Two fallacies around Hinkley Point
15 September 2016
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It looks as if Hinkley Point will now be given the green light. Astonishingly, the government has found a way of producing electricity that is even more expensive than offshore wind, and it is backing it. It just goes to show that the new industrial strategy is not a great deal different from the old industrial strategy – the theory is that the government picks winners, but the reality is that it makes goods and services more expensive and raises taxes by picking losers. Surrounding the news coverage and rationale for building Hinkley there are two fallacies.
Fallacy one: Hinkley should be built to reduce carbon emissions
It appears that Hinkley Point is being built to make a contribution to the government’s carbon reduction programme. At face value, to build a power station that requires 2,500 miles of cables, 230,000 tonnes of steel and 5.6 million cubic metres of earth to be removed does not strike me as being very “environmentally friendly”. However, even if, on balance, nuclear were completely green, the government will be paying a high price to cut carbon emissions – a much higher price than almost any other way of reducing carbon emissions in common use.
This raises all sorts of questions about government intervention in the energy market. Surely, given the emissions trading scheme, it is better for energy companies and their consumers to find the best ways to reduce carbon emissions without government interference. Indeed, reduced government intervention in the energy market is essential to ensure that companies are comfortable making long-term investment plans without worrying that “regime change” will undermine the return on their investments. Indeed, there are many ways to reduce carbon emissions and not all of them relate to how we produce electricity (insulation, wearing warmer clothing, replacing high-carbon with low-carbon generation, driving the car less, replacing low-carbon with no-carbon generation, storage etc). Each one of these has different advantages and disadvantages (intermittent power generation, not being able to walk round in t-shirts when the temperature is -15 degrees, having to cycle or walk more, and so on). There is no single answer about the best way to reduce carbon emissions that suits 60 million people. If we wish to reduce emissions, we should allow power generating companies and households to get on with the job in their own way without government interference.
Fallacy two: Hinkley should be built to create jobs
Perhaps even more bizarrely, the government is arguing that Hinkley will “create jobs”. Jobs are not a benefit of Hinkley point, they are a cost. The reason why Hinkley will be so expensive is because the capital and labour used in its building and operation have alternative uses. To paraphrase Thomas Sowell, the first lesson of economics is scarcity; the first lesson of politics is to ignore the first lesson of economics.
Currently, around 75 per cent of the UK labour force is employed. Given the subsidies provided by the state for child care, the level of taxation and the government-induced high cost of housing more people might be employed than would be without state intervention – that is, there might be “over-employment” in the UK. However, even if there were cyclical or structural unemployment (which is hard to argue in the UK at the moment), building a highly capital-intensive nuclear power station in order to create 25,000 jobs would be a curious way to go about alleviating the problem. The government and commentators contend that these jobs are apparently “quality jobs”. Putting aside the implicit sneering at those in “low-quality” jobs occupied by people who provide us with essential services such as caring for the elderly, cleaning and serving in restaurants, given the widely reported skills shortages, the fact that these are “quality jobs” merely compounds the folly. In other words, well qualified people will be bid away from other valuable activities to build and operate a nuclear power station. If the power station were a massive competitor to McDonalds employing industrious but relatively low skilled (in the technical sense) people in more productive activities then it might be of benefit to those in the labour market who have struggled to see their earnings rise in the last few years. On the other hand, there are plenty of competing uses for engineers who (it is suggested) are in short supply.
Electricity firms should be allowed to build nuclear power plants. It is possible that some arrangement has to be made with the government to provide a predictable legal framework for dealing with accidents, disposal of waste etc – though it could equally be argued that our current tort and liability laws deal with this question. However, the government should not subsidise nuclear power plants to cut carbon emissions. Still less should it build them to create jobs. Hinkley will be an expensive way to cut emissions and the people it employs are a cost of the project and not a benefit – they could be doing more useful things.
Fallacy one: Hinkley should be built to reduce carbon emissions
It appears that Hinkley Point is being built to make a contribution to the government’s carbon reduction programme. At face value, to build a power station that requires 2,500 miles of cables, 230,000 tonnes of steel and 5.6 million cubic metres of earth to be removed does not strike me as being very “environmentally friendly”. However, even if, on balance, nuclear were completely green, the government will be paying a high price to cut carbon emissions – a much higher price than almost any other way of reducing carbon emissions in common use.
This raises all sorts of questions about government intervention in the energy market. Surely, given the emissions trading scheme, it is better for energy companies and their consumers to find the best ways to reduce carbon emissions without government interference. Indeed, reduced government intervention in the energy market is essential to ensure that companies are comfortable making long-term investment plans without worrying that “regime change” will undermine the return on their investments. Indeed, there are many ways to reduce carbon emissions and not all of them relate to how we produce electricity (insulation, wearing warmer clothing, replacing high-carbon with low-carbon generation, driving the car less, replacing low-carbon with no-carbon generation, storage etc). Each one of these has different advantages and disadvantages (intermittent power generation, not being able to walk round in t-shirts when the temperature is -15 degrees, having to cycle or walk more, and so on). There is no single answer about the best way to reduce carbon emissions that suits 60 million people. If we wish to reduce emissions, we should allow power generating companies and households to get on with the job in their own way without government interference.
Fallacy two: Hinkley should be built to create jobs
Perhaps even more bizarrely, the government is arguing that Hinkley will “create jobs”. Jobs are not a benefit of Hinkley point, they are a cost. The reason why Hinkley will be so expensive is because the capital and labour used in its building and operation have alternative uses. To paraphrase Thomas Sowell, the first lesson of economics is scarcity; the first lesson of politics is to ignore the first lesson of economics.
Currently, around 75 per cent of the UK labour force is employed. Given the subsidies provided by the state for child care, the level of taxation and the government-induced high cost of housing more people might be employed than would be without state intervention – that is, there might be “over-employment” in the UK. However, even if there were cyclical or structural unemployment (which is hard to argue in the UK at the moment), building a highly capital-intensive nuclear power station in order to create 25,000 jobs would be a curious way to go about alleviating the problem. The government and commentators contend that these jobs are apparently “quality jobs”. Putting aside the implicit sneering at those in “low-quality” jobs occupied by people who provide us with essential services such as caring for the elderly, cleaning and serving in restaurants, given the widely reported skills shortages, the fact that these are “quality jobs” merely compounds the folly. In other words, well qualified people will be bid away from other valuable activities to build and operate a nuclear power station. If the power station were a massive competitor to McDonalds employing industrious but relatively low skilled (in the technical sense) people in more productive activities then it might be of benefit to those in the labour market who have struggled to see their earnings rise in the last few years. On the other hand, there are plenty of competing uses for engineers who (it is suggested) are in short supply.
Electricity firms should be allowed to build nuclear power plants. It is possible that some arrangement has to be made with the government to provide a predictable legal framework for dealing with accidents, disposal of waste etc – though it could equally be argued that our current tort and liability laws deal with this question. However, the government should not subsidise nuclear power plants to cut carbon emissions. Still less should it build them to create jobs. Hinkley will be an expensive way to cut emissions and the people it employs are a cost of the project and not a benefit – they could be doing more useful things.
8 thoughts on “Two fallacies around Hinkley Point”
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The revenues from Hinkley will be >£3bn per year, and the operational costs and amortized capital costs will be around £1.2bn. EdF can expect a whopping 10% return.
That says more about the failure of the successive UK governments to plan than is does about the inherent cost of nuclear power.
The ETS was dreamed up by ideologues, and has functioned how some predicted it would. By rewarding rent seeking parasites, not cutting emissions.
A nice simple carbon tax, implemented 20 years ago, and rising with time would have done the job nicely. Yet, as Australia showed, twatish right wing politicians scuppered that idea.
The French have low cost electricity and very low CO2 emissions. Would Prof Booth like to comment as to why the UK shouldn’t have simply copied that particular strategy?
yes, their nuclear programme was not captured by rent seekers as ours was so that it ended up extremely expensive. I agree with your point about carbon tax versus emissions trading scheme (but, once you have a carbon tax, you do not need government to pick winners in terms of energy generation). There was a paper I saw recently that suggested that a carbon tax rising with time causes problems (that is, encourages more fossil fuel consumption today as the cost of leaving the stuff in the ground is higher).
Daft “worst of all worlds” scheme, worthy of “Yes Minister” or “Men from the Ministry”. It will impose a huge brake on the UK economy. They might almost as well be building a pyramid at Hinkley Point – that would “create jobs” as well.
As for its so called green credentials, it is also to important to remember that it will use a massive amount of concrete, the making of which creates vast quantities of pollution, not to mention all the fossil fuels consumed in mining and refining uranium.
“The French have low cost electricity and very low CO2 emissions.”
No – the French have low price electricity, not necessarily low cost electricity. Do French electricity consumers pay the full cost of constructing, running and decommissioning their nuclear plants? Unless you can demonstrate that that is the case, you cannot say that the cost is as low as the price.
“Do French electricity consumers pay the full cost of constructing, running and decommissioning their nuclear plants? ”
Yes.
Benjamin Weenen – Can you provide some evidence for your assertion please?
Dear Phillip,
This was a truly superb analysis of the current situation with regard to Hinkley Point C.
In 2013 my colleagues , Frazer Ball, Ann Thornton, Catherine Caine and I wrote a paper “Nuclear power: ecologically sustainable or energy hot potato? A case study @ http://www.inderscience.com/info/inarticle.php?artid=51926” where we argued with reference to Hinkley Point C from an economic perspective there are serious questions that need to be answered with regard to the decommissioning costs. Amongst other things this paper questioned the then government attitude to passing on financial responsibility for dealing with the current generation’s energy ‘solutions’ to generations 100 years in the future was in keeping with the principles of sustainability which theUnited Kingdom has signed up to.
Best regards,
Tilak
Tilak Ginige
Convener Environment & Threats Strategic Research Group
Senior Lecturer in Environmental Law
Faculty of Science & Technology
Bournemouth University
Talbot Campus
Christchurch House
Fern Barrow
Poole
BH12 5BB
Tel: 01 202 965680
Mobile: 07946541641
tginige@bournemouth.ac.uk
HPC is an appalling bad decision, principally because the design of the reactor/s proposed is a truly dreadful one, which inherently dangerous and so needs 1001 safety features to make it pass H&S tests.
Using an inherently SAFE reactor design would obviate the need for all those added-on safety features and so reduce the cost os building and running the reactor by 75%.
I can only assume that the plutonium waste from HPC is required for future UK weapons, as there can be no other possible reason for choosing what is, fundamentally, the late 1960’s Westinghouse design
Why not an updated CANDU reactor – or the modern S Korean design now being built there? The latter producing 75% more electricity at 25% the construction costs of HPC