Is the UK rolling back free energy markets?

In the UK, the debate over future energy policy is heating up, and the battle lines are drawn over the debate between decarbonization (which includes nuclear) and a focus on renewables. In the process, free-market economics is being tossed out the window – because new nuclear is not bankable. Is the announced approval of new plant construction just a ploy in negotiations over price with France's EDF?

Yesterday, British Energy Secretary Ed Davey announced his approval for the construction of a new nuclear plants, Hinkley Point C. Yet, not everyone seems convinced that the project will go ahead.

British trade union GMB immediately welcomed the announcement, but in a press release it also stated that the government's failure to announce a price for the nuclear power is "bad for investment and jobs." Davey has estimated that some 25,000 jobs could be created.

GMB's argument shows, however, how much support nuclear needs to get going: "The state is required to guarantee the levels of returns on investment for electricity suppliers," writes GMB's Energy Secretary Gary Smith. Back in November, when the Cameron government published its new Energy Bill, GMB expressed its approval of the "partial renationalization of electricity industry." The press release's lead paragraph says it all:

Even the Tories now that recognize that the UK needs a nationalised Central Electricity Purchasing Board, underwriter by the taxpayer and with Government having powers to fix wholesale electricity prices, in order to keep the lights on.

Essentially, the British power market seems poised to move in the direction of the old way of doing business, with corporations relying on guaranteed profits under the monitoring of governmental bodies, which prevent price gouging. A similar discussion is taking place in Germany because of the shift to renewables, and Denmark – which has far more green electricity than Germany does – nationalized its grid years ago.

France's EDF has the go-ahead to build a new nuclear plant in the UK, but the price tag has not been announced. Has an agreement even been reached?

Uschi Dreiucker | pixelio.de

Nonetheless, the discussion itself is further evidence that the free market is not going to bring about new nuclear plants; nuclear is not bankable. Furthermore, the entire debate reveals clearly that feed-in tariffs are not only good for fledgling technologies and are not some special thing for renewables; indeed, they are what the conventional power sector was used to for decades and would like to have again.

It will be interesting to see whether Secretary Davey's announcement of plans approval will turn out to have been a political ploy in negotiations with France's EDF, which is to build the plant. Should the French not accept whatever guaranteed price the British government is willing to offer – and that price will be greater than the price of green power – the deal may yet fall through.

Meanwhile, the UK's Renewable Energy Association (REA) saw fit to remind everyone today in a press release that the cost of renewables "has been responsible for only three percent of the overall 250 pound increase" in household energy costs in the past two years, with the greatest price hikes coming from "fossil fuel price volatility." The same holds true for Germany; while the press seems nervously interested in how the rising cost of electricity will affect the poor, the cost of power has actually risen far less than the cost of natural gas or petroleum. (Craig Morris)