‘A very good deal for Britain,’ is how Ed Davey described the contract with EDF and Chinese backers to build a new nuclear power station at Hinkley Point in Somerset, when it was signed back in October. Yesterday, it became clear just how wrong the energy secretary was when Ineos chief Jim Ratcliffe revealed on the BBC that his company has just agreed a similar deal to build a nuclear plant in France – but at a strike price of 45 Euros (£37.94) per MWh rather than the £92.50 per MWh which the government committed the consumer to paying for energy from Hinkley Point. Think of the very worse PFI deal signed under Labour and multiply it: the consumer will still be paying that hugely inflated strike price 35 years after the plant opens in 2023.
We are going to see a lot more of these bum deals over the next few years, or at least until Britain remains committed – as it is under the Climate Change Act 2008 – to slashing carbon emissions by 80 per cent by 2050. As was revealed at the Spectator Energy Conference a fortnight ago, old coal-fired power stations are closing at such a rate that Britain’s generating capacity next winter will be down to just two per cent above peak demand. And that was before the likely closure of the Eggborough power station in South Yorkshire – itself responsible for generating four per cent of the country’s electricity. The lights do not need to go out, but there will be more rushed deals between government and power providers, with consumers paying the price. As for heavy industry, it isn’t going to stay in Britain and suffer.
Deals such as that at Hinkley make nonsense of the government’s attacks on Miliband for proposing to fix retail energy prices. If it is ‘socialism’ to try to fix retail prices, why is it any better to fix wholesale prices through guaranteed strike prices?
The tragedy is that none of it needs to happen. If the government had left electricity generation to the market, with just the nudge of a reasonable carbon tax, we would by now be in the midst of a gas boom – and, like the US – would be enjoying rapidly falling prices as well as falling carbon emissions from the replacement of coal plants with gas plants.
It will of course take time for British shale gas supplies to come on stream – at least two years. But in the meantime there is an alternative solution: to import liquefied shale gas from the US. The much-maligned Ineos could be part of this solution. Its plant at Grangemouth – very nearly closed in an industrial dispute with Unite in October – is the first in Britain to have the facilities for importing US gas shipped across the Atlantic.
The only obstacle is the Climate Change Act, whose unilateral targets are doing nothing for the plant but everything to damage British industry. Never did a piece of legislation pass through the Commons with so little opposition – just four MPs voted against – and yet proved to be such an error.
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