Posts Tagged investment

This week the House of Lord’s Science and Technology Committee published its report “ Nuclear research and technology: Breaking the cycle of indecision”. Weinberg Next Nuclear welcomes the report and agrees with many of its conclusions.

Nuclear has undoubted potential in the UK, but indecision for many years, through successive governments, has impaired progress. Continual delays have damaged both short and long term opportunities, as well as tarnishing the reputation for nuclear in the UK and limiting investor confidence.

Instead, the report argues that the Government “must act now to provide underpinning strategic support to the nuclear industry”. This action can and should be chosen strategically, and the Government can decide to either be a designer, manufacturer and operator of nuclear power itself, or be a destination to operate nuclear reactors designed and potentially manufactured overseas.

The report recommends investment in nuclear research and development, including allocating the £250 million announced by former chancellor George Osborne in 2015 and giving core funding to the National Nuclear Laboratory (see our recommendations for investment in this report). Small modular reactors (SMRs) are one of the areas that have particular potential, with the report recognising they are likely to be “globally important for the future of nuclear energy”. The UK’s experience in this sector, through defence application expertise, gives it the potential to be a world leader. Despite the potential both for the technology globally and the UK specifically, the SMR competition is still delayed. The report recommends the results should be published without delay, and joint ventures with foreign partners to develop the resulting technologies should be considered. Finally the report expresses caution (as we ourselves have done in this blog) on the risks of leaving Euratom as part of the Brexit process without a suitable replacement. Convening a group to plan to preserve the essential benefits of Euratom membership is a matter of urgency as the UK risks losing access to markets, skills and even fuel.

Unless the cycle of indecision is broken, the UK not only risks losing its status as a global leader in the nuclear sector, it also risks development of a secure and sustainable power supply for the future, and even the continued operation of its existing nuclear power plants. Weinberg Next Nuclear hope the Government heed this report, and its recommendations. Following the General Election in June, nuclear power policy should come off of hold and onto fast track.

New Report: The Case for a Clean Energy Alliance

Posted by Suzanna Hinson on January 23rd, 2017

23 January 2017: Clean energy sectors should set up an alliance to shape a supportive industrial strategy.

The British government is today publishing a consultative green paper on a new industrial strategy. It proposes to offer ‘Sector Deals’ to address sector-specific challenges and opportunities. These would “offer a range of support”, including supporting innovation.

The Government highlights that Britain has strengths in research and development of smart energy technologies. And one of the ten” strategic pillars” will be:

“Delivering affordable energy and clean growth. We need to keep costs down for businesses, and secure the economic benefits of the transition to a low-carbon economy.”

In response to the green paper, the Alvin Weinberg Foundation think tank has published a report on The Case for a Clean Energy Alliance. The report argues that:

 

“An Alliance would bring together like-minded organisations – those concerned with energy security, fuel poverty, economic competitiveness, environment, air quality and climate change – to work towards a common goal of decarbonisation. The renewables, CCS and nuclear sectors do already work together on specific issues, through their trade associations. An Alliance would add value by taking a strategic approach, to complement, not duplicate, the tactical co-operation that takes place between sectors already. The Alliance should not be an alternative public voice for clean energy, but rather unite existing voices.”

“The energy industry needs to offer strategic advice to governments on how best to facilitate clean energy. Some competition between sectors is inevitable: public money is limited. Nevertheless, there are significant questions on which competition is neither necessary nor helpful.”[i]

The criteria for judging what is low-carbon should include the full life-cycle of the technology, including land use change. Full members should be trade associations: companies and civil society organisations could become associate members.

Stephen Tindale, Weinberg director, said:

“An active industrial strategy offers a great opportunity for clean energy. To take advantage, different clean energy sectors should work together more strategically. With all the energy challenges of today, now is not the time for sectoral technology tribalism: it is the time for a Clean Energy Alliance.”

Contact: Stephen Tindale

stephen.tindale@the-weinberg-foundation.org

07941 433780

[i] Strategic questions that an Alliance could address include:

  • Should low-carbon energy technologies continue to receive public financial support into the 2020s?
  • If so, how should such support be delivered – through guaranteed tariffs or through grants?
  • Should public money to support clean energy be raised through taxation or through energy bills?
  • How can the operation of the Levy Control Framework be improved in order to increase investor confidence?
  • Is the Contract-for-Difference approach efficient and fair: should it be reformed or would the resulting regulatory instability undermine any potential benefits?”

Weinberg’s response to the Industrial Strategy Consultation

Posted by Suzanna Hinson on September 29th, 2016

A commitment to industrial strategy is welcome, and must include sustainable development, decarbonisation and energy security at its core.

The debate on the extent of state involvement, in reference to climate change and sustainable development, is a valid one. However, the market is far from free. It would only be free if all externalities were included, but they are not. If there was a strong carbon price the government would be able to be less involved, but there will always be a need for some government intervention. Examples of this include research and development for industrial innovation that often requires initial government support.

The government must ensure that the Climate Change Act remains central. It has now been proven that the costs of action on climate change are far less than the costs of inaction (Stern review), with key industry and market leaders in agreement. The CBI says:

Ensuring that we maintain a secure, affordable and low-carbon supply is vital to British business. Additionally, we must continue to use energy more efficiently. The CBI is lobbying for government to provide a long-term, stable policy framework to enable continued business innovation and investment in the UK’s low-carbon transition.[1]

The Governor of the Bank of England Mark Carney said:

The combination of the weight of scientific evidence and the dynamics of the financial system suggest that, in the fullness of time, climate change will threaten financial resilience and longer-term prosperity. While there is still time to act, the window of opportunity is finite and shrinking. [2]

Christine Laggard, of the International Monetary Fund, agreed saying:

If climate change issues are not adequately addressed—if we keep running those nice energy subsidies, if the price on carbon is not adequately set, if policymakers dont have it on their radar screens—then financial stability in the medium and long-term is clearly at stake.[3]

It is thus essential that this significant threat to industries, markets, and the environment is mitigated.

The government also needs to accompany the targets on climate change with action by investing in future solutions. Research and development must continue to nurture infant industries that not only have the potential to benefit the UK’s energy and environmental security, but could also offer exciting new export potential. Initiatives like the Swansea tidal lagoon (a world first), advanced nuclear power including the SMR competition, floating offshore wind farms, Carbon Capture and Storage (CCS) and advanced bioenergy from algae are all great opportunities for the UK to pursue. Until externalities are internalised, low carbon energy industries will often require public financial support. The UK Government should provide this, where necessary, from taxes not consumer bills, and should also stop subsidies to unnecessary high carbon energy, including coal-fired power stations

An industrial strategy should be about developing new industries, whilst providing what existing industries need. Developing sustainable energy options not only consolidates the UK’s position in the growing green economy but also contributes to achieving affordable, sustainable and secure energy that is essential for existing industries. Some options, such as CCS, could give new life to declining existing heavy industry as a new report suggests[4] and development at already approved nuclear sites could help improve the rural economy in those areas. Combining heat and power provision through systems like district heating, also offer promising mutual benefits once the initial investment and development is made.

Industry needs security, but in the uncertainty wrought by the Brexit vote it also needs consistency. Blocking low cost, green solutions such as onshore wind, is unwise. A consistent approach should be used between energy sources. For example, if local communities are not allowed a veto vote over shale gas developments, they should also not be allowed a veto on wind farms. Whatever is decided on veto policy, it should be consistency across technologies.

Similarly, industry needs consistency over time. Regulatory stability and long-term agendas help investor confidence. One of the key mechanisms for delivering regulatory stability was EU membership. In the Brexit scenario that the UK now finds itself in, it is essential that a stable, consistent and long-term approach to policy is developed, to maintain confidence and ensure industrial progress.

The UK must also ensure it stays competitive and open to EU and global markets, whilst also maintaining its leadership in certain fields. One of these fields is emissions. The Industrial Emissions Directive, is a key policy that keep relationships with Europe strong whilst protecting our local and global environment. It is essential that that this, and other environmental initiatives are maintained and strengthened to allow the UK to continue to be a key part of Europe’s sustainable industrial future.

Finally, the UK should take inspiration from around the world. In the USA, Obama’s “all of the above” strategy allows security in energy to be achieved through variety of supply. Germany became a world leader in wind and solar development largely due to its Stromeinspeisungsgesetz law, ensuring a very attractive feed in tariff for renewables. This policy was so successful they now need to invest in storage and interconnection to integrate the renewables into a wider energy system. Sweden’s NUTEK created demand for new technologies with greater energy efficiency by technology procurement and government guarantees for market demands. By keeping abreast of these policy developments elsewhere, and future-proofing industry by investing in sustainability, the UK can ensure it continues to prosper.

A well-designed industrial strategy can propel the UK into a leading role in a number of policy areas, including energy, as well as provide some much needed clarity in the post-Brexit environment.

[1] http://www.cbi.org.uk/business-issues/energy/

[2] http://www.bankofengland.co.uk/publications/Pages/speeches/2015/844.aspx

[3] http://www.wri.org/blog/2013/04/lord-nicholas-stern-identifies-3-obstacles-international-climate-action

[4] http://www.ccsassociation.org/news-and-events/reports-and-publications/parliamentary-advisory-group-on-ccs-report/

Hinkley Point to go ahead

Posted by Suzanna Hinson on September 15th, 2016

The controversial Hinkley point C in Somerset has finally been given the go-ahead by the government. The Department for Business, Energy and Industrial Strategy said,[1]

“the Government has decided to proceed with the first new nuclear power station for a generation. However, ministers will impose a new legal framework for future foreign investment in Britain’s critical infrastructure, which will include nuclear energy and apply after Hinkley.”

The decision in July by Prime Minister Teresa May to stall and review the £18 billion project, planned to produce 7% of UK electricity, shocked the industry. The ensuing debate was weighty and is unlikely to subside as the “white elephant” project goes through its expected 10-year construction.

The questions and concerns over the project are wide ranging. The strike price is high, and many are worried about being committed to expensive energy for many years, whilst other options get increasingly cheaper. There are also concerns over the foreign investment, particularly that of the Chinese. New Nuclear Watch Europe dismissed this security issue in their recent guest blog for Weinberg Next Nuclear.[2] The government’s “new legal framework” supposedly addresses some of the financial and security concerns though the opposition has called it “window dressing”.[3] Perhaps the main concern is the technology. The European Pressurised Reactor, planned for Hinkley, has encountered extensive problems where it has been built in France and Finland and to a lesser extent in China. It has not yet been delivered on time or on budget anywhere.

In response to the news, Weinberg Next Nuclear’s director Stephen Tindale said,

“The EPR is not the most promising reactor design – very complex and so very expensive. But now that the Government has decided to go with the EDF proposal, I hope Hinkley Point C is built as quickly as possible, without major problems and without going significantly over budget. And Secretary of State for Business, Energy and Industrial strategy Greg Clark can now turn his attention to other nuclear projects: those at Wylfa and Moorside, the Small Modular Reactor competition and some advanced nuclear reactors to use spent fuel and plutonium as fuel.” 

Weinberg Next Nuclear previously reported and wrote to Greg Clarke, that there are more promising nuclear technology options than Hinkley. However we also strongly believe that new nuclear is necessary to mitigate the energy and climate crises. As such, we now hope Hinkley’s progress goes as smoothly as possible to provide much needed low carbon electricity, whilst advanced nuclear options continue to be pursued to ensure the UK has a bright nuclear future.

 

[1] https://www.gov.uk/government/news/government-confirms-hinkley-point-c-project-following-new-agreement-in-principle-with-edf

[2] http://www.the-weinberg-foundation.org/2016/09/07/theresa-may-has-nothing-to-fear-from-foreign-investment-in-nuclear-a-guest-blog-by-tim-yeo/

[3] https://www.theguardian.com/uk-news/2016/sep/15/hinkley-point-c-nuclear-power-station-gets-go-ahead

Theresa May has nothing to fear from foreign investment in nuclear. Here’s why…

New Nuclear Watch Europe (NNWE) was established under my chairmanship at the end of 2014. Its purpose is the promotion of new nuclear capacity across Europe and further afield.

As such, although an industry funded body, NNWE is not a trade body but more a campaigning organisation. Our philosophy and core principles are described in more detail on our website: www.newnuclearwatch.eu.

Our starting point is that tackling the challenge of climate change requires almost total decarbonisation of the electricity industry by the middle of this century. That goal can only be achieved with a substantial contribution from the nuclear industry. Nuclear power is therefore an important element in the energy mix in many countries.

However, in addition to being a reliable, low carbon and very safe source of electricity, nuclear must also show governments, taxpayers and consumers that it offers good value for money. This is necessary because of current unusually low gas prices and falling costs in renewable technologies such as solar and wind power.

In Britain, controversy has surrounded the high strike price which the Government has agreed for Hinkley Point C (HPC). What appeared a reasonable deal during negotiations four years ago, when the cost of alternative sources of electricity was much higher, looks less competitive now.

In addition, EDF’s continuing technical problems with the EPR have created doubts about when, or even whether, HPC will actually come on stream. Against this background, NNWE has argued strongly for consideration to be given to alternative cheaper nuclear technologies.

However, any fresh setback at HPC will be seized on by opponents of nuclear as evidence of the industry’s inability to deliver new capacity. We have therefore supported the project, even though the value of the baseload power it can provide will be less if further technical delays occur. We have suggested that a reduction in the price should be sought if HPC is not in production by 2025.

Nuclear will certainly have been high on the agenda for the bilateral meeting between President Xi Jinping and Prime Minister Theresa May last weekend in the margins of the G20 summit in the lovely old eastern Chinese city of Hangzhou.

Various explanations of the last minute intervention by the Prime Minister to review the HPC agreement have been advanced in the last few weeks. One of the most common – though least rational – advanced by some people who ought to know better is that foreign ownership of a nuclear power station exposes British consumers to the risk of blackouts.

There are two serious flaws in this theory. The first is the inability of its proponents to explain the circumstances in which it would be in the interests of China, or any other foreign owner, to shut down a nuclear plant on whose construction they had just spent billions.

Nuclear power is more capital intensive than almost any other form of energy. All of the huge investment required has to be made upfront during the construction period. This means that almost a decade passes before any return at all is earned on these massive capital outlays, and a second decade will go by before the project produces a net surplus.

A malignly motivated plant shutdown would therefore be financially catastrophic for any foreign investor. Equally important in this case, it would destroy any possibility of future Chinese investment in infrastructure assets in western countries, effectively closing the door on profitable opportunities in many of the world’s most attractive markets.

Furthermore, no commercial objection could be raised to including in the contract a provision that if the generation of electricity from a nuclear plant is halted by the owners for political rather than operational reasons, the reactor could be taken over by the British government without compensation being paid.

The second flaw in the theory is the ineffectiveness of action to stop electricity production. Although the loss of as much as seven percent of the nation’s supply would be uncomfortable and strain capacity for a while, it would not paralyse the economy as effectively as interference in some other foreign controlled infrastructure would.

For a start, other generators would increase their output. Additionally, by the late 2020s, the earliest possible completion date for Bradwell, the nuclear plant which China hopes to control, the capacity of interconnectors to import electricity from continental Europe will be much greater. National Grid could also ensure that the burden of any shortages was shared by consumers nationwide.

Contrast this with the devastation which would result from a closure of, for example, UK Power Networks. This company delivers electricity to the premises of millions of users in southeast England including the whole of London.

Few people have heard of this crucial infrastructure company. It rarely receives attention from the popular media because it does not send bills directly to domestic consumers. Its ownership by a company based in Hong Kong has been accepted for years, without a murmur of protest from the people now clamouring to block Chinese investment in Hinkley.

Yet at the flick of a switch UKPN could impose a total blackout on London. This would inflict far more devastating consequences than the loss of a single nuclear plant could ever achieve. The economic damage alone would be incalculable and there wouldn’t even be a minority British shareholder to protest.

This is not intended to raise any alarms. In my view it is inconceivable that UKPN would ever act in such a harmful and irrational way because it has much more to lose than to gain. But the same arguments apply to other foreign investors too.

So when the Prime Minister discusses these issues with her counterparts, let her concentrate on real concerns such as cyber security, completion date guarantees and proportions of localised supply chain work. These are legitimate subjects for negotiation. Fanciful notions of malign plant shutdowns are not.

The importance of settling the Hinkley question swiftly goes much wider than nuclear, wider even than the whole energy sector. Until the present uncertainty is resolved, every infrastructure investment in Britain is affected because all investors hate uncertainty.

The inevitable consequence is that prospective investors will seek higher returns from any investment they make in Britain. The cost of those higher returns will fall entirely on British consumers.

For that reason, let’s hope that the Prime Minister enjoys a cup of China’s finest tea beside the scenic West Lake with her host President, and returns home determined to get the best deal for the British people. One way to do that is to maintain, on this issue at least, her predecessor’s welcome for responsible foreign investment into Britain and its energy industry.

Tim Yeo was Conservative MP for South Suffolk from 1983 to 2015. He now chairs New Nuclear Watch Europe and the University of Sheffield Industrial Advisory Board for the Energy 2050 initiative. As an MP he served as Shadow Secretary of State for Trade and Industry (2002-03, Chair of the House of Commons Environmental Audit Select Committee (2005-2010) and Chair of the Energy and Climate Change Select Committee from 2010-2015.

Guest blogs represent the views of the author(s), and not necessarily the views of Weinberg Next Nuclear.

New Nuclear Watch Europe (NNWE)
www.newnuclearwatch.eu | @newnuclearwatch | contact@newnuclearwatch.eu

Fast reactors front-running in Russia

Posted by Suzanna Hinson on February 2nd, 2016

In December, Russia began generating more electricity from nuclear power as Unit 4 of the Beloyarsk plant in Sverdlovsk was connected to the grid. The new addition is a BN-800 fast neutron reactor with a capacity of 789MWe making it the world’s second most powerful fast reactor. It is fuelled by a mixture of uranium and plutonium oxides and, as a breeder reactor, produces more fuel as it burns.

The connection of the reactor has been heralded as an outstanding event for the Russian nuclear industry as it is the first of its kind to be launched in 35 years. Andrey Petrov, general director Rosenergoatom (a subsidiary of Rosatom) said that although the fast reactor had presented challenges the achievement marked “another important step in the transition of Russia’s nuclear industry to a new technology platform”.

In line with the aim, last week the Russian energy ministry approved Rosenergoatom’s 2016-2018 investment programme, allocating the equivalent of almost $7 billion to the civil nuclear power plant operator. It is thus likely that there will be more developments and achievements in Russia’s nuclear industry to come.

 

http://www.world-nuclear-news.org/NN-Russia-connects-BN800-fast-reactor-to-grid-11121501.html

 

http://www.world-nuclear-news.org/-Russia-allocates-7-billion-to-reactor-operations-over-three-years-20011601.html

Chinese nuclear on British shores

Posted by Suzanna Hinson on September 28th, 2015

A landmark agreement on increased nuclear co-operation between the UK and China is likely to be concluded next month, when President Xi Jinping visits London. In preparation, last week Chancellor George Osborne went to Beijing and announced that the British government will provide a £2 billion underwrite for Chinese investment in the proposed EPR at Hinkley C power station.

Weinberg Next Nuclear does not think that an EPR should be built – at Hinkley C or anywhere else – for reasons explained in our last blog. However, in return for the funding, the UK-China agreement is also expected to open the door for two Chinese state companies, China General Nuclear and China National Nuclear Corporation, to build a new nuclear power station at Bradwell in Essex. Weinberg Next Nuclear asked the Department for Energy and Climate Change what type of reactor this would be but they were unable to enlighten us further. However, some contacts have suggested that it is likely to be a Chinese version of the AP1000.

If this is correct, it does represent some progress. The AP1000 is not an advanced nuclear reactor but it is a superior design compared with the EPR. Nugen, a consortium between Toshiba and ENGIE (formerly GDF Suez), plans to build an AP1000 at Moorside, Cumbria. Another AP1000 would be a welcome addition to the UK’s generating capacity – and has much more chance of being built on time and on budget than an EPR does.

 

 

Steenkampskraal Thorium Limited, a South African company pioneering thorium-fuelled gas-cooled pebble bed reactor design seeks funding with target to build and commission within 5-10 years

http://africanheraldexpress.com/blog7/2012/09/27/steenkampskraal-thorium-limited-seeks-funding-for-thorium-plant-project/

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