Hinkley Decision Shows Costs of Being Poor, Weak and Indecisive
Today’s announcement that Hinkley C has been given the green light is good news. We will still need base-load power in the 2020s and nuclear is the cleanest and most reliable source of those precious electrons.
The trouble is that it’s late. Very late. All the projections suggest that 2015-20 will be a difficult period for UK power capacity. By 2020 it is hoped that energy efficiency improvements and increased renewable and new gas plant should see the situation improving. We’ll still need it, but it would have been a lot more useful if it had been delivered five years earlier.
And it so easily could have been. Strategically, a decision on new nuclear could have been taken as soon as we closed the pits and North Sea gas started running out. In the nineties we should have been making firm decisions about sites like Hinkley as we decided what to do to replace our retiring nuclear plant, let alone coal plant that would become obsolete.
Yet new nuclear was only publicly accepted by Tony Blair in 2005. Even then, a quick move could have allowed Hinkley to have an impact in the crunch period 2015-20.
Instead the uncertainty of a botched consultation and lack of political bottle meant the general proposal for a new nuclear plant at Hinkley was only approved in principle in 2008. It has taken five more years to get from a general nod to a specific approval.
When we are talking about 7% of the UK’s electricity supply, in the context of an aging fleet, an eight year delay is extraordinary.
Even excluding increases in the cost of capital, that delay has been painful:
1. The lead developer – EDF – has had to spend a reported £1m a day to keep the project going pushing up the overall costs of the build.
2. As generation options have fallen away, and starved of public finance by the crisis, the UK government has been left in a corner. A £92.50 strike price was the only way to secure the investment. The bill-payer will pay the price of a our inability to do a deal when we weren’t quite so desperate.
3. Lack of political delivery has seen a ‘British’ minority stakeholder – Centrica – exit, to be replaced by the Chinese state. If we had got on with it UK shareholders (pension funds) would benefit from the eventual profits. As citizens we may also feel less like our country is increasingly becoming a business park to host projects to generate returns on foreign capital.
(as an aside, the legal bills run up by the government while new nuclear has been kicked around must also be spectacular.)
And the waiting is not over yet. There is still a final investment decision to get through, and delays constructing similar reactors in Finland, France and China suggest that a construction phase of ten years is very optimistic.
This government should be congratulated for getting new nuclear out of the starting blocks. But the delays and uncertainty of their predecessors will cost us.
As we see prevarication on a number of strategic infrastructure projects we should learn the lessons from the new nuclear experience. The Olympics showed us that when faced with a deadline and when politicians are forced to show a bit of guts, Britain can deliver big projects.
Whether it’s HS2, renewables or housing developments, strategic political leadership and vision along with a proper sense of urgency must be the order of the day. These qualities will help ensure we do not lapse into expediency now only to pay a far greater price to take the same action later.