most of us were caught up in the wall-to-wall coverage of the Leveson report last Thursday, other significant announcements were being made in Westminster.

The Energy Secretary, Ed Davey, made a statement on the publication of the Energy Bill 2012, which is the product of months of industry-wide dialogue and debate on how we can keep the lights on while ensuring a low-carbon economy.

Nuclear power

The focus on energy efficiency is only going to increase and the Energy Bill throws up a number of issues that will be the subject of keen debate over the coming weeks and months, not least deferring the decision on setting a binding decarbonisation target for 2030 until after 2016. However, one thing it does indicate is that the coalition government sees a nuclear new build programme as essential to secure the UK’s future energy supply. As a result it has been well received within the nuclear sector.

Progress since 2010

I blogged some time ago on the future of nuclear energy in the UK and the key areas that could make or break the nuclear new build programme in the UK. Although there has been progress on many of the issues identified, such as standardisation and programme management, the lack of specialist skills in the UK workforce is still a major issue due to the generation gap since the last nuclear build programme. To address this requires an investment in the workforce and SME’s that will only happen if a significant programme of nuclear new build is guaranteed.

Keith Parker, Chairman of the Nuclear Industry Association who worked with BLP on our 2010 report, Building Britain’s Nuclear Future, has welcomed the Energy Bill saying it “provides much needed investment certainty. A major nuclear new build programme will lead to substantial industrial and employment benefits – including considerable opportunities for the UK nuclear supply chain and a boost for UK manufacturing and construction.”

Exemptions for energy intensive industries

Together with the Energy Bill, the government announced that it intends to exempt “energy intensive industries” from additional costs arising from the new long term “contracts for difference” designed to bring on investment in low carbon power plants such as nuclear power stations and wind farms. Although this is subject to further consultation (and state aid clearance from the EU) it recognises that the transition to a low carbon economy will depend on products made by energy intensive industries (steel, cement and high-tech textiles) for use in nuclear power stations. The exemption will ensure the UK retains the industrial capacity to support a low carbon economy.

The future for nuclear?

These recent announcements, coming on the back of Hitachi’s recent purchase of Horizon Nuclear Power, coupled with the operating licence granted for Hinkley Point C and news that design approval for the reactors at Hinkley Point and a recommendation by the Planning Inspectorate is due by the end of this year, seem to be good news for the UK nuclear new build programme.

There are still many issues to be resolved – not least agreement of a minimum price for nuclear power. Additionally, recent press coverage of the government’s interest in relying upon gas fired power stations will put the cost of nuclear into focus – in particular the role and potential abundance of shale gas that may make nuclear look very expensive and drive investment in the nuclear industry elsewhere. The cost to consumers (that is, voters) will be a major concern for the government and is likely to drive energy policy.

The government is committed to making nuclear new build a reality, but it is not yet certain whether this will result in one new nuclear power plant, or many more. For now the future seems a bit brighter – or certainly less dark than it was two years ago.

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