The Grauniad reports today that, despite protestations to the contrary over several years, our beloved government is planning to subsidise new nuclear power stations – by a levy on us all to ensure the price of CO2 doesn’t fall below € 30.
This is not actually new: I can tell you that DTI / BERR / DECC / XYZ have been contemplating not only a nuclear levy but also a ‘diversity’ levy (to make electricity suppliers buy their power from a wide range of different sources) and a ‘capacity’ levy (to make them buy large amounts several years in advance). We already have a renewables levy, of course,
Putting aside for a moment the prospect we’ve noted before, that such levies may count as government spending (and thus be quite awkward for several years to come), you really have to marvel at the reasoning.
> nuclear power ‘needs’ a CO2 price of greater € 30 to be ‘economic’
> today’s prices (spot and forward) are a lot less – around half that - and thanks to (a) plenty of measures taken to cut emissions (!!), and (b) the recession, they are set to stay that way for quite a while
> so nukes ‘need’ a minimum price to be guaranteed by the government, thank you very much
This syllogism only works, of course, if we ‘need’ 'em in the first place !
Here’s the answer. There is no natural market in clean energy, so the EU has created one using cap-and-trade on CO2 emissions – and in mechanistic terms it works very well, too. Let’s assume it continues in being (indeed, probably to be joined by a US one in due course).
IF the caps have been set at the correct level to meet emissions targets - and, with a couple of exceptions (Poland, this means you) they have, and IF the resultant CO2 price is less than the level required to justify nuclear power at the moment, THEN it means we don’t need nukes to get our emissions down – at the moment. We only need whatever can be justified by reference to the forward price of CO2.
Ah, the nukes say (well, aarrgghh!, actually), but that ignores the long lead-time for nukes to be built, there isn’t a CO2 forward curve out 8-10 years. So we ‘need’ the government to guarantee one for us.
No, matey, you ‘need’ the government - well, us actually - to make an heroic, costly and entirely speculative shot in the dark, to cater for the highly probable contingency that we solve our problems before 2018 or whenever it is you think you might be ready, using much cheaper means.
I can confidently predict that this will be by a combination of gas and coal. And if this means we need to find a modus vivendi with the Russians, well, that’s what we’ll do.