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UK Nuclear: Forefront to Backfoot

Jim Ratcliffe is a very wealthy man. This fact was evinced by his swift closure of the Grangemouth plant following strike action from UNITE back in October; the union rallied against planned changes to salaries and pensions, and by shutting the site down rather than enter into any sort of bargain he made it perfectly clear that financial security does not rank on his list of concerns.

20th December 2013    |     Peter Rolton: Chairman, Rolton Group

What this position of affluence affords Ratcliffe, if you will excuse the pun, is the freedom to say exactly what he thinks. Unfortunately for UK manufacturers, what he thinks is that British nuclear has been rendered completely unaffordable by an exceptionally high guaranteed price, and, unfortunately, I think he’s right.

Ineos, the company two-thirds owned by Ratcliffe, operates globally, and this worldwide perspective endows his opinions with a certain authority. From where he’s sitting, there are no energy markets as expensive as the UK’s; in an interview with the BBC this week, he stated plainly that ‘it is more expensive than Germany, it is more expensive than France, and it is much, much, more expensive than America. It is not competitive at all, on the energy front, I am afraid.’

The question is: why is the price for nuclear so much higher in the UK than elsewhere? The British Calder Hill power station was the first in the world to generate electricity on a commercial scale, so we evidently weren’t dragging our feet in the beginning…

Problems started when public perception of nuclear turned sour, and any ground gained from this flying start was lost as development of nuclear power in Britain came to a sudden halt. Meanwhile, neighbouring countries steadily continued to invest and consequently have been able to standardise the process, reducing their costs and equipping their workforce with the necessary skill to run a successful industry.

The absence of an existing nuclear sector has meant that the UK is now effectively starting from scratch, and has to import expertise from countries that have been doing it for years. This, alongside the lack of any template for standardisation, equals higher expense. These factors alone would go some way to explain the startlingly high price, but there is another reason: risk.

Whereas other countries have state-funded systems in place to support their nuclear sectors, UK government has left it entirely up to private companies to carry the industry, through fair and foul. A business needs a highly compelling commercial reason to invest in something as capital-consuming and high risk as nuclear power, and it is here that we find the most convincing justification for the £92.50 p/Mhw pricetag. Compare this to the recent deal made by Ineos for nuclear power in France at the equivalent of £37.94 p/Mwh and the difference speaks for itself.

If we had followed a sustained and stable path of development in nuclear power, we would not now be in this position; as it stands, we’ve priced ourselves out of a market in which we were once a frontrunner. What this should make absolutely clear is that reliable and consistent investment, not knee-jerk reactions at every turn, is what is needed to create an industry that runs efficiently and with economic viability. Energy legislation is rife with reneged promises and myopic policies, and all it has served to do is leave us lagging behind in the global power race; long-term thinking has become an urgent requirement if we are to turn our fortunes around.

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