23 Mar 2011

A new subsidy for nuclear?

This is the government that said there would be no subsidy for the nuclear industry. But George Osborne seems to have found another way to give the industry a boost, funded by anyone who pays a domestic energy bill.

 This government said over and again that there would be no subsidy for the nuclear industry. But George Osborne seems to have found another way to give the industry a boost, funded by anyone who pays a domestic energy bill. You will pay more. Some of the money will go to the UK government, and some will go to help boost the renewables industry. But you might be surprised to hear that some will also effectively go to the government of France.

cooling towers at a nuclear power plant (getty)

The Chancellor says he wants to increase the proportion of revenue raised from environmental taxes. And the government wants to make low-carbon technology financially attractive. Setting a new ‘Carbon Floor Price’ means that from 2013 up to 2020 electricity generators who emit carbon dioxide (from gas or coal fire power stations) will steadily pay more every year for carbon permits. They will pass that on to consumers. It isn’t a tax on their profits but is effectively part of their generating costs, so they will argue that there is no reason why they should not pass the costs on. Renewable and nuclear generators will not have to pay these extra taxes as they do not emit carbon dioxide. The electricity price is set by the amount that gas fired power stations can sell their electricity, because they are the ‘marginal plant’ (the last bit of electricity traded when demand is high). So the renewable and nuclear companies, who do not have to pay for carbon permits because they do not emit carbon dioxide,  will effectively get a windfall profit (because they sell electricity at the same price as those whose costs have risen).

Britain’s nuclear operator British Energy was taken over by the French company EDF, which is mostly owned by the French goverment. So your energy bills are going to rise to pay the French. Wars have been fought over less!

And lest you think this question of hidden subsidy hasn’t occured to the government look again at Prime Minister’s Questions where David Cameron carefully avoided the “no subsidy for nuclear” phrase and instead said we should not have “unfair subsidies”. There is a huge difference. And EDF, who this afternoon warmly enthused about the new carbon price floor, will have spotted it too.

Topics

,