UK nuclear power plant builders want higher carbon tax

Australian government members harbouring a not-so-secret fantasy to see nuclear generation in Australia can add another major offence to its principals that such projects would require.

The Telegraph in the UK is reporting that EdF, the mostly French government owned nuclear giant that is proposing to build the $26 billion Hinkley Point C, is now pushing the UK government to increase its carbon tax so the financials for the first nuclear plant in the UK for nearly three decades adds up.

As Centrica (formerly British Gas) chairman Sir Roger Carr noted last year when pulling his company and its 500 million investment out of the consortium: “Nuclear is not a cheap option.”

It also requires massive subsidies. The Hinkley Point plant requires a guaranteed tariff of £92.50/MWH ($170/MWH), that is twice the wholesale price in the UK and about four times the price in Australia.

And Hinkley also requires a massive loan guarantee (£10 billion) to cover the cost of building the plant. The European Commission is currently investigating the deal struck between EdF and the UK government to see if the subsidies are illegal. It noted in a 70-page interim report published in January that the total subsidies of £17 billion amount to more than the cost of the plant.

EDF had been expected to announce a final investment decision on the plant in July, but the Telegraph reports that this will now not be met. It cites the EC investigation and concern that the UK will put a cap on its nation carbon tax, which it applies to the electricity industry (and is over and above the EU carbon price).

“EDF is also lobbying strongly against a long-term freeze of the UK’s rising carbon tax, which it fears would weaken the case for Hinkley by pushing up the bill for direct subsidies for the plant,” the Telephraph writes.

“EDF – whose existing nuclear power plant fleet would also benefit significantly from the rising carbon tax – is understood to be urging the Chancellor to guarantee that any freeze would last no more than a two years and that the tax would then revert to its upwards trajectory.”

The company, which is still in talks with potential investors to take stakes in the Hinkley Point project, also argues that a policy u-turn on the carbon tax would damage the UK’s attractiveness.

This is interesting stuff for Tony Abbott’s conservative government. Many of his advisors favour nuclear, the nuclear option will be canvassed in the upcoming energy white paper, and some members, such as the climate-denying, would-be science minister Dennis Jensen, suggest that car workers could be retrained to run nuclear plants.

Apart from the improbability of that last suggestion, it seems clear that if Abbott was ever to entertain nuclear as a serious option – it could only do so by abandoning the idea of a cheap fuel source, accepting the need for loan guarantees, and for a carbon price.

May be they should just focus on what they have got – ironing out the cost absurdities in network pricing and building its renewable energy portfolio.