Nuclear

As the smoke of briefings from the government PR machine clears, the shape of the deal to secure the development of the new nuclear station at Hinkley Point in Somerset is becoming clearer. As mere consumers we are not allowed to know the full facts – that privilege is given, it seems, only to the companies involved and the French and Chinese governments. But we can piece the story together. Read more

Any new graduate wanting to learn about how companies should handle tough public policy questions should study how the energy companies have responded to Ed Miliband’s proposal to freeze utility prices in his party conference speech three weeks ago. Their actions and comments have been a masterclass in how to make a difficult situation worse.

We have had a mixture of denial (“they’ll never get elected”, “he didn’t really mean it”, “the lawyers will stop him”), mindless abuse (“I don’t think people want to live under Stalinism”) and fear tactics which usually mention the prospect of the lights going out. No one in the industry has bothered to think about why Mr Miliband’s comments have proven so popularRead more

The German election later this month might seem to be about to produce more of the same. On the eurozone currency crisis – as Quentin Peel wrote in the Financial Times a couple of weeks ago – the expectation of a big reform plan once Angela Merkel wins re-election has given way to the realisation that nothing much will change unless the markets force a radical response. Austerity and crisis management are the watchwords, and only a major event such as a collapse in the credibility of Italian debt repayment will force Germany to address the need for a full-scale resolution of the problem. That could involve the creation of a tighter EU core, or a reluctant acceptance that the euro as designed cannot work without a backstop funding mechanism in the form of Eurobonds. Nothing in the election campaign has provided a clue as to which of these alternatives will prevail.

Similarly on energy policy the election is beginning to look like a breakpoint which could have wide implications across Europe. But the direction of change remains uncertain and dangerously dependent on the precise make up of the next coalition government. Read more

The Chinese, as reported by my colleague Guy Chazan, are in talks with EDF on sharing the costs of building the new nuclear plant at Hinkley Point in Somerset. Their price is an unspecified “degree of control”. The Russian company Rosatom announced a couple of weeks ago that it was considering joining the game with the aim of building future nuclear stations in the UK. Perhaps we should be grateful that such nice people have taken an interest in the UK’s energy needs. But before we roll over in gratitude perhaps we should consider the links between energy and security. Read more

You have to feel very sorry for the vast majority of the companies who make up the world’s nuclear power industry. Westinghouse, CANDU, EDF and many others have all run overwhelmingly safe operations free of accidents for many many years. The companies have extended the lives of existing plant and spent tens of millions on plans for new capacity – in the US, the UK, Russia and some parts of the developing world. In many of these countries, the old fears of nuclear power had been tempered or removed. Even parts of the green lobby had embraced nuclear as part of the solution to climate change.

But now all that progress is once again vulnerable to the weakest link. Tepco. Read more

Can anyone really predict what the world’s energy market will look like in 2040? Many certainly try – including companies and governments – but they don’t deserve to be taken too seriously and certainly shouldn’t be the basis for decision-making. Read more

Nearly. That was my summary of the state of negotiations between the UK government and EDF on new nuclear last month. Nearly but not quite as comments by Ed Davey over the past week make clear. The government had hoped to make a positive announcement before the summer but it is now looking at the prospect of more months of further talks. A deal, intended by ministers in London to represent a final offer, was put on the table four weeks ago. EDF in Paris, where all the energy company’s decisions are made, has failed to respond.

Frustrated by the unwillingness of EDF to engage, the government, which wanted to do a deal and thought an agreement was possible after the last Anglo-French summit in May, has now effectively stepped back and is talking to other possible suppliers. Read more

At the last meeting of the President’s Committee of the CBI, the British employers’ association, members were asked to name the two biggest problems their companies faced. The answers were the skill levels of their recruits and energy policy – the chronic indecision of Whitehall which leaves investment frozen, prices rising uncompetitively and Ofgem warning about blackouts.

A few weeks ago at an Anglo Indian business summit one British bank Chairman warned the Indians that while an Indian energy strategy was clearly needed, the worst example they could follow was the UK model. Meanwhile on the serious side of Whitehall, there is increasing talk of a pre summer reshuffle to strengthen the Energy Department and even mutterings about abolishing the separate Ministry entirely and merging its functions back into the the business department. Read more

If Samuel Beckett had made Godot a woman he would have called her Angela. That is the joke in Berlin where every policy is on hold and everyone – from the members of the Eurozone to the prospective nominees for the new European Commission – is waiting for Angela. And she in turn is waiting for the results of the election on September 22nd. Then and only then will we know the shape and balance of the next coalition Government. The result is a period of deep uncertainty, not least over energy policy which is frozen by indecision. Read more

As the FT reported on Friday, negotiations on the terms for new nuclear have advanced and there is increasing optimism that a deal can be done. The meeting between David Cameron and Francois Hollande in Paris two weeks ago amounted to a declaration of agreement in principle. Just three issues remain to be resolved. Read more

Behind the continuing negotiations on new nuclear in the UK one big question remains unanswered. Who is going to pay? Senior officials are concerned that the pressure to close a deal is undermining a sensible negotiating strategy by separating the terms – including the strike price and the issues of risk allocation – from the question of funding.

To grasp what is happening you have to understand the degree of desperation which now exists in Government to deliver growth. Growth is the justification of the whole economic strategy and of course the solution to the challenge of rising borrowing. Growth is seen as the only platform from which either coalition party can go back to the electorate. But growth is elusive and time is running out. Read more

Burbo Bank Wind Farm, River Mersey
Finally, the UK’s energy policy is taking shape after months of confusion. At its heart is a realisation that, while some decisions are urgent, others can wait. Time and timing matter. The approach is practical as well as political but it won’t suit everyone. And it leaves the biggest issue of all – climate change – unresolved. Read more



The sanctions imposed on Iran are not working. The Iranian economy is in a mess with shortages and inflation. But, as a very interesting paper just published by Patrick Clawson of the Washington Institute shows, it is not collapsing. Non-essential imports have been cut back and a range of exports – including minerals, cement and agricultural products – are actually growing. Iran’s main trading partners are Iraq, China, the UAE and India. Unemployment is high and no one believes the official figures, but it is probably lower than that of Spain. And, most seriously, oil sanctions are breaking down.

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Is it possible that while one Whitehall Department is constructing a “secret” crisis centre to deal with cyber attacks, another located less than a quarter of a mile away is preparing to sell part of the UK’s national infrastructure to the very people behind those attacks?

The establishment of a cyber security centre was reported by the FT last week. Anyone who doubts that its primary focus is the Chinese should read the report produced a couple of months ago by the specialist US consultancy Mandiant.

The company identified attacks originating in a building occupied by the General Staff Department of the People’s Liberation Army in Shanghai which had targeted 141 companies across 20 major industries. China has denied official involvement but has not yet agreed to stop the attacks.

Unfortunately no one seems to have mentioned these developments to Ed Davey, energy secretary, or EDF, the company which wants to develop new nuclear power stations in Britain. If the price and risk allocation for that deal is agreed, and Mr Davey has said that agreement is close, the next question is how the deal will be funded. EDF does not have the capacity to find the £14bn required and so has been looking to Chinese partners to provide much of the cash. Read more

Sizewell A (left) and Sizewell B (right), two generations of British nuclear power on the Suffolk coast

Sizewell A (left) and Sizewell B (right), two generations of British nuclear power generation on the Suffolk coast

Why is it proving so difficult to close the deal on new nuclear in Britain? In part, of course, there is the normal arm wrestling negotiation. This is focused on the so called “strike price” – an energy price below which the suppliers will get compensation from the state – and on the allocation of risk around a £14bn construction contract.

The UK government wants a strike price of around £65 to £70 per MWh which is high but probably politically defensible. They well remember that in 2008 EDF talked about a price of £45 per MWh. EDF now wants something between £95 and £100, but they can probably afford to accept the Government’s figure and still make a reasonable profit.

The allocation of the risks is even more important than the strike price. Unless the Government is careful it could end up pay enormous sums for capacity which is underused because cheaper supplies will be available to consumers. If the company gets it wrong, a bad deal would overhang its finances for decades. Read more

A number of well-sourced reports over the past two days suggest that, as predicted, we are on the edge of a deal for the construction of new nuclear power stations in the UK.

The champagne corks however are not quite popping either in Whitehall or in Paris. Read more

Getty Images

The negotiations between the UK government and EDF over the contract terms for new nuclear development continue. As well as a sizeable gap on the strike price there is also disagreement on the distribution of risks. In some ways this is just a normal negotiating process but behind the meetings and the attempts at news management are two questions.

The first is whether the UK really needs new nuclear. Read more

EDF faces probe into its relations with China. Getty Images

A new inquiry instigated by the French government into the international activities of the French nuclear industry poses a new challenge to the UK’s plans for a new generation of nuclear power stations. Further delay in reaching a final decision seems certain.

The formal inquiry, established just before the New Year, will be undertaken by the powerful Inspection Generale des Finances. The inquiry is sector wide and focused on potentially inappropriate transfers of protected technologies through the international partnerships developed by the nuclear companies. But according to the French press the inquiry is directed specifically at EDF and its relationships in China. Read more

Government plays at panto with energy policy. Getty Images

And so the UK energy policy saga continues. Recently it was all wind and decarbonisation. Now it is about gas and shale.

Each step is presented as the answer – definitive and final – but behind that rhetoric is the slippery suggestion of another review of the policy in 2016, which makes everything decidedly temporary.

In the Department of Energy and Climate Change itself, pantomime season has come early this year. Jack and the Wind Turbines will be performed by an all-star cast. Young Greg, played by Kenneth Williams, and followed everywhere by a small dog, goes around planting windmills – “look behind you, there’s another”. He is followed around by the Rev. John, played by Ronnie Barker, proclaiming wind to be wicked, contrary to the word of the Lord and trying to pull them down. Led, if that is the word, by Mr Davey, an eternally optimistic but increasingly emotional character, caught beautifully by Tony Hancock, our heroes wander around looking for an energy policy on which they can agree. Read more

Anglo-French relations could hamper negotiations over UK nuclear power stations. Image by Getty

Another European summit, and another step in the progressive disengagement of the UK from the core of Europe. I wonder if the UK government appreciates the impact of what is happening on the real world of business? Let’s take just one example. Relations between Britain and France are at a very low ebb. No one is throwing plates but there is now a mood of mutual indifference, which, as anyone who has lived through a bad marriage will tell you, is worse.

I was in Paris this week visiting the Banque de France. The Banque’s senior management were as ever exquisitely polite, but the sense of distance from the UK was unmistakeable.

Anglo-French relations are always complicated but the current round of problems really began with Franςois Hollande’s visit to London at the end of February. Mr Hollande was at that time a candidate rather than Le President de la Republique. He was clearly ahead in the polls and judged likely to win by the most experienced observers of the French scene. But Mr Cameron, usually a model of politeness when it comes to personal relations, refused to see him. Read more