The UK Government promised earlier not to subsidise nuclear power. It’s just promised to pay more than twice the present market price, for 40 years. It’s also going to give significant help to the infant shale gas industry. It adds up to a strange energy policy for others to follow.

Companies wishing to prospect for shale gas in the UK have been granted ten-year tax breaks and will get special planning permission from the Government if they go for large scale projects. To avoid delays, the Government also used its budget to announce plans to tempt local communities with cash to accept these developments.

This controversial push to exploit shale gas for electricity production comes as the Government’s already contentious plans to subsidise new nuclear stations ran into legal trouble in Brussels.

With many EU countries opposed to nuclear power, including Germany, it is unlikely that a majority of the 27 member states would vote to set aside existing competition legislation to let the UK favour nuclear power over other forms of generation.

This setback for nuclear in the UK is a blow for the industry worldwide, since Britain has been seen as the flagship country for a new nuclear renaissance, the only large western economy to embrace a new generation of nuclear power stations.

With Britain’s coal-fired stations gradually being closed because of EU legislation aimed at reducing carbon emissions, and plentiful supplies of wind power untapped because of planning delays, the UK Government’s energy strategy is in disarray and the future uncertain (see our story of 5 February, UK’s nuclear plans come unstuck).

By backing two forms of energy generation despised by environmental groups, the country’s coalition Government is fast losing any hope of earning the reputation it claimed it would gain of being “the greenest government ever”.

But an even worse prospect for the coalition is the warning of some industry insiders that by 2016, with so many old power stations closing, there may be winter power cuts.

The Government does not believe this will happen and remains publicly committed to building at least eight nuclear stations, but this now seems an unlikely prospect.

Subsidy log-jam

Any new nuclear stations would face questions, chiefly cost, what to do with the waste they produce, and whether they would help the UK’s stated aim of moving to a low-carbon economy. These doubts may explain why ambitious plans to exploit shale gas have been pushed through by Ministers.

However, the Government is still banking on at least two nuclear stations as part of its energy mix, despite the EU’s competition rules. Last week the Energy Secretary, Edward Davey, gave the French nuclear company EDF planning permission to build two 1,600 megawatt reactors at Hinkley Point in Somerset in the West of England.

These would provide electricity for five million homes but are the same type of reactors that are five years behind schedule and billions of euros over budget in both Finland and France.

EDF will not start building any reactors in the UK unless the British Government agrees a minimum price in advance for the electricity they will generate. The so-called strike price being negotiated is around £100 a megawatt hour, double the existing market price. Not only that, but EDF wants this high price guaranteed for 40 years to make the projects attractive for potential investors.

For a government that has repeatedly promised no subsidy will be given for nuclear power this is an embarrassment. But without a substantial guarantee EDF will not build the stations, and there are no other operators in a position to do so either.

As a result of EDF’s demands the British Government is asking the European Commission to by-pass the rules on unfair competition among generators.

The UK now plans to pay subsidies for solar power, off-shore wind and nuclear, claiming they are all low-carbon generators needing support. This is despite the fact that nuclear has previously been regarded as a well-developed technology not in need of subsidy.

Long-term commitment

According to Reuters, the reaction of Doerte Fouquet, a lawyer specialising in EU law at the Berlin law firm Becker Buettner Held, was that “neither under the current nor under possible future frameworks could this scheme for nuclear generators be declared compatible with European state aid rules.”

Even if the rules were to be changed, she said, it would take around two years of consultations and need the consent of the majority of the 27 states.

There is already considerable opposition within the UK to the Government’s proposals to increase the price of electricity to subsidise the French Government-owned EDF, and it is likely to face legal challenges in the UK too.

This is partly because the Government had said there would be no subsidy and had estimated the price of new nuclear at between £33 and £41 per megawatt hour. It is now proposing to guarantee to pay more than double that for 40 years.

But there was also the promise that no nuclear stations would be built unless the waste problem had been solved. The one plan to dispose of waste by building a giant depository in the British Lake District was thrown out by the local authority, Cumbria county council. The government has no alternative plan for the waste, so would be breaking another promise.

Despite these setbacks the Department of Energy and Climate Change is still backing nuclear. John Hayes, DECC’s Minister of State, said: “New nuclear will help diversify our electricity supply and improve our energy security. Nuclear is also cost-competitive with other generation technologies and is expected to be one of the cheapest sources of low carbon electricity in the future.”

He said the Government’s policy was not to provide a “levy, direct payment or market support” for nuclear unless it was made available to other types of generation. A spokesman for his department said this was what the government was talking to the Commission about, to see that the proposed payments “are consistent with EU state aid rules.”