Why Can We Afford #HS2 But Not Power Stations ?

Is it me? Why is it that this government can afford £50 billion for a high speed railway, which a lot of people don't want but don't have any money for essential things like new power stations which only cost c£16 billion?

It strikes me as odd, that the government is willing to commit £50bn in building HS2, basing a business case on shaky assumptions about connectivity, capacity and its effect on growth, while the more critical issue of adequate power generation for the country is left to the considerations of private enterprise. Surely it should be the other way round? Or have I got it wrong ?

For the current price of HS2 we could build three nuclear power stations which would provide almost a quarter of our power requirement.

Hinkley Point C – French/Chinese Funded

A month ago, our government struck a deal with the French utility, EDF to build the country’s first new nuclear plant in a generation. EDF and its partners will take the risk of constructing the power station to budget and schedule. The company is expected to hold between 45-50% of the equity in the project.

Currently, the French nuclear developer Areva will hold 10%, and two state-owned Chinese companies – China General Nuclear Power Group and China National Nuclear Corp – will hold between 30-35%. EDF is in talks with other partners for a stake of up to 15%.

It forms the centrepiece of a long-awaited deal between the government and EDF and paves the way for the construction of the £16bn power station which, when completed in 2023, will provide 7 per cent of the UK’s electricity.

The construction costs of Hinkley nuclear power station maybe financed by China and France, but what we don’t get told is that the huge decommissioning costs (which dwarf the construction costs), will be dumped on to the British taxpayer. So as if by magic, an unattractive business proposition suddenly looks very appealing to foreign investors. We must be idiots to put up with this sort of thing.

Green Taxes and Subsidies

The generation and supply of power is a classic example of something that should remain in the public sector. There are so many outside influences that there is no way a private investor will recoup his expense via a normal commercial price mechanism. That’s why the government is willing to rig the price with all these CO2 emission charges and taxes, which ultimately aim to create inflated electricity price for years to come, to the huge detriment of us the customers, just to encourage private investors to commit funds for what will surely be a very long payback period.

Since the need for additional power generating capacity is now well beyond dispute, it would make sense for the state to enter the market itself and build that capacity. If the future energy price, driven by market forces, fell short of what the state generator needed to stay in business, then and only then would the government provide for the shortfall.

Currently the state charges us ‘green taxes’ then pays the power companies a subsidy (the strike price) for the power. If the state ran the power stations you could cut both out and reduce our power bills.

A similar arrangement to the Network Rail/TOC relationship could be created in the power sector whereby the state is responsible for power generation whilst the energy companies compete for the distribution. The state sets a standard tariff all the energy companies purchase at, they then have to declare their profit margin when bidding for a distribution franchise. This isn’t rocket science.  

HS2 – An Unnecessary Folly

Two of my previous blogs have concentrated on the waste of public money that is HS2 so I don’t intend to repeat it all here. Suffice to say, the need for it is very much disputed; cost estimations vary widely and, in any case, public funds sunk into this white elephant will ultimately benefit only those who will use the line in the future, not the rest of us.

There is no case for a benefit for the general public being provided here unlike power generation. Therefore, the obvious thing for the government to do is just to assure potential investors that the wayleave concessions would be obtained and allow them to weigh the likely benefits of such an investment. If private investors consider this investment sensible and profitable, they will undertake it. If not, they won’t. That surely will mean it is not worth being undertaken – unless of course the private sector say otherwise.

Pure Ideology

These policies aren’t going to change. The government have now started discussions with the power companies about how much the strike price (subsidy!!) will be needed to get further new power stations built, such as Wylfa on Angelesy. It is about time we started thinking in terms of strategically important infrastructure rather then endless discussions about whether wind farms get more subsidy then the fossil fuel industry gets tax breaks etc.

I still find it totally amazing that Cameron and Co are prepared to leave the provision of our power supply to the French tax payers and Communist China, whilst using our own money to pay for a posh boys train set. Am I missing something here in the priorities stakes?

Both main parties have persisted in privatising transport, whether that be rail, buses or air saying they must be subject to commercial market forces despite subsidising them, yet the biggest investment in the transport network in decades is being funded by the state. Similarly both main parties have perpetuated the system whereby our essential power and water infrastructures are run by the private sector but again with massive subsidies. It’s just plain daft ! 

All this goes to show is that there are very little differences between the polices of the two main identikit parties. To me, it's pure ideology that's going to end with this country being reduced in status to being a mere 'customer' of other states and will continue until the money, the credit and the debt evaporates into the coffers of foreign countries.