Created 21st October 2013 – http://www.fraw.org.uk/mei/musings/
Contact Paul Mobbs:   email mei☮fraw.org.uk;   web http://www.fraw.org.uk/mei/


The glowing, radioactive elephant-in-the-room:

Hinkley C and new nukes – the deeper systemic realities behind the obscuring smoke of nuclear economics

Having bashed out this email this evening I felt that I had to share it more widely. I've had a few arguments about this in the past few weeks and, unfortunately, thus far everyone appears to miss the deeper realities of what the terms of the contract for Hinkley C predict for future energy prices and the economy. Pity – because I believe that argument would be more readily considered by the public than the more abstract nuclear issue within which it is being described.

On Mon, 2013-10-21 at 17:09 +0100, you wrote:
> Greenpeace UK – Nuclear Power1
> £92.5/MWh is nearly double the current market price for electricity.

The importance of this contract2 is not the price for nuclear power – as we know it's expensive3. The REAL issue here is what this contract demonstrates about underlying energy trends and why the Government is accepting those trends (primarily because they have no other options within our current economic model – which I will expand upon later).

Let's say that electricity bills continue to rise at 7% per year for the next decade. For any constant exponential rise the "doubling time"4 is 70 years divided by the annual percentage rise – so at 7% p.a. that's a doubling time of (70÷7=) ten years... which is of course when this plant is projected to come on-line. Therefore what the price of electricity will be when the plant opens in ten years times is DOUBLE what it is today, even without the Hinkley C contract driving those prices (which, as a marker for future prices, it will undoubtedly do). Consequently we might see this contract as a conformation of current trends in annual energy price rises rather than as a contract which permits the official systemisation of expensive nuclear power into the UK generating mix. As such, is this a bad deal for Britain, or is EdF simply accepting present (and likely future!) economic realities as part of their pricing of the contract?

More fundamentally, what DECC has enshrined in the subtext of the contract for Hinkley C is an abandonment of any allusion to conventional 'econometric theory' within their energy demand and price forecasts5 – making a mockery of their assertion to have any control over energy markets in general through fiscal or technological measures. They're just "going with the flow" of where the demand-driven market trends are heading.

Quite simply this contract prices future power within the bounds of the expected, depletion-driven present trends to insure a return on EdF's/China's investment at today's capital rates. That's absurd in any case given that local6 and global7 inflation rates, and shortly-to-rise UK8 and global9 interest rates7, are likely to knacker the capital discount model underpinning the economics of the build10 (basically they'll be back for more money11 in about five or six years time when it's half-built!). And what's forcing those prices to rise is not the costs of nuclear (it's still a minimal component of the overall price – and highly intermittent due to shutdowns). It's the depletion of other fossil fuel sources12 which are driving up prices, and that in turn drives power generation costs. And unless we talk about depletion13 as a key factor in current decision making – which DECC/politicians generally will simply not do – then you can't present a rational basis for a whole range of decisions they're taking today; from fracking to new nukes.

The REAL scandal here isn't simply the financing of corporate nuclear largesse – although that's a valid criticism and Greenpeace are right to present it. The greater public scandal here, which must be uncovered and explained, is the underlying policy of DECC to capitulate to the constant 6% to 10% per year rise in energy prices, ad infinitum – and the process of resource depletion which has been driving those trends for the last decade or so.

The economy, and especially the poorest groups in Britain today, can't stand those increases now14 – let alone in ten years time when they effectively double the price of power. Ed Miliband might make token gestures15 about consumer energy prices (which he could weasel out of by capping consumer prices and allowing the relatively lower16 industrial/commercial power prices to rise instead – redistributing inflationary trends indirectly via other consumer prices), but that still doesn't address the long-term indicators as to where energy and economic trends are ultimately heading under current growth-based development models.

Long before Hinkley C opens we'll see a progressive worsening and failure of the UK's current economic model; and unless "they" (by which I include the public, campaign groups AND the establishment) accept the underlying ecological limits driving those trends, that system will fail17 and will progressively impoverish18 a greater proportion of the nation. And on the more general "limits" issue19, don't forget that there have been ongoing concerns about future uranium production20 for at least a decade ago now, and those fundamental flaws in uranium production21 have still not been addressed. Therefore we're likely to see a significant rise in uranium prices as depletion reduces supply and new nuclear capacity drives demand in about a decade from now.

Likewise shale gas – forget it. Even the USA now accepts that its natural gas prices are going to double22 in the next 20 years or so due to "developing new incremental production needed to support continued growth in natural gas consumption" – in other words, shale gas is more expensive than conventional production, and so prices will have to rise to pay for new unconventional gas sources. In any case even the best probabilistic values23 (so called "P90" values) of future UK shale gas resources, distributed across the likely production period, suggests that this will only ever supply a very small proportion of current UK gas demand. Thus even if we massively despoil and pollute the countryside, it will make little real difference to UK energy supply and thus prices in the end – which questions the core principle of that policy given that other options (e.g. marginally cheaper24 renewable sources and energy demand reduction) might be funded with that investment capital.

Renewable sources might more expensive now, but we might expect to see a tailing-off of prices as the underlying capital cost of the transition is paid for. However, renewable energy sources will never replace the value of energy we're currently expending from fossil fuels, nor could they without themselves causing ecological damage (e.g. biofuels25). Renewable energy technology – in particular the mega-watt+ turbines, many of the latest tidal devices, and PV panels – will not be a viable/affordable option beyond the next decade or two. Just like uranium or natural gas, the finite mineral resources26 they are manufactured from are themselves depleting/are in short supply, and that will ultimately limit their global applicability to displace fossil fuel use.

There is one strategy which CAN get us away from the fundamentally unsustainable trends which are driving the failure of our current economic process – "DEGROWTH"27 (for a more expansive definition see Latouche's editorial in the Journal of Cleaner Production28). Inevitably such an approach entails accepting the underlying validity of the "limits to growth" model, its efficacy for analysing strategies for meeting our future needs as both a national and global community, and its continued accuracy29 in depicting the current development trends which are driven by the growth-based economic model.

As environmentalists, surely that's what we all desire, isn't it? emoticon, wink

The problem is that the key players in the environment movement – including Greenpeace and others – apparently refuse to make any "limits"-based economic argument30, or allude to the projected collapse of "growth economics" over the next few decades if these trends do not change. Mainstream environmentalism, it seems, is as fearful as mainstream politics of asserting any evidence-based argument for the imminent collapse of consumerism31 and the need for a transition to a simpler/less material intensive development model.

However, in the final analysis, that's where the data leads us – and if they are not willing to face up to that basic truth then "they" (by which I include the public, campaign groups AND the establishment) should accept that they have failed just as much as the economic model which their inaction over the "limits" issue seeks to protect.

Peace 'n' love 'n' simple pleasures,

P.



References
  1. Greenpeace UK: 'Hinkley C -- Greenpeace statement and briefing', 21st October, 2013 – http://www.greenpeace.org.uk/media/press-releases/hinkley-c-greenpeace-statement-and-briefing-20131021
  2. BBC News On-line: 'Nuclear power plant 'good deal' for UK'http://www.bbc.co.uk/news/business-24613550
  3. The role of nuclear power in a low carbon economy, Paper 4: 'The economics of nuclear power – An evidence-based report for the Sustainable Development Commission', Science & Technology Policy Research (SPRU, University of Sussex) and NERA Economic Consulting, March 2006 – http://www.fraw.org.uk/files/nuclear/sdc_nuclear_2006-4.pdf
  4. Wikipedia: 'Doubling time'http://en.wikipedia.org/wiki/Doubling_time
  5. DECC: 'Energy and emissions projections'https://www.gov.uk/government/collections/energy-and-emissions-projections
  6. Guardian On-line: 'Inflation higher than expected with energy price rise on way', Tuesday 15th October 2013 – http://www.theguardian.com/business/2013/oct/15/inflation-higher-than-expected-energy-price-rise
  7. Guardian On-line: 'IMF downplays threat of inflation to world economy', Tuesday 9th April – http://www.theguardian.com/business/2013/apr/09/imf-inflation-fears-central-banks
  8. Guardian On-line: 'Interest rates may rise next year, says Bank of England chief economist', Wednesday 16th October 2013 – http://www.theguardian.com/business/2013/oct/16/bank-of-england-interest-rates-may-rise-next-year
  9. Guardian On-line: 'IMF cuts global economic growth forecasts for this year and next', Tuesday 8th October 2013 – http://www.theguardian.com/business/2013/oct/08/imf-cuts-global-economic-growth-forecasts-weo
  10. Wikipedia: 'Economics of nuclear power plants'http://en.wikipedia.org/wiki/Economics_of_nuclear_power_plants
  11. Guardian On-line: 'Nuclear power's real chain reaction – spiralling costs', Friday 22nd July 2011 – http://www.theguardian.com/environment/damian-carrington-blog/2011/jul/22/nuclear-power-cost-delay-edf
  12. Cassandra's Legacy: 'Peak Oil: a fertile concept', Thursday 29th August 2013 – http://cassandralegacy.blogspot.co.uk/2013/08/peak-oil-fertile-concept.html
  13. Smithsonian Magazine: 'Looking Back on the Limits of Growth', Mark Strauss, April 2012 – http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html
  14. The Money Charity: 'Debt Statistics' (monthly) – http://themoneycharity.org.uk/debt-statistics/
  15. BBC News On-line: 'Ed Miliband: Labour would freeze energy prices', 24th September 2013 – http://www.bbc.co.uk/news/uk-politics-24213366
  16. Pages 37/37, DECC: 'UK energy in brief 2013', July 2013 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224130/uk_energy_in_brief_2013.PDF
  17. Pages 37/8, CSIRO Working Paper Series 2008-09: 'A Comparison Of The Limits To Growth With Thirty Years Of Reality', Graham Turner, June 2008 – http://www.fraw.org.uk/files/limits/csiro_2008.pdf
  18. Guardian On-line: 'Energy bill increases and low wage rises 'threaten UK economic recovery'', Monday 21st October 2013 – http://www.theguardian.com/business/2013/oct/21/energy-bills-low-wages-rises-economic-recovery
  19. Cassandra's Legacy: 'Limits to Growth' – an alternative history, Thursday 29th November 2012 – http://cassandralegacy.blogspot.co.uk/2012/11/limits-to-growth-alternative-history.html
  20. Paul Mobbs/MEI archive: 'Uranium Supply and the Nuclear Option', Oxford Energy Forum, May 2005 – http://www.fraw.org.uk/mei/archive/oies_article.pdf
  21. Oxford Research Group: 'Factsheet 4 – Energy Security And Uranium Reserves', July 2006 – http://www.fraw.org.uk/files/nuclear/willem_van_leeuwen_2006.pdf
  22. Page 76/figure 88, US Energy Information Agency: 'Annual Energy Outlook 2013', April 2013 – http://www.eia.gov/forecasts/aeo/pdf/0383%282013%29.pdf
  23. Chapter 4, Britsh Geological Survey: 'Bowland Shale Gas Study – Main Report', July 2013 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226874/BGS_DECC_BowlandShaleGasReport_MAIN_REPORT.pdf
  24. Wikipedia: 'Marginal abatement cost'http://en.wikipedia.org/wiki/Marginal_abatement_cost
  25. Biofuelswatchhttp://www.biofuelwatch.org.uk/
  26. EC JRC: 'Critical Metals in Strategic Energy Technologies', 2011 – http://www.fraw.org.uk/limits/ec_jrc_metals_2011.pdf
  27. Wikipedia: 'Degrowth'http://en.wikipedia.org/wiki/Degrowth
  28. Journal of Cleaner Production: 'Degrowth', vol.18 pp519-522, 2010 – http://www.fraw.org.uk/files/economics/latouche_2010.pdf
  29. Smithsonian YouTube Channel: 'Perspectives on Limits to Growth', 1st March 2012 (see especially videos 5, 6 and 7) – http://www.youtube.com/playlist?list=PL2817969CA87E5B47
  30. American Scientist: 'Revisiting the Limits to Growth After Peak Oil', vol.97, May 2009 – http://www.fraw.org.uk/files/peakoil/hall_2009.pdf
  31. Wikipedia: 'Overshoot (population)'http://en.wikipedia.org/wiki/Overshoot_%28ecology%29