The UK plan is uneconomic for owners and consumers, writes Nick Butler Read more
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The UK plan is uneconomic for owners and consumers, writes Nick Butler Read more
Organisations, especially those that are doing well, can easily get stuck on narrow views of the future and their own role within it. It can be useful and creative in those circumstances to give people the opportunity to think more widely. One method that I have seen used to great effect is to ask people to imagine the world in 10 years’ time and suggest what might have changed, particularly against the expectations of the conventional wisdom. The process can provide a useful counterweight to long-term forecasts, which tend to do no more than roll forward recent history.
In that spirit, and for the holidays, here are a few stories on the energy sector from the FT in 2025. These are not forecasts — just possibilities. Readers would be welcome to suggest additions to the list.
1. In Moscow, ShellGaz — the world’s largest energy company as measured by its listing on the FTNikkei 250 — announces that it is proceeding with Eaststream3, the latest in a series of export projects from eastern Siberia. Eaststream3 will take gas by pipeline to the rapidly growing cities of northern India. ShellGaz was formed in 2017 through the merger of Royal Dutch Shell and Gazprom and represented the first fruit of the reset of European-Russian relations after the agreed federalisation of Ukraine. Read more
The EU approval of the nuclear development at Hinkley Point marks an important, if not decisive, chapter in the story of new nuclear in the UK. There are still legal challenges to be overcome and a financing package to be finalised within the constraints set by the EU ruling but this is a good moment to identify winners and losers.
The obvious losers are the UK’s consumers who are trapped into paying a price for electricity that is double the current wholesale price for 35 years after the plant starts up. The deal will go down in history, alongside the privatisation of the Royal Mail, as an example of the inability of the British government – ministers and civil servants alike – to negotiate complex commercial deals. The phrase “rolled over” will enter the French language and be accompanied always with a Gallic smile. Still, one should recognise talent and so chapeau to the French negotiators. 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
July promises to be a busy month in Whitehall Place, the home of the UK’s Energy and Climate Change Department. Unfortunately, however, despite the prospect of a flurry of activity it seems as if all key decisions will still be left on hold. 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
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
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
There is absolutely no need for an energy shortage in the UK, but the indecision of policy makers is making serious problems over the next few years ever more likely. There is no shortage of supply – but the raw materials of the energy business – such as gas and coal, or for that matter wind – have to be converted into power to produce the electricity which is essential for a complex modern economy. If the power stations are not in place electricity can’t be produced. Read more
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
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
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
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