Monday 21 May 2012

Might as well still be Huhne

...  because instead of taking the opportunity for a clean break, Huhne's successor Ed Davey appears set to carry on with the Huhnite delusion. The chances of there being any pleasant surprises when he publishes the Electricity Market 'Reforms' later this week are slender: we pretty much know what we are getting.

In particular we shall find out that new nukes are to be paid for via a 'contract for difference', i.e. a vast 2-way swap with very high strike price.  Recently there have been mutterings from the only plausible beneficiary of this (the French) that it will be of no use to them unless the counterparty is HMG (well of course: think of the credit risk on a derivative that is designedly so far out of the money !); and counter-mutterings that this would constitute state aid and is therefore not possible under EU regs.  A nice dilemma ! and yet another reductio ad absurdum which ought to be understood for what it is: proof that only governments can do nukes.

I wouldn't normally quote industry participants on such matters because they are all in the queue for subsidies of one sort or another and just talking their own book.  However, with RWE having withdrawn from the new-nukes game, Volker Beckers (their UK CEO) may be viewed as slightly more neutral than most.  This from the Sunday Telegraph:

'He questioned the Government’s approach to energy sector reform, which includes separate overhauls of retail markets and networks as well as the various elements of the Energy Bill. “Pulling so many levers at once in such a complex area risks losing sight of your original objectives”'.

Yes, as well as being fatuous, the 'reforms' could very well completely bugger the workings of the UK electricity market.  Although the government continues to talk of 'market solutions', there is the strong possibility of the reintroduction by confusion and stealth of a command-and-control, CEGB-style electricity sector.  The lights will start to flicker anyway.  

And in all events, astronomical costs are being needlessly foisted on electricity consumers.  An astonishing tale of half a decade of bungling. 

ND

11 comments:

Electro-Kevin said...

For Hunite substitute Cameronite.

Perhaps we should go to the Iranians for nuclear power. If they can do it under the onslaught of Mossad then they should have no problem with greenists.

rahul said...
This comment has been removed by a blog administrator.
CityUnslicker said...

and so it continues. Sadly, the government in many areas is far too happy to continue the New Labout policies.

Elby the Beserk said...

"An astonishing tale of half a decade of bungling."

Decades, Nick. When did we last have an energy policy at all, never mind one that made sense. I sometimes wonder whether we would do better without politicians at all...

Nick Drew said...

Kev - I'd dispute that in detail, but best done over a beer

suffice to say, there was a decent energy policy in place circa 2000

only problem then was lack of balls in enforcement of competition law, with some mergers of co's in the electricity sector being allowed that never should have been

Electro-Kevin said...

Nick - I tried getting a comment posted on John Redwood's but it was so heavily censored that the point was lost.

The Germans invaded Greece in WW2 and appropriated a lot of their gold.

Boris Johnson was quoted by one contributor as having said "If the Germans want the Greeks to buy their washing machines then they really ought to start giving them some money."

I responded thus:

"It wouldn't be the first time the Bosch have cleaned up in Greece."

Now I don't know if you've gathered this already but I'm not always serious when I make my comments.

Nick Drew said...

excellent ! why does Redwood censor that ??

of course you are wasted around here as we are very straight-faced and prone to missing the joke

Budgie said...

E-K, it's a good job you didn't pick on Siemens, then.

Electro-Kevin said...

Nick - P'raps he wanted to save the joke for himself.

Budgie - I would have understood being censored for that one.

rwendland said...

EK, I think the credit ratings agencies are doing as good an anti-nuclear job now as the green lobby - telling EDF if they invest loads-of-money in UK nucs they'll get a downgrade.

If this new 'contract for difference' + higher carbon pricing in regime is in place for at least a decade, I suspect the Chinese will benefit more than the French. The Chinese will likely have tested Generation III reactors for sale internationally in about 10 years time, a lot cheaper than the French EPR I should think.

Basically the French home market is more than saturated, but the Chinese have a large home market to provide the volume to bring unit prices down, + the technological skills and heavy industry base. Strategically you have to bet on the Chinese winning this market, unless we properly recognise the nuclear risks. Fukushima should be a big clue to us all of the risks we are taking.

Electro-Kevin said...

Fukushima did really well, actually.

Thanks for the reply.