I was astounded to hear this morning that the coalition government in Germany has decided to abandon generation of electricity using nuclear power, choosing to close all nuclear power plants by 2022. My first reaction was ‘They have gone bonkers!’ but through the day I have let news percolate in my mind and as I write this at 10:15 p.m. I am really not all sure – but I will be very interested to find out. I will write more about this in future – I would particularly like to compare the breakdown of generation in the UK and Germany – but for now let me just compare and contrast the conventional economic view; the German approach; the UK approach. And finally, I will say what I would do if I ruled the UK :-).
This decision has not been driven by economics. The ‘economic’ way to generate electricity is to burn coal and gas, of which there is plenty available – perhaps more than we thought. The energy density is high and the technology is well understood. The downsides to burning fossil fuels and getting the cheapest electricity possible are that:
- The fuels emit carbon dioxide – and we are burning them in ever increasing quantities. In all likelihood, this will create problems in coming decades on a scale too large to fully appreciate.
- The fuels are not sustainable – and eventually we will need to find alternatives.
However, all the alternatives are more expensive. The ‘economic’ solution is to wait until the price of fossil fuels rises to the point that sustainable energy generation is cheaper, and then the market will drive the growth of sustainable electricity generation. An alternative would be to estimate the (frankly) un-estimatable damage caused by carbon dioxide emissions and add this to the costs of fossil fuel generation through a carbon tax. But the uncertainties are so great that the correct ‘economic’ level of the tax is really nothing more than a guess.
The German approach is driven by politics: the Greens won’t support the government unless it stops nuclear electricity generation. The Green view appears to be that nuclear power – in and of itself – is bad, and that rising carbon dioxide emissions are a price worth paying. This view appears to have widespread support in Germany, and although I sympathise, I basically disagree. The most bizarre element of the agreement appears to be a plan to engineer a 10% cut in electricity use. How? Well this might be achieved by a massiveprice increase or by ‘rationing’. ‘Rationing’ might involve legislation to ban shop lighting after a certain hour, or street lighting, or specifying that electricity usage above a certain level is anti-social and to be charged for punitively. From a UK perspective, any of these options looks extremely unrealistic, which just adds up to higher carbon dioxide emissions.
The UK approach is also driven by politics: basically no politician wants to take any responsibility for actually making a decision. The strategy is to ‘let the market decide’. If this is genuinely the policy – and I find it hard to tell if this is just a front – then no matter what the Government say, new nuclear power stations will not be built be in the UK because following Fukushima they will be uninsurable. If in fact the plan is to subtly subsidise nuclear power – which I suspect is the case – perhaps by setting a limit to liability, then we may have nuclear power. But we have no plans to reduce electricity usage – in fact quite the opposite. We subsidise renewable energy generation, but the amount of renewable energy generated is still – frankly – negligible, and plans for its growth still seem tentative.
My view is… that ‘the electricity market’ is not a genuine market and that it is unlikely provide appropriate solutions for the UK. In particular, the market has no obligation to act in the best interests of the UK – particularly not over the timescale of decades that building electricity infrastructure requires. If investing £1billion in Indonesia will make a company more money than in the UK, then they will not bother to invest in the UK. It’s not that the company is evil, it’s that that’s just business. So the UK ends up competing to offer the best return on investment to companies – instead of companies competing to offer the best value to the UK. Personally I think that the electricity infrastructure, like the road infrastructure or the rail infrastructure, is best planned by a single entity with public representation. Come back CEGB – all is forgiven.