Cameron’s nuclear option

A small moment of controversy at yesterday’s Scottish Renewables conference concerned nuclear power.

Guy Doyle, Chief Economist of the Energy Unit at Mott MacDonald, presented findings from a major research project on the costs of various sources of energy. As he said, this is a very inexact science given the range of important unknown variables like the cost of oil and gas, improvements in renewable technologies, the upfront cost (including cost of capital) of new power stations, not to mention heated debate over the externality costs which should be attached to different forms of energy. However, using the most robust assumptions available, Doyle argued that new nuclear still looks like one of the cheapest sustainable energy sources in the medium (2020) to long (2050) term.

In questions a young woman asked: ‘given that Siemens have pulled out of the nuclear industry and given the problems France is having with its attempts at new nuclear, aren't the industry’s prospects and any hopes for new cheaper, safer types of nuclear swiftly receding?’. Doyle responded by saying that Russia, China and South Korea all seemed to have quite economical nuclear for their home market, but the question remains over whether a combination of public opinion, stricter regulation and access to investment funds might kibosh plans for an expansion of nuclear in the UK.

No doubt the questioner will feel her doubts have been confirmed by today’s news that EON and RWE have withdrawn from the project to develop a new nuclear power station for Anglesey. As Robert Peston points out, the Coalition’s reaction - which is to argue that the other projects are still on track – may be too sanguine.  The nuclear sector wants more certainty about future income streams, but certainty is something in short supply right now.

Much in the energy sector is on hold until the conclusion of the Government’s already delayed Electricity Market Review. The review has to achieve the difficult balancing act of keeping prices (and subsidies) down, while securing supply and delivering on carbon reduction targets. The sector and its investors say they want predictability above all. But the more the Government provides long term price guarantees the greater is the danger of tying itself into unnecessary cost when prices, stocks and technologies change.

Standing back, there is a connection between the nuclear story and lengthening queues at petrol stations. Our immediate need for energy is absolute and visceral. In the short term, we panic and protest if we think we will be without fuel, and even minor power cuts are a reminder of the utter dependence of modern life on the steady flow of energy.

As a policy problem, energy is one of the toughest containing many of the ingredients for challenging decision making; acting for the long term, managing unquantifiable risks, balancing public private collaboration with the need for competition etc. Public attitudes pose another difficulty; policy makers face unrealistic expectations and under most scenarios need to encourage significant behaviour change, particularly around demand management. Yet the energy debate tends to be dominated by energy wonks, vested interests and people sitting astride a very big hobbyhorse (peak oil conspiracy theorists on the one side, pathological wind farm haters on the other).

I had a brief deep dive into energy during my time in Number Ten when Tony Blair decided it was a key strategic priority (this was the beginning of a shift in official thinking about nuclear). This convinced me both that energy – clearly and honestly explained - is an issue which can engage any thoughtful citizen and that raising public awareness is an important part of element of making good policy.

As David Cameron tries to put Number Ten lasagna and Gregg’s pasties behind him, and perhaps seeks to place the fuel 'crisis' into a wider perspective, he could do worse than making energy policy a major public talking point.