Ambition but no guarantees in the government’s energy infrastructure wish list
The government today unveiled its latest plans for updating the UK’s energy system in its new national infrastructure plan. The 145-page document outlines plans for over £375 billion worth of new railways, roads, waste disposal units, and power plants. The brightest of the promised new energy jewels is a new nuclear plant to be built in Anglesey, Wales.
Chief Secretary to the Treasury Danny Alexander announced the plans with glee, saying the plan showed that “Underground, overground, on shore, offshore, wired or wireless, tarmac or train track. You name it, we’re building it right now.”
But – without wishing to undermine Mr Alexander’s impressive Womble impression – today’s announcement is just the start of a very long process, with many hurdles to hop, before the plans come to fruition.
New nuclear on the Horizon
Today’s news that the government signed a ‘memorandum of understanding’ with Japanese technology company, Hitachi, and UK-based developer, Horizon, to build a new nuclear plant grabbed most of the headlines. But today’s agreement is just the first step on a very long path to get new nuclear power flowing out of northwest Wales.
The government has today agreed “in principle” to underwrite the loans needed to get the nuclear plant built. It hopes the news will bring down the costs of borrowing for Hitachi and Horizon, lowering the overall cost of building the plant.
But exactly how much the plant will cost – and how many billions of pounds of investment the government will be guaranteeing – is yet to be confirmed. The government said today’s announcement was a precursor to a further agreement with more precise costs by the end of 2016.
Assuming the Hitachi-Horizon project is on a similar timeframe to the government’s recent high profile nuclear deal to build a new plant at Hinkley Point, it could be another decade or so before the Anglesey plants come online.
It took the government 12 months to agree a guaranteed price for the electricity from the Hinkley plants, owned by ‘big six’ energy company, EDF. It’s thought the government’s offer to guarantee EDF’s loans to the tune of £10 billion was a necessary precursor to that deal eventually being struck.
It’s possible the government has learned from that experience, and it will be easier to get the Hitachi-Horizon contracts confirmed. But even with the negotiations over, EDF’s plants aren’t expected to be generating electricity until 2023 – and construction on those plants has already started.
And the complications don’t end there. The European Commission is currently investigating whether the EDF deal violates EU state aid rules. If it decides the government is unfairly favouring the nuclear industry, the UK’s nuclear plans could be back to square one.
So all in all, the new plant is not likely to materialise any time soon, despite Danny Alexander’s optimism.
Other energy goodies
Given that most of this morning’s headlines focused on the new nuclear deal, you could be forgiven for thinking the government has forgotten all about the UK’s other energy sources.
Not so: the infrastructure plan identifies a number of other “high priority” energy projects – as the table below summarises:
Image - NIP table, DEC13 (note)
Source: Government National Infrastructure Plan; table by Carbon Brief
Nine gigawatts of wind power currently has planning consent, with construction yet to start. It remains to be seen what happens to those projects now the government has announced new strike prices for renewable energy, with onshore wind one of the losers.
It’s notable that there’s also 16 gigawatts of new gas plants currently in the planning stages. That announcement comes after a government report in July suggested a greater amount of new gas capacity (35 gigawatts in all) might be needed by 2030.
The government maintains it’s investing in a diverse energy mix, and the infrastructure plan seems to back up that claim.
Wish list
It seems apt that the government has published this energy wish-list as children across the land prepare their Christmas lists for Santa. It’s important to note that all of the projects are ‘in the pipeline’ and are at various stages of planning – far from being 100 per cent confirmed.
It says the free market should sort out which of the shiny, new projects are best value for money. But the government’s inevitable involvement in getting the projects off the ground – by underwriting loans, for instance – means this will no doubt be open to dispute.