Could the lights go out at the flick of a Chinese switch?

The media is awash with rumour and speculation about the unexpected postponement of the decision on whether to build a new nuclear power station in partnership with France and China. Well, they should have seen it coming!

First, the National Audit Office has estimated that the lifetime costs to the taxpayer of Hinkley Point C could reach an eye-watering £30billion, and that is in addition to the £18bn construction cost to be shared between EDF Energy and China. So, it’s right that the Government needs to assess, and, just as importantly, be seen to assess the scheme for value for money. Whilst that review was undertaken in the past, first under Coalition, and then by George Osborne as Chancellor of the Exchequer and the then Energy Minister, Amber Rudd, we now have a new government that understandably, if frustratingly to those behind the project, wants to look again at the figures to see if a better deal can be struck.

Secondly, there are many who have argued vociferously that the sheer scale of the project, which has already experienced many delays, means that its construction will over-run and that there is no guarantee it can be delivered, up and running within the timetable needed before other current energy sources prove inadequate in meeting the nation’s needs.

Those who call for investment in other sources fall into a variety of different camps. Some argue passionately for more renewable investment; others for more gas generation; and still others for investment in alternative nuclear technologies such as small modular reactors that can be factory built and have the potential to be delivered in a shorter time frame. There’s also greater scope to import energy, a source which could be delivering up to 15% of our energy needs in the 2020s.

This competition between different energy sources is rather unhelpful in the policy environment. Put simply, we don’t want all the nation’s energy eggs in one basket. Our strategic interests and the ability to keep down costs for consumers are best served by the right mix and diversity.

Thirdly, there are the views of a certain Nick Timothy, now the Prime Minister’s Joint Chief of Staff and longstanding advisor, about the security implications. Timothy’s views are quite clear and are not the subject of rumour. Security experts, he argues, are worried that the Chinese could use their role to build weaknesses into the computer systems controlling the new reactor which would allow them to shut down Britain’s energy production at will. In short, Chinese involvement could be a Trojan horse and destabilise our economy at the flick of a switch in Bejing. China is a proud nation, and the call-in decision is something of a slap in the face with a wet fish to its Government.

We know Nick Timothy holds these views because he wrote an article on the subject on the leading political website, Conservative Home, in January of this year when his boss, Theresa May, was then Home Secretary and when he would have had direct access to those unnamed “security experts”. Such websites are invaluable to those who need to follow, analyse and interpret the nuances of emerging political policies and decisions. [In the interests of balance, this column would also recommend Labour List as regular, if currently depressing, reading].

Fourthly, to “call in” for review such a major decision is simply Theresa May’s way of doing business; and in that she differs substantially in style to David Cameron. Our previous Prime Minister was a great delegator, leaving his Cabinet colleagues largely free to run their own departments subject to a degree of meddling and constraint being exercised by George Osborne. Theresa May adopted a different approach at the Home Office, a Department which has led to the end of so many political careers it being such a challenging and in many regards a thankless task. She took personal charge and ensured she fully understood different policy options before making decisions.

The call-in is not a slight to the new Business & Energy Secretary, Greg Clark, as some are suggesting, merely a reflection of the cautious, but determined approach that has been the hallmark of Theresa May’s career to date. And with official electricity price forecasts being slashed in recent years it makes sense to review the figures prior to signing a contract that will give those behind the project a guaranteed price for energy that is fixed for 35 years and which was negotiated when the cost of oil, and hence a wider range of fossil fuels, was considerably higher than it is now.

That fall in the wholesale gas and electricity price also has major implications for the other controversial energy technology, fracking, which so dominated the news in the recent past, but which is now seen as uneconomic across many parts of the United Kingdom where the costs of extraction are high. It’s a technology that can, however, be relatively easily turned on and off as the gas price shifts, so the prospect of fracking in the future has not gone away, and we may still experience the shale boom advocated by Osborne and Cameron.  

Environmentalists are unhappy with the fracking technology arguing that it will make the climate change targets unachievable. The Government’s Committee on Climate Change (CCC) does not share that view. It calls for regulations to control the process arguing that emissions should be strictly limited during shale gas development, production and well decommissioning. The CCC says this needs tight regulation, close monitoring of emissions, and rapid action to address any leaks.

This raises an even bigger question for Theresa May’s Government. Will she, her new Chancellor of the Exchequer, Philip Hammond, and her Business & Energy Secretary, Greg Clark, stick by the self-imposed carbon reduction targets set out under the provisions of the Climate Change Act 2008? Or, might they reach a conclusion that such limits are unreasonably strict, impose unnecessary costs on industry and on domestic consumers whose bill are increased by them, and so merit relaxation, despite the personal welcome Ms May gave to the legislation as “necessary and ambitious” when it was being considered by Parliament in 2008.

Like many other big decisions, post our departure from the European Union, this is one that the British Government will not only be able, but also be required to take for itself. That is what a repatriation of sovereignty looks like in practice and is long overdue.

Against a background of Brexit and changing economic conditions, the new May Government has already announced what amounts to a relaxation of austerity in economic terms. Might it be about to do the same on energy policy? Your author suspects not, but he won’t be betting that Hinkley C will go ahead on anything like the terms currently proposed.

This article first appeared in The Catholic Universe of 5th August 2016

Cllr Chris Whitehouse KSG is Chairman of Westminster’s leading political consultancy, www.whitehouseconsulting.co.uk, Secretary of the Catholic Legislators’ Network, a Trustee of the Right To Life Charitable Trust, and a Member of the Isle of Wight Council (Cons. Newport West).

t: @CllrWhitehouse

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