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Stop Hinkley: How to Waste £Billions

30th July 2016

How to Waste £Billions

The Tory cabinet is dithering over the Hinkley contract. No wonder. It has been described as ‘the most expensive object to be built on earth’. Caroline Lucas calls it “the costliest white elephant in British history.”

How did the government get in this bind? The article below reprinted from December 2015 issue of Labour Briefing, the magazine of the LRC, explains why.

Energy needs are plannable and in the past energy requirements in this country have been provided by publicly owned institutions in a planned manner. That apparatus has been dismantled and energy supply returned to chaos. All the Big Six energy companies responsible for 90% of electricity supply do is bill the customers. They do not regard themselves as being responsible for making sure Britain will have secure energy sources into the future. They rely on the government to put these in place. For their part governments, both Tory and New Labour, have accepted the rule of profit.

The result: the Blair government proposed the Hinkley project in 2006, insisting that all new plants should be privately built and run. It was supposed to start generating electricity in 2017. Now, if Hinkley goes ahead, the earliest electricity could come on stream is 2026.

The guaranteed prices offered to EdF for decades into the future look even more ridiculous since we seem to have a prolonged period of low oil and gas prices ahead of us.  Managers within EdF, including the workers’ representative on the board, fear the firm is biting off more than it can chew. Hinkley C is fundamentally unsound.

As the Guardian pointed out it would be better to invest in renewable energy. “Technology for tidal energy that will come from projects like the lagoons at Cardiff and Swansea is maturing. One of the world’s largest proposed wind farms, at Dogger Bank, off the north-east Yorkshire coast, could challenge the output from Hinkley C…Most effectively, an investment of less than £1bn a year in domestic and industrial energy efficiency would halve demand by 2050.”

But for any of these options to be even considered requires that the energy supply be planned. To do that, we must overthrow the rule of profit and start to plan production. That must begin by taking over the Big Six.

Stop Hinkley
Labour Briefing December 2015

It seems the nuclear reactor at Hinkley Point will go ahead at a price of £24bns.  That’s not the end of the cost to us. To be on the safe side the Tory government is prepared to guarantee the builders an energy price of £92.50 per megawatt hour, rising along with inflation for 35 years. So electricity consumers will subsidise the plant to the tune of at least a further £4.4bns through their bills.

That’s reckoned to be between £150 and £660 per customer for per year for 35 years. Why such a wide variation in the estimates? Because nobody has the foggiest idea how much electricity will cost in 35 years’ time. The hand-out could be even bigger. Independent environmental thinktank E3G reckons the price guarantee could cost us all £45bns over time.

The guarantee price of £92.50 is twice the current price of energy. The Tory offer only makes sense if oil prices (currently about $45 a barrel) soar to $150 and stay there for ever. Nobody believes that will happen.

EdF – state-owned Electricite de France - is building the power station. This firm is being given the privilege of making super-profits from British energy consumers, while Chinese companies are also barging in on the act. Apparently Britain doesn’t have the engineering expertise to build it. What an indictment of the rundown of British manufacturing, construction and skills!

There are big problems with the project in any case. The European Pressurised Reactor (EPR) model for Hinkley Point is experiencing long delays in France and Finland. The plant is supposed to be built by 2025, but the contract allows the builders to overrun till 2033. So Hinkley Point is not going to help out Britain’s current energy needs any time soon. The Tories say nuclear is a ‘green’ option. Tell that to the people of Chernobyl and Fukushima.

How has the government got itself into this pickle? Over the past few years coal fired power stations and the old generation of nukes have been in the process of being phased out. Everyone knew that this would happen and that they needed replacing.  Nobody did anything. As a result there is hardly any excess capacity in the industry, and there is a serious prospect that the lights may go out this winter.

What was needed was forward planning. Energy needs are plannable. Our peak energy requirement, anticipated by the industry, took place in 1990 during the England v West Germany World Cup semi-final. At half time 1m extra kettles went on and an extra 2,800 megawatts of energy were provided. (England lost in a penalty shot-out.)

The reason energy generation is now unplanned is because of the privatisation of the industry. Capitalist politicians like Randolph Churchill in the 1870s knew that capitalists would prosper mightily with the necessary infrastructure. They put in place ‘gas and water socialism’. To begin with the energy industry developed chaotically. By the 1920s there were 70 electricity generating stations in London alone. Gradually the Central Electricity Board rationalised the industry and began the national grid. The work was completed when Labour nationalised 505 generating and supply organisations in 1947 to create a unified industry with a co-ordinated national grid to share energy and plan for peaks. Order out of chaos.

The Tories privatised electricity in 1989. The area electricity boards were captured by private interests, with the instinct to make as much money as possible. Predictably the result was the rise of the Big Six who control more than 90% of energy distribution. EdF is one of the Big Six, with an 11% market share.
Motivated entirely by profit, these firms use their market power to gouge money from consumers and plunge millions, including more than a million households in work, into fuel poverty. They do not invest for the future. Instead, secure in what is effectively their monopoly position, they hold out the begging bowl to the government and squeal for subsidies, as we see. Now EdF has got the main contract for Hinkley Point as well. They are in clover.

The Tories tell us, “We all have to pull in our belts.” Actually they are wasting £billions. They don’t care since it’s our money they’re wasting, not theirs. The fragmentation of the industry and the drive for short term profits make rational planning impossible. 68% of the public think that energy should be in public hands. They are right. It’s high time to take over the Big Six.