It's been more than half a century since the world's first civil nuclear power station, Calder Hall, was built in the northwest of England and once again, Britain is relying on public funding to launch a £16-billion ($26.6-billion) nuclear power project. This time, however, the backer is not the British state – EDF, the French state-controlled power company has stepped into the breach with two Chinese state-owned power companies. China General Nuclear Power Group and China National Nuclear Corp are together taking a third of the financial risk.
Britain is getting a badly-needed boost to its power grid – the twin Hinkley Point reactors will supply 7 per cent of Britain's energy – while shifting the exposure onto the balance sheets of France and China. It sounds clever, except that consumers must bear the price risk. Britain is guaranteeing EDF and its Chinese partners an electricity price of £92.50 per megawatt hour for the next 35 years, roughly double the current wholesale price of about £55.
If at any time the wholesale power price falls below the agreed strike price, the government pays the difference, funded by a levy on consumer bills. If the wholesale price is higher, EDF pays back the difference. It's a hefty premium and the Labour opposition are already screaming about the high cost of energy, but without this deal, Britain could be much worse off. The favourite energy of the Left and the Greens is offshore wind, mandated by government diktat and costing £150 per megawatt hour.
No one has a clue what the price of electricity, gas, coal or uranium will be in 10 years time, let alone 30 years, but it's not unreasonable to assume that it will be a lot higher than today. In the mid-eighties, the oil price was below $20 (U.S.) per barrel – about $35 in current value. More importantly, we also know that game-changing technologies that transform markets don't emerge more than once in a generation.
Consider our energy universe – all of the electricity-generating technologies used in the world today existed in one form or another in the 1950s. Calder Hall was opened by the Queen in 1957. Nuclear power engineering has become more sophisticated and safer but there have been no great technological leaps and the cost of building nuclear plant has suffered terrible inflation. Solar power, using photovoltaic cells, was also developed 60 years ago. Coal, oil and natural gas have been around for more than a century and as for wind turbines – the pet technology of the neo-medievalists – who knows who built the first windmill?
The world desperately needs a cheap and safe nuclear energy solution, but little effort or money is being spent to develop such technology. It is a measure of the paucity of our political vision that governments would rather rob consumers by forcing them to pay heavily to subsidize archaic technology rather than spend tax dollars on research into something truly novel. It may be that the next game-changing energy technology is still decades away, but if we are prepared to guarantee the electricity price for 35 years, we can surely throw a billion or two at cheaper nuclear power.