The Hinkley Point decision: An analysis of the policy process
Stephen Thomas
Energy Policy Public Services International Research Unit (PSIRU) Business School, University of Greenwich, 30 Park Row, London SE10 9LS, UK
H I G H L I G H T S
 Britain's nuclear power policy is failing due to high costs and problems of ﬁnance.
 This has implications for European countries who want to use the same ﬁnancing model.
 The continued pursuit of a failing policy is due to poor advice from civil servants.
 Lack of expertise in the media and lack of public engagement have contributed.
 Parliamentary processes have not provided proper critical scrutiny.
a r t i c l e i n f o
Article history:
Received 6 October 2015
Received in revised form
8 June 2016
Accepted 11 June 2016
Available online 20 June 2016
Keywords:
Nuclear power
Policy process
UK
Hinkley Point
a b s t r a c t
In 2006, the British government launched a policy to build nuclear power reactors based on a claim that
the power produced would be competitive with fossil fuel and would require no public subsidy. A decade
later, it is not clear how many, if any, orders will be placed and the claims on costs and subsidies have
proved false. Despite this failure to deliver, the policy is still being pursued with undiminished determination.
The ﬁnance model that is now proposed is seen as a model other European countries can
follow so the success or otherwise of the British nuclear programme will have implications outside the
UK. This paper contends that the checks and balances that should weed out misguided policies, have
failed. It argues that the most serious failure is with the civil service and its inability to provide politicians
with high quality advice – truth to power. It concludes that the failure is likely to be due to the unwillingness
of politicians to listen to opinions that conﬂict with their beliefs. Other weaknesses include
the lack of energy expertise in the media, the unwillingness of the public to engage in the policy process
and the impotence of Parliamentary Committees.
Crown Copyright & 2016 Published by Elsevier Ltd. All rights reserved.
1. Introduction
The UK plan to build two reactors at the Hinkley Point C site is
of crucial importance for the nuclear industry. If the order is
placed, this will be signiﬁcant evidence that the Nuclear Renaissance
the nuclear industry predicted more than 15 years ago
has not failed.
In November 2005, Prime Minister Blair announced a review of
energy policy with an objective to determine whether Britain
‘would take enabling steps to facilitate the construction of a major
programme of new nuclear power plants in Britain’.1
The Green
consultation paper, published in July 2006 concluded: ‘new nuclear
power stations would make a signiﬁcant contribution to
meeting our energy policy goals’.2
However, by 2016, most of the premises on which the policy
was based, particularly a promise that there would be no public
subsidies, had been abandoned. Yet the policy was still pursued by
the government with undiminished enthusiasm. This paper examines
the policy process and attempts to identify why a policy,
which has proved impossible to implement in its original form,
has not been at least subject to a comprehensive review. It looks in
particular at the checks and balances’ that would be expected to
prevent failing or misconceived policies from being pursued. The
institutions examined are: party politics; Parliamentary scrutiny;
the civil service; the public and the media; and a pro-nuclear
lobby.
Contents lists available at ScienceDirect
journal homepage: www.elsevier.com/locate/enpol
Energy Policy
http://dx.doi.org/10.1016/j.enpol.2016.06.021
0301-4215/Crown Copyright & 2016 Published by Elsevier Ltd. All rights reserved.
E-mail address: Stephen.thomas@gre.ac.uk
1
http://webarchive.nationalarchives.gov.uk/20060715135117/http://num
ber10.gov.uk/page8606 (Accessed July 27, 2015).
2
Department of Trade & Industry, 2006. The Energy Challenge, Cm 6887, DTI,
London. https://www.gov.uk/government/uploads/system/uploads/attachment_
data/ﬁle/272376/6887.pdf.
Energy Policy 96 (2016) 421–431
I look at:
 The context of the 2006 decision.
 The attempt to implement the policies over the following decade,
identifying in particular where and why the policy was
changed.
 The status of the project including remaining uncertainties in
2016 and the more general lessons for nuclear ordering.
 The roles of the parties identiﬁed above in the policy and why
they appear to have had little impact on it.
I identify issues raised that might explain the history presented
but which are beyond the scope of the analysis presented and
appear worthy of further investigation. Conclusions are drawn on
how the policy process could be strengthened to avoid costly
pursuits of misconceived or unachievable goals.
1.1. The context to the 2005 decision and the position in 2016
The economic experience with nuclear power in the UK has
been poor with high costs falling on the public. The key element
that made the policy politically acceptable was a promise that no
public subsidies would be offered. The Green Paper stated: ‘Any
new nuclear power station would be proposed, developed, constructed
and operated by the private sector who would also meet
decommissioning and their full share of long-term waste management
costs’.3
The implication was that new nuclear power
plants would compete on equal terms in the market with other
forms of generation.4
In October 2013, the government and the
state-controlled utility, Electricité de France (EDF), announced
agreement in principle to the terms for purchase of power from
the proposed Hinkley Point C nuclear power plant.5
These terms
were revised in October 2015 but either party could walk away
with no penalty. By mid-2016, a ﬁnal investment decision for
Hinkley Point C had not been taken. There was opposition to the
agreement even from those strongly in favour of nuclear power
and increasing practical hurdles to be cleared before the project
can proceed. Table 1 shows that to get this far has required the
government to go back on many of the promises on which the
policy was sold to the public, particularly the promise of no
subsidies.
2. The 2006 decision
UK government reviews of energy policy are infrequent, typically
taking place no more than once a decade (see Table 2 for a
timeline of UK nuclear policy decision since 2000). So the announcement
of a review in November 2005 two years after publication
of the previous policy White Paper6
was surprising. What
made the announcement more remarkable was the focus on reviving
nuclear ordering when only two years previously, the
nuclear option had been rejected. The 2003 White Paper stated:
‘Although nuclear power produces no carbon dioxide, its current
economics make new nuclear build an unattractive option
and there are important issues of nuclear waste to be resolved.
Against this background, we conclude it is right to concentrate
our efforts on energy efﬁciency and renewables’. ‘However we
do not rule out the possibility that at some point in the future
new nuclear build might be necessary if we are to meet our
carbon targets’.
One unusual feature of the review that led to the 2003 White
Paper, was that it was not carried out by the energy ministry, the
Department of Trade & Industry, but by a division of the Prime
Minister's Cabinet Ofﬁce, the Performance & Innovation Unit (PIU).
The PIU was set up in 1998 and portrayed in the press as a tool to
increase Blair's control over government departments.7
However,
the PIU brought in a wide range of independent experts to contribute
to the review and might have been more independent as a
result.
The proviso in the 2003 White Paper that the nuclear power
option should remain open was reported as down to Tony Blair. In
2001, he had been reported as ordering the government to keep
the nuclear option open.8
However, the spectacular ﬁnancial collapse
in 2001 and 2002 of British Nuclear Fuels Limited (BNFL), the
state-owned fuel cycle company, and British Energy, the privatised
nuclear generation company, meant that any attempt to launch a
nuclear power construction programme would have been politically
difﬁcult. By 2001, it was clear that BNFL could not meet the
clean-up cost for the facilities it owned, then estimated at about
d34bn.9
The government chose to break-up and sell off its component
parts placing all the liabilities in a new government organisation,
the Nuclear Decommissioning Authority (NDA). British
Energy had been privatised in 1996 and in 2002, it went effectively
bankrupt.10
The British government chose to rescue the company
at a cost to taxpayers estimated by the government of in excess of
d10bn.11
Both rescues required European Union state-aid cases and
it was not until 2005 that the rescue of British Energy was approved,
and the NDA launched.12
In May 2006, two months before the results of the review were
published in a Green Paper, Blair pre-empted the ﬁndings. In a
speech to the Confederation of British Industry he said: ‘These
facts put the replacement of nuclear power stations, a big push on
renewables and a step-change on energy efﬁciency, engaging both
business and consumers, back on the agenda with a vengeance’.13
This conclusion was particularly surprising given that the expected
costs of nuclear power had gone up since 2003 and there was no
evidence that the cost of energy efﬁciency and renewables had
risen.
One explanation is that Tony Blair favoured a nuclear programme
long before the 2005 announcement and had waited until
the fall-out from the failure of BNFL and British Energy had cleared
3
Department of Trade & Industry, 2006. The Energy Challenge, Cm 6887, DTI,
London. https://www.gov.uk/government/uploads/system/uploads/attachment_
data/ﬁle/272376/6887.pdf.
4
Blair's Energy Minister, Malcolm Wicks, was more explicit when questioned
by the Commons Energy Select Committee. In response to the question: ‘Is that the
Government’s position? No direct subsidies and no indirect subsidies’, he stated:
‘No checks will be written, there will be no sweetheart deals’. http://www.pub
lications.parliament.uk/pa/cm200506/cmselect/cmtrdind/1123/6101005.htm Q 483
and Q 488. (Accessed April 17, 2016).
5
https://www.gov.uk/government/news/initial-agreement-reached-on-newnuclear-power-station-at-hinkley
(Accessed July 27, 2015).
6
Department of Trade & Industry, 2003. Our energy future: creating a low
carbon economy, Cm 5761, DTI, London. http://webarchive.nationalarchives.gov.uk/
þ/http:/www.berr.gov.uk/ﬁles/ﬁle10719.pdf (Accessed July 27, 2015).
7
The Independent. Parliament & Politics: Blair sets up new Whitehall machine,
July 29, 1998.
8
The Independent. Blair wants UK to keep nuclear power, December 16, 2001.
http://www.independent.co.uk/environment/blair-wants-uk-to-keep-nuclear-pow
er-9198699.html (Accessed July 27, 2015).
9
The Telegraph. BNFL on the brink of bankruptcy, October 21, 2001.
10
On September 5, 2002, British Energy shares were suspended after the
company warned the government it could face insolvency if it did not receive
immediate ﬁnancial assistance. Financial Times ‘British Energy issues insolvency
alert’ September 6, 2002.
11
http://eur-lex.europa.eu/legal-content/EN/ALL/? uri¼OJ: L:2005:142: TOC
(Accessed July 27, 2015).
12
http://eur-lex.europa.eu/legal-content/EN/ALL/? uri¼OJ: L:2006:268: TOC
(Accessed July 27, 2015).
13
http://webarchive.nationalarchives.gov.uk/20040105034004/http://num
ber10.gov.uk/page9470 (Accessed July 27, 2015).
S. Thomas / Energy Policy 96 (2016) 421–431422
sufﬁciently to make a policy to re-launch nuclear power politically
plausible.
The Green Paper14
was challenged by Greenpeace in the High
Court, which found the consultation process was ‘seriously ﬂawed
and that the process was manifestly inadequate and unfair’ and
the consultation had to be redone.15
The White Paper, ‘Meeting the
Energy Challenge’,16
that followed on from the Green Paper was
published in May 2007 and coincided with the launch of the
consultation paper, ‘The Future of Nuclear Power’17
on nuclear
power. The preliminary conclusion on the economics of nuclear
power was that.
‘Based on this conservative analysis of the economics of nuclear
power, the Government believes that nuclear power stations
would yield economic beneﬁts to the UK in terms of reduced
carbon emissions and security of supply beneﬁts under likely
scenarios for gas and carbon prices. As an illustration, under
central gas and nuclear cases, and with a future carbon price of
€36/tCO2, the net present value over 40 years of adding 10 GW
of nuclear capacity would be of the order of d15 billion’.
In January 2008, the government published ‘Meeting the Energy
Challenge: A White Paper on nuclear power’18
which
concluded.
‘The Government believes it is in the public interest that new
nuclear power stations should have a role to play in this
country's future energy mix alongside other low-carbon sources;
that it would be in the public interest to allow energy
companies the option of investing in new nuclear power stations;
and that the Government should take active steps to
open up the way to the construction of new nuclear power
Table 1
The British nuclear power programme: promises and reality.
What was promised What was agreed
No subsidies: would compete in the market on equal terms with
all other sources.
Contract for 35 years. Government loan guarantees perhaps covering all the borrowing, about d17bn,
of the expected (including ﬁnance) cost.
No ‘sweetheart deal’ No competitive procurement process
Competitive with other forms of generation generating at d31–44/
MW h.
Most expensive power on system,d92.5/MWh: more than double 2013 wholesale electricity cost.
Construction cost excl. ﬁnance d2bn per reactor. Construction cost, excl. ﬁnance d8bn per reactor.
First power 2017. First power 2026.
Consortium 80% EDF, 20% Centrica Consortium 66.5% EDF, 33.5% Chinese companies
Programme of 12 reactors by 2030 No more than a handful of reactors built by 2030
Competition between developers & technologies. Bilateral negotiations with NNB GenCoþ EPR
Table 2
Key policy points in British nuclear power policy post-2000. Sources: See footnotes.
Date Decision
June 2001 Tony Blair announces a review of strategic issues surrounding energy policy to be carried out by the Performance and Innovation Department of the Cabinet
Ofﬁcea
Feb 2003 White Paper (policy) published giving a negative verdict on the economics of nuclear powerb
Nov 2005 Tony Blair announces a new review of energy policyc
July 2006 Green Paper (consultation) published giving a favourable verdict to new nuclear power plantsd
Feb 2007 High Court rules consultation on new nuclear build ﬂawed and orders it be re-donee
May 2007 White paper on energy policy published and new consultation on nuclear power launchedf
Jan 2008 White paper on nuclear power proposing measures to promote new orders publishedg
Dec 2010 Electricity Market Reform programme launched expected to lead to big changes to the marketh
Oct 2013 Provisional agreement on terms for Hinkley Point C between government and EDFi
Dec 2013 Energy Act 2013 passed giving legal basis for Hinkley deal including Contracts for Differencej
a
http://www.publications.parliament.uk/pa/cm200102/cmhansrd/vo010625/text/10625w01.htm#10625w01.html_spmin0 (Accessed August 19, 2015).
b
Department of Trade & Industry, 2003. Our energy future: creating a low carbon economy. Cm 5761, DTI, London. http://webarchive.nationalarchives.gov.uk/þ/http:/
www.berr.gov.uk/ﬁles/ﬁle10719.pdf (Accessed July 27, 2015).
c
http://webarchive.nationalarchives.gov.uk/20060715135117/http://number10.gov.uk/page8606 (Accessed July 27, 2015).
d
http://webarchive.nationalarchives.gov.uk/þ/http:/www.dti.gov.uk/ﬁles/ﬁle31890.pdf (Accessed August 18, 2015).
e
http://www.greenpeace.org.uk/media/press-releases/governments-nuclear-plans-declared-unlawful-by-high-court (Accessed July 27, 2015).
f
Department of Trade & Industry, 2007. Meeting the Energy Challenge, Cm 7124, TSO, London http://webarchive.nationalarchives.gov.uk/20100512172052/http:/www.
decc.gov.uk/en/content/cms/publications/white_paper_07/white_paper_07.aspx (Accessed July 27, 2015) & Department of Trade & Industry, 2007. The future of nuclear
power, DTI, London. http://webarchive.nationalarchives.gov.uk/þ/http:/www.berr.gov.uk/ﬁles/ﬁle39199.pdf (Accessed August 18, 2005).
g
Department for Business Enterprise & Regulatory Reform, 2008. Meeting the Energy Challenge: A White Paper on nuclear power, Cm 7296, BERR, London http://
webarchive.nationalarchives.gov.uk/20100512172052/http:/www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/nuclear/white_paper_08/white_paper_
08.aspx (Accessed July 27, 2015).
h
https://www.gov.uk/government/uploads/system/uploads/attachment_data/ﬁle/42636/1041-electricity-market-reform-condoc.pdf (Accessed August 18, 2015).
i
https://www.gov.uk/government/news/initial-agreement-reached-on-new-nuclear-power-station-at-hinkley (Accessed July 27, 2015).
j
https://www.gov.uk/government/collections/energy-act (Accessed August 18, 2015).
14
Department of Trade & Industry, 2006. The energy challenge, Cm 6887, DTI,
London. http://webarchive.nationalarchives.gov.uk/þ/http:/www.dti.gov.uk/ﬁles/
ﬁle31890.pdf (Accessed August 12, 2015).
15
http://www.greenpeace.org.uk/media/press-releases/governments-nuclearplans-declared-unlawful-by-high-court
(Accessed July 27, 2015).
16
Department of Trade & Industry, 2007. Meeting the Energy Challenge, Cm
7124, TSO, London. http://webarchive.nationalarchives.gov.uk/20100512172052/
http:/www.decc.gov.uk/en/content/cms/publications/white_paper_07/white_pa
per_07.aspx (Accessed July 27, 2015).
17
Department of Trade & Industry, 2007 ‘The future of nuclear power’ DTI,
London. http://webarchive.nationalarchives.gov.uk/þ/http:/www.berr.gov.uk/ﬁles/
ﬁle39199.pdf (Accessed August 18, 2015).
18
Department for Business Enterprise & Regulatory Reform, 2008. Meeting the
Energy Challenge: A White Paper on nuclear power, Cm 7296, BERR, London. http://
webarchive.nationalarchives.gov.uk/20100512172052/http:/www.decc.gov.uk/en/
content/cms/what_we_do/uk_supply/energy_mix/nuclear/white_paper_08/white_
paper_08.aspx (Accessed July 27, 2015).
S. Thomas / Energy Policy 96 (2016) 421–431 423
stations. It will be for energy companies to fund, develop and
build new nuclear power stations in the UK, including meeting
the full costs of decommissioning and their full share of waste
management costs’.
The White Paper claimed nuclear power would beneﬁt from
the fact that nuclear power plants do not emit carbon dioxide and
its owners would not need an emissions permit.19
With a Carbon
emissions permit price (in the European Union's Emissions Trading
Scheme (EUETS)) of €36/tCO2, it forecast nuclear power would
be competitive under all its scenarios and that ‘in the central case
and high cases for gas prices and a central case for nuclear costs,
nuclear power provides economic beneﬁt regardless of the carbon
price’. The White Paper stated that the government would not be
making any investment but that it would allow ‘energy companies
the option of investing in new nuclear power stations’.20
To allow
companies to make such decisions enabling measures were needed
so that companies did not face unnecessary barriers to ordering
nuclear power plants.
3. The enabling measures and their implementation
The main enabling measures were:
 Streamlining the planning system to prevent delays implementing
decisions.
 Identiﬁcation of sites for nuclear plants approved by the
government.
 Introduction of a Generic Design Assessment (GDA).
 Efforts to make the EUETS a more effective instrument.
In addition to these, two further enabling measures, Contracts
for Differences (CfDs) and loan guarantees were later introduced
to try to overcome problems of ﬁnancing nuclear
investment.
3.1. The planning system
Reforms to the planning system were announced in July 2011
and were aimed at ‘removing uncertainty to give industry the
conﬁdence to invest in much needed new energy infrastructure in
this country’ by use of Energy ‘National Policy Statements’.21
3.2. Identiﬁcation of sites and the potential investors22
A Strategic Site Assessment (SSA) process was launched in
200823
and eleven potential sites were identiﬁed with three
green-ﬁeld sites and eight sites of existing nuclear facilities. Only
the existing sites were identiﬁed as suitable for nuclear power
plants (see Blowers (2010) for a discussion of why sites of existing
facilities were chosen).24
Four were wholly owned by the Nuclear
Decommissioning Authority (NDA), two were wholly owned by
British Energy and both organisations owned parts of the other
two. In 2009, before the ﬁnal selection had been made, land at the
four sites solely owned by NDA was auctioned and bought by the
three consortia set up to build nuclear plants.25
These three consortia remain the established candidates to
build nuclear plants in Britain, and were formed of electric utilities
already with signiﬁcant businesses in the UK: NNB GenCo (EDF
80%, Centrica 20%), Horizon (EON 50%, RWE 50%) and NuGen (GDF
Suez 37.5%), Iberdrola 37.5%, S&SE 25%.
EDF took over the British nuclear generation company, British
Energy, in 2009 giving it sole or part ownership of four of the eight
sites. EDF also bought land in the auction at NDA's Bradwell site.
Horizon bought land at NDA's Wylfa and Oldbury sites while NuGen
bought land adjacent to NDA's Sellaﬁeld location at a site
known as Moorside.
In 2012, Horizon was sold to the reactor vendor Hitachi-GE for
about d700 m26
and in 2013, Centrica withdrew from NNB
GenCo.27
S&SE sold its stake in NuGen in 2011 for d5.75 m leaving
GDF Suez and Iberdrola each with 50% of the company.28
In January
2014, the reactor vendor, Toshiba paid d102 m to take over
Iberdrola's stake and some of GDF Suez's29
stake giving it 60% of
the equity.30
3.3. Generic design assessment
Four designs were submitted to the Ofﬁce of Nuclear Regulation
(ONR)31
GDA process in 2007, the Areva European Pressurised
Reactor (EPR), the Toshiba/Westinghouse AP1000, the AECL ACR-
1000 and the GE-Hitachi ESBWR. The latter two designs were
withdrawn within a year of the process starting. EDF chose the EPR
design while Horizon and NuGen had not chosen their technologies
by the time they were taken over by Hitachi-GE and Toshiba
respectively. The GDA for the EPR was due to be completed in June
2011 but was delayed, amongst other reasons by the Fukushima
disaster. In December 2011, the UK regulator gave Interim Design
Acceptance Conﬁrmations to the EPR and AP1000 subject to resolution
of 29 and 51 design issues respectively.32
This was completed
for the EPR in 201233
but Toshiba did not attempt to resolve
the AP1000 issues because it then had no prospective UK
customer.34
The Design Acceptance Conﬁrmation is valid for 10
years.
Hitachi-GE chose the Advanced Boiling Water Reactor (ABWR)
19
Some argue that the use of fossil fuels particularly in the mining and processing
of uranium is high enough, especially as the ore quality being exploited
goes down, that nuclear power should not be seen as ‘low-carbon’.
20
Department for Business Enterprise & Regulatory Reform, 2008. Meeting the
Energy Challenge: A White Paper on nuclear power, Cm 7296, BERR, London, p. 19.
http://webarchive.nationalarchives.gov.uk/20100512172052/http:/www.decc.gov.
uk/en/content/cms/what_we_do/uk_supply/energy_mix/nuclear/white_paper_08/
white_paper_08.aspx (Accessed July 27, 2015).
21
https://www.gov.uk/government/news/energy-planning-reforms-approvedby-parliament
(Accessed July 28, 2015).
22
The devolved Scottish government had made a decision not to build new
nuclear plants and so two existing sites in Scotland were not considered.
23
Department for Business Enterprise & Regulatory Reform, 2008. Consultation
on the proposed process for the Strategic Siting Assessment, BERR, London.
http://webarchive.nationalarchives.gov.uk/þ/http:/www.berr.gov.uk/ﬁles/
ﬁle47136.pdf (Accessed September 14, 2015).
24
Department of Energy & Climate Change, 2011. National Policy Statement for
Nuclear Power Generation, TSO, London. https://www.gov.uk/government/uploads/
system/uploads/attachment_data/ﬁle/47859/2009-nps-for-nuclear-volumeI.pdf
(Accessed July 28, 2015).
25
http://www.nda.gov.uk/2009/04/winning-bidders-in-nda-land-auction-an
nounced/ (Accessed August 12, 2015).
26
Sunday Times. Hitachi bets d700 m on nuclear Britain; Japanese reactor
maker’s bid for Horizon consortium is boost for UK energy strategy, October 28,
2012.
27
Nucleonics Week. EDF Energy considers new Hinkley partners, February 7,
2013.
28
Platts European Power Daily. SSE closes NuGen stake sale to GDF, Iberdrola,
February 17, 2012.
29
GDF Suez was subsequently renamed ENGIE.
30
Nucleonics Week. Toshiba to buy 60% of UK's NuGen, plan AP1000s at
Moorside, January 16, 2014.
31
The Nuclear Installations Inspectorate was renamed the Ofﬁce of Nuclear
Regulation in 2011.
32
http://www.world-nuclear-news.org/RS_Last_stage_of_UK_reactor_licen
sing_1412111.html (Accessed August 12, 2015).
33
http://www.onr.org.uk/new-reactors/reports/step-four/close-out/
epr70475n.pdf (Accessed July 28, 2015).
34
http://www.onr.org.uk/new-reactors/reports/ap1000-onr-gda-idac-11–002issue-1–131211.pdf
(Accessed July 28, 2015).
S. Thomas / Energy Policy 96 (2016) 421–431424
for Horizon and in January 2014, the ONR began the main phase of
the assessment with an expectation the process would be completed
in 2018.35
Toshiba asked to reactivate the GDA process for
the AP1000 to resolve the remaining issues and in January 2015,
work began in earnest. Toshiba aimed to complete the process in
early 2017.36
3.4. Contracts for differences
Utilities were expected to be unlikely to choose nuclear because
of the risks inherent in a competitive electricity market.
Financiers were concerned about two major risks: technology risk,
the risk that the costs would be higher than forecast; and market
risk, the risk that the electricity wholesale price would fall below
the cost of generation of the nuclear plant. These risks had not
been important to utilities while they were monopolies because
they had generally been able to pass on to consumers whatever
costs were incurred.
Market risk was clearly illustrated in 2002 when the operating
cost alone of Britain's nuclear power plants, was higher than the
electricity market price and British Energy was effectively bankrupted.
CfDs were introduced as part of the 2010 UK Electricity
Market Reform (EMR). In February 2010 the Energy Minister, Ed
Miliband, and the economic regulator for the energy sector, the
Ofﬁce of Gas & Electricity Markets (OFGEM) announced that
market-driven electricity system would not meet objectives in
terms of reliability and greenhouse gas emissions. The Chief Executive
of OFGEM stated (OFGEM 2010):
‘The unprecedented combination of the global ﬁnancial crisis,
tough environmental targets, increasing gas import dependency
and the closure of ageing power stations has combined
to cast reasonable doubt over whether the current energy
arrangements will deliver secure and sustainable energy
supplies’.
The Energy Minister in the Labour government agreed.37
.
‘The Neta system [the British wholesale market], in which
electricity is traded via contracts between buyers and sellers or
power exchanges, does not give sufﬁcient guarantees to developers
of wind turbines and nuclear plants’.
Of most relevance to the nuclear programme was the introduction
of Contracts for Difference. These were said ‘to provide
stable ﬁnancial incentives to invest in all forms of low-carbon
electricity generation’.38
In practice, these were simply ﬁxed price
contracts with part of the payment coming from the market at
market price with the ‘difference’ between the market price and
the contract price paid by a consumer subsidy.39
The energy minister claimed in a statement to Parliament in
October 2010 that the government was not offering subsidies to
nuclear power. However, the statement appears contradictory: ‘I
should like to take the opportunity to reconﬁrm the Government's
policy that there will be no public subsidy for new nuclear power.
To be clear, this means that there will be no levy, direct payment
or market support for electricity supplied or capacity provided by
a private sector new nuclear operator, unless similar support is
also made available more widely to other types of generation’.40
It
was not until October 2015 that the government acknowledged
that ‘the no subsidies policy no longer applies’.41
3.5. Loan guarantees
Technology risk has always been a feature of nuclear projects
because reactors have often not been built to time and cost, operating
reliability has not met expectations and operating costs
have been higher than expected. Despite the accumulation of experience,
there is little sign technology risk is diminishing.
The government announced a programme of infrastructure
loan guarantees worth up to d40bn in July 201242
and in June
2013, it offered guarantees under this programme to Hinkley.43
The Hinkley project is pre-qualiﬁed to receive these guarantees.44
Under this scheme the banks ﬁnancing a nuclear project will effectively
be lending money to the government. If the plant owner
fails, taxpayers repay the loans.45
The risk to utilities was limited by the utilities creating consortia
that would own and operate the plants. If the plant was
uneconomic, the parent companies might simply allow the consortia
to go bankrupt and there would be no recourse to them
beyond their stake in the company. The loan guarantees would
reduce any incentives on lenders to demand performance guarantees
from the members of the consortium in their role as
contractors.
3.6. The EUETS
The government's initial case for nuclear power was dependent
on a well-functioning Carbon market if gas prices were low.
However, by 2010, there was no sign that the EUETS would produce
prices that reﬂected the additional cost of using low-carbon
sources. The government announced in 2011 it would introduce a
Carbon Floor Price (CFP) to apply from 2013 onwards to give
greater predictability to carbon prices. However, the offer of CfDs
meant the carbon price had no impact on the economics of
nuclear.
4. The state of negotiations in 2016
In September 2010, EDF claimed it would make a Final
35
http://news.onr.org.uk/2014/01/regulators-begin-second-phase-of-assess
ment-of-new-nuclear-reactor-for-uk/ (Accessed July 28, 2015).
36
http://news.onr.org.uk/2015/03/revised-resolution-plans-for-westinghouseap1000-design-published/
(Accessed July 28, 2015).
37
The Times. Labour prepares to tear up 12 years of energy policy, February 1,
2010.
38
http://webarchive.nationalarchives.gov.uk/20121025080026/http:/www.
decc.gov.uk/en/content/cms/legislation/white_papers/emr_wp_2011/emr_wp_
2011.aspx (Accessed July 31, 2015).
39
In the event the market price was higher than the contract price, the generator
would repay the difference.
40
https://www.gov.uk/government/news/written-ministerial-statement-onenergy-policy-the-rt-hon-chris-huhne-mp-18-october-2010
(Accessed August 6,
2015).
41
It stated: ‘The Government conﬁrms that it is not continuing the ‘no public
subsidy policy’ of the previous administration’. https://www.gov.uk/government/
news/hinkley-point-c-to-power-six-million-uk-homes (Accessed June 3, 2016).
42
https://www.gov.uk/government/news/government-uses-ﬁscal-credibilityto-unveil-new-infrastructure-investment-and-exports-plan
(Accessed August 12,
2015).
43
The Guardian. Investment in renewables may get hit despite rise in wind
farm subsidies, June 27, 2013.
44
https://www.gov.uk/government/publications/uk-guarantees-scheme-pre
qualiﬁed-projects/uk-guarantees-scheme-table-of-prequaliﬁed-projects (Accessed
August 12, 2015).
45
The documentation states: ‘HMT will provide an unconditional and irrevocable
ﬁnancial guarantee in favour of a Beneﬁciary and on behalf of the Company,
capable of demand in the event of non-payment of scheduled principal and interest
owing from time to time under the underlying document (be that a loan, a bond, or
other ﬁnancial instrument). To this end, HMT will unconditionally and irrevocably
agree to pay to the Beneﬁciary any such amounts which have become due for
payment but are unpaid by reason of non-payment’. https://www.gov.uk/govern
ment/uploads/system/uploads/attachment_data/ﬁle/209806/UK_Guarantee_-_A_
brief_overview_-_Allen___Overy.pdf (Accessed September 14, 2015).
S. Thomas / Energy Policy 96 (2016) 421–431 425
Investment Decision (FID) in 2011, start construction in 2013 with
ﬁrst power in 2017.46
However, it was not till October 2013 that
initial agreement between the government and EDF on the terms
for a power purchase agreement was reached. EDF then claimed
an FID was imminent and ﬁrst power would be in 2023. In October
2015, revised terms were announced. The costs remained the same
but the completion date had been put back to 2025, the expected
composition of the NNBG consortium had been changed and there
was more clarity on the loan guarantees (see below). By June 2016,
the contracts for Hinkley had still not been signed despite repeated
announcements by EDF that an FID was about to be taken
and EDF acknowledged that the 2025 target probably could not be
met.47
In this section we examine what the factors behind these
delays have been.
4.1. The October 2013 deal
The terms of the power purchase agreement for the reactors
planned for Hinkley Point C announced in October 2013.48
The
power purchase contract would cover 35 years, at a pre-determined
price, the ‘strike price’, of d92.5/MWh (2012 prices) index-linked
to inﬂation, outside the market and at levels more than
double the wholesale market price for electricity that prevailed in
2013. This agreement was based on an assumption that each reactor
would cost d8bn (in 2012 prices) four times the cost forecast
by the government in 2008. Financing charges were expected to
add about d4bn per reactor, and sovereign loan guarantees covering
all the borrowing, expected to be about d17bn, were expected
to be offered. A second pair of EPR reactors at the Sizewell
site would also be built by the consortium but no timings were
given.
4.2. State-aid inquiries
The October 2013 agreement was far from a ﬁnal deal. The
immediate hurdle was that it had to be examined by the European
Commission competition authorities to determine whether the
contract represented state aid that would distort the electricity
market between member states. If it did, this be illegal under EU
law. With a number of member states looking to follow the UK's
example with their own nuclear programmes if the contracts are
acceptable under EU law, this decision would have far-reaching
consequences.49
Despite an initial evaluation that was highly critical of the
deal,50
on October 2014, the Commission published its verdict that
the deal did not break European Union law.51
However, far from
clearing the way for the project to go forward more hurdles have
appeared since then. The Austrian and Luxembourg
governments52
and some renewable companies53
announced their
intention to challenge the Commission's verdict but by June 2016,
these challenges had not been heard. A separate inquiry into the
terms being offered by the government to deal with waste management
plans was also required and in October 2015, this was
approved.54
By June 2016, no announcement had been made as to
whether the rescue of Areva and the further aid EDF will receive
from the French government discussed below will trigger state-aid
inquiries.
4.3. The October 2015 announcement
In October 2015, revised terms were announced by EDF and the
British government.55
It was asserted that the construction cost
and the strike price were unchanged but the completion date had
gone back to 2025 and there had been signiﬁcant changes to the
composition of the consortium. The ‘Funded Decommissioning
Programme’, the arrangements under which decommissioning
would be paid for, was approved by the UK government although
few details of this have been published. It was also announced that
EDF would release its Bradwell site to a Chinese company, China
General Nuclear (CGN) which is expected to be a minority stakeholder
in Hinkley. Chinese technology, the Hualong One nuclear
reactor design would be built there. CGN announced it would
submit this design to ONR in 2016.56
By June 2016, this had not
happened, the number of reactors to be built had not been announced
and no timings given.
4.4. The consortium
By mid-2016, the consortium had not been established. The
October 2013 agreement stated it was expected to comprise EDF
with 40–50%, the two Chinese companies, CGN and China National
Nuclear Corporation (CNNC) with 30–40%, Areva, with 10% and
investors with whom discussions had already taken place taking
15%. The October 2015 agreement inevitably saw Areva, which by
then had ﬁnancially collapsed, drop out, the 15% to be taken by
other investors had not materialised leaving EDF with 66.5% and
CGN with 33.5%. CNNC was not mentioned in the deal although
subsequently it claimed it would still be an investor.57
For Sizewell,
the consortium would be 80% EDF with Chinese investors taking
the rest, while for Bradwell, it would be 66.5% CGN and the rest
EDF.
4.5. The loan guarantees
In June 2013, Ed Davey, the Secretary of State for DECC announced
that loan guarantees worth up to d10bn would be available
to Hinkley.58
The DECC press release for the October 2013
announcement stated: ‘HM Treasury announced on 27 June 2013
that Hinkley Point C had been pre-qualiﬁed for consideration for a
UK Guarantee’. The press release for the Commission state-aid
decision59
stated: ‘With respect to the State guarantee, the Commission
found that the initial guarantee fee which the operator
46
Nucleonics Week. Despite slippages, EDF on target for 2013 construction at
Hinkley, September 9, 2010.
47
http://www.world-nuclear-news.org/NN-EDF-Energy-chief-refuses-to-pre
judge-outcome-of-HPC-talks-24051601.html (Accessed June 3, 2016).
48
https://www.gov.uk/government/news/initial-agreement-reached-on-newnuclear-power-station-at-hinkley
(Accessed July 27, 2015).
49
For more detailed analysis see: Thomas, S., Fouquet, D., 2013. The new UK
nuclear power programme: A FIT for nuclear and a blueprint for state aid, Greens/
EFA Group – European Parliament, Brussels. http://www.nuclearconsult.com/docs/
Turmes_report.pdf (Accessed September 14, 2015).
50
http://ec.europa.eu/competition/state_aid/cases/251157/251157_1507977_
35_2.pdf (Accessed August 5, 2015).
51
http://eur-lex.europa.eu/legal-content/EN/ALL/? uri¼OJ: L:2015:109: TOC
(Accessed August 5, 2015).
52
Platts European Power Daily. Austria ﬁles lawsuit against EC nuclear ruling,
July 8, 2015.
53
Platts European Power Daily. Ten companies to ﬁle lawsuit over Hinkley, July
2, 2015.
54
http://ec.europa.eu/competition/elojade/isef/case_details.cfm? proc_
code¼3_SA_34962 (Accessed June 3, 2016).
55
https://www.gov.uk/government/news/hinkley-point-c-to-power-six-mil
lion-uk-homes and https://www.edfenergy.com/energy/nuclear-new-build-pro
jects/hinkley-point-c/news-views/agreements-in-place (Accessed June 6, 2016).
56
https://www.edfenergy.com/energy/nuclear-new-build-projects/hinkleypoint-c/news-views/agreements-in-place
(Accessed June 6, 2016).
57
The Telegraph ‘Second Chinese company poised to invest in Hinkley Point’
May 7, 2016. http://www.telegraph.co.uk/business/2016/05/07/second-chinesecompany-poised-to-invest-in-hinkley-point/
(Accessed June 6, 2016).
58
http://www.theguardian.com/politics/2013/jul/05/davey-minister-nuclear-
power-hinkley-point.
59
http://europa.eu/rapid/press-release_IP-14–1093_en.htm.
S. Thomas / Energy Policy 96 (2016) 421–431426
would have paid to the UK Treasury was too low for a project with
this risk proﬁle. The guarantee fee was therefore signiﬁcantly
raised’. And ‘The new Hinkley Point C nuclear power station will
require debt ﬁnancing of GBP 17 billion’. The common assumption
then was that loan guarantees to cover all the debt were fully
agreed. However, closer examination of the Commission verdict
revealed there were conditions, particularly a ‘Base Case Condition’
which was that until Flamanville 3 was in commercial service,
there would be a cap on the guaranteed loans effectively meaning
funding would be primarily through equity.60
The Base Case
Condition had to be met by the end of 2020 or the loan guarantees
would be withdrawn. There are increasing doubts that Flamanville
3 can meet this deadline (see below). During a state visit by the
Chinese President, the UK Treasury announced an initial d2bn in
loan guarantees which would ‘pave the way for a ﬁnal investment
decision by energy company EDF, supported by China General
Nuclear Corporation and China National Nuclear Corporation, later
this year, and with further amounts potentially available in the
longer-term’.61
The Treasury stated…further amounts [would be]
available should EDF meet certain conditions and subject to fuller
government approvals’.62
The implication that loan guarantees
were not as committed as had been commonly assumed was reinforced
by EDF implying it would fund construction of Hinkley
from equity (its own funds) rather than borrowing. It seems improbable
that EDF would choose to do this if borrowing with loan
guarantees was an option given its low proﬁtability and the relatively
high cost of equity compared to debt. It was also reported
EDF was looking to sell up to €10bn in assets to fund
construction.63
In January 2016, the Telegraph reported64
: ‘EDF
had originally been expected to use project ﬁnancing for Hinkley,
backed up by up to d16bn in UK Government guarantees via Infrastructure
UK. But Mr Lévy [EDF CEO] announced in October a
“radical change” to what he said was a “more efﬁcient” option of
delivering its d12bn share of the project from EDF's own balance
sheet. It has since emerged the UK had attached a sub-investment
grade BBþ credit rating to the project’. In March 2016, Reuters
reported65
: ‘Levy said in a letter to staff the utility will not go
ahead with its plan to build two nuclear reactors in Britain unless
it gets more ﬁnancial support from the French state’. In May 2016,
it was reported the French government was looking to sell some of
its stakes in companies such as Peugeot to support a capital injection
to EDF through bond sales of €4bn.66
Doubts as to the
availability of loan guarantees increased after a reply by the UK
Treasury on May 10, 2016 to a Parliamentary Question stated67
:
‘This initial guarantee (the d2bn announced in September 2015)
will be repaid (sic) in December 2020. There is no further obligation
to issue guarantees after that date’. There had been no hint
that this initial guarantee had been so short-term and the stress
that there were no obligations to issue further guarantees increased
suspicions that the terms and conditions required by the
UK government for further guarantees were unpalatable to EDF.
There was clear dissent within EDF with the resignation of the
Chief Financial Ofﬁcer, Thomas Piquemal, in March 2016 in protest
at the deal while the union representatives on the Board were
threatening to vote against the deal.68
EDF's credit rating is in
decline and Moody's downrated EDF in May 2016 partly because
‘EDF had not accounted for the incremental risks associated with
Hinkley Point C’.69
4.6. The collapse of Areva
In March 2015, Areva's annual results revealed losses of
€4.8bn.70
The French government brokered a rescue and a provisional
deal was announced in July 2015. This involved EDF taking a
majority stake (at least 51%) costing about €2bn in the reactor
sales and servicing division of Areva, Areva NP71
with Areva taking
no more than 25%. Other potential investors included CNNC and
CGN, and the Japanese company, Mitsubishi. Standard & Poors
stated the takeover deal might not be completed in 2016.72
It
seems implausible that a state-aid inquiry will not be required
given the reported need for the French government to provide a
€4–5bn capital injection as well as having to indemnify buyers
from any liabilities resulting from the Olkiluoto order and the
problems with reactor vessels (see below).73
4.7. Reactor vessel issues
In April 2015, Areva informed the French safety authorities,
Autorité de Sureté Nucléaire (ASN), of ‘an anomaly in the composition
of the steel in certain zones of the reactor vessel head and
reactor vessel bottom head of the Flamanville EPR’.74
The same
manufacturing fault applied to the parts supplied to the two EPRs
in China (Taishan) plus parts destined for the two Hinkley reactors
and a reactor subsequently not ordered for the Calvert Cliffs site in
the USA. For Taishan and Flamanville, the components had already
been installed and if the anomalies are too serious, it may be
uneconomic to replace or repair these parts. Some of the parts
destined for Hinkley and/or Calvert Cliffs are being destructively
tested to determine whether they meet requirements. A decision
by ASN on the adequacy of the material was not expected before
late 2015 or 2016.75
Even if construction at Taishan and Flamanville
is allowed to proceed, this problem has seriously damaged
the credibility of Areva as a supplier of equipment. As a result of
these issues, ASN asked Areva to carry out a quality review on the
manufacturing work carried out in its Creusot Forge plant. This
revealed: ‘irregularities in the manufacturing checks on about 400
parts produced since 1965, about ﬁfty of which would appear to be
in service in the French NPPs. These irregularities comprise inconsistencies,
modiﬁcations or omissions in the production ﬁles,
concerning manufacturing parameters or test results’.76
By June
60
The size of the cap was redacted in the published verdict as being commercially
conﬁdential.
61
https://www.edfenergy.com/energy/nuclear-new-build-projects/hinkleypoint-c/news-views/treasury-announcement
(Accessed June 7, 2016).
62
https://www.gov.uk/government/news/2-billion-support-for-hinkley-pointc
(Accessed June 7, 2016).
63
Utility Week ‘EDF looking at (EURO)10bn assets sale’ October 23, 2015.
64
http://www.telegraph.co.uk/ﬁnance/newsbysector/energy/12123674/Hink
ley-Point-go-ahead-delayed-amid-EDF-funding-doubts.html.
65
http://af.reuters.com/article/energyOilNews/idAFL5N16J4TT.
66
The Times ‘French sell-off to help pay for Hinkley Point’ May 2, 2016.
67
http://www.parliament.uk/business/publications/written-questions-an
swers-statements/written-questions-answers/?
page¼1&max¼20&questiontype¼AllQuestions&house¼commons%2clords&use-
dates¼True&answered-from¼2016–03-01&answered-to¼2016–05-
01&member¼3930&keywords¼Hinkley%2cPoint (Accessed June 7, 2016).
68
http://www.bbc.co.uk/news/business-36394601 (Accessed June 7, 2016).
69
http://www.world-nuclear-news.org/C-EDF-ratings-downgraded-UK-arm-
clariﬁes-Hinkley-cost-13041601.html.
70
Areva, 2014. Areva 2014 Reference Document, Areva, Paris. http://www.are
va.com/ﬁnance/liblocal/docs/doc-ref-2014/DDR_EN_310315.pdf (Accessed August
5, 2015).
71
Areva is split into three main divisions, Areva NP supplies reactors and reactor
services, Areva NC for nuclear fuel and Areva TA for nuclear propulsion and
research facilities.
72
Nuclear Fuel ‘S&P expects clarity on Areva recapitalization by December’
October 26, 2015.
73
Financial Times. Lossmaking Areva needs €7bn capital injection, July 30,
2015.
74
http://www.french-nuclear-safety.fr/Information/News-releases/Flaman
ville-EPR-reactor-vessel-manufacturing-anomalies (Accessed August 5, 2015).
75
Inside NRC. Flamanville-3 RPV issue technical, not regulatory: ASN ofﬁcial,
June 1, 2015.
76
http://www.french-nuclear-safety.fr/Information/News-releases/Irregula
S. Thomas / Energy Policy 96 (2016) 421–431 427
2016, the implications of this revelation were not clear but if they
add further potential liabilities to Areva, a rescue of Areva as a
going concern might be impossible.
4.8. Prospects for the order going ahead
The concessions that the British government had to give to get
the provisional deal were predictable. In 2008, Thomas wrote77
:
‘Subsidies and guarantees required to allow them to build a
nuclear plant would probably include: a guarantee from either
the vendor or the government that the cost they pay will be the
contract price, so that if the costs do overrun, they do not pay;
loan guarantees so that if the companies go bankrupt, the
banks that lend the money are still repaid (in order to ensure
affordable interest rates on the loans); and some guarantee on
the price paid for the power produced so that if the electricity
wholesale price collapses, as it did in 2002, the company is
protected’. And ‘On any realistic schedule, the ﬁrst nuclear order
is still ﬁve years away and companies like EDF cannot be
held to promises made now that they can build plants without
subsidy. The fear must be that if companies insist they will not
proceed unless subsidies are offered, even after ﬁve years of the
government pursuing what Hutton calls “a strong nuclear
agenda”, the government will be prompted to drop its refusal to
give subsidies before abandoning its nuclear ambitions’.
By mid-2016, it was unclear whether the Hinkley deal would go
ahead with new barriers, such as the ﬁnancial collapse of Areva,
the quality control issues, the internal dissent within EDF and the
barriers to loan guarantees appearing more rapidly than existing
ones are overcome.
4.9. Orders beyond Hinkley
Given the extreme difﬁculty EDF is having ﬁnancing 66.5% of
Hinkley Point C, it is implausible that Sizewell C with an 80% EDF
stake can go ahead much before 2030.
If the Hinkley deal collapses it may be that Horizon and NuGen
will also not proceed. The Horizon consortium plans to build two
ABWRs at each of its sites. The GDA for the ABWR is scheduled to
ﬁnish in 2017 and if Hinkley is a guide, agreement with the government
on the terms will take a year and it will be 2–3 years
before construction can start. Horizon is forecasting ﬁrst power
from Wylfa before 2025 but this seems unlikely and Oldbury will
be signiﬁcantly later.
NuGen plans to build three AP1000 reactors at its Moorside site
with the ﬁrst expected on-line by 2024. This will be an expensive
site to develop because unlike the other sites, it does not have a
connection to the national grid. The GDA for AP1000 will not be
complete before 2017. So, like Horizon, ﬁrst power is more likely to
be closer to 2030 for the ﬁrst reactor. The Bradwell project is much
less advanced and is unlikely to be on line before 2030.
4.10. Barriers to nuclear ordering
The history of this project has revealed more clearly the extent
of the barriers, especially in terms of ﬁnance, to nuclear ordering.
What gave Blair's 2006 announcement resonance was the claim
that new nuclear plants could be built without subsidy. This claim
has proved false partly because nuclear costs have continued to
rise making it uncompetitive with some renewables. However, the
main factor is the technology risk resulting from the poor record of
reactors being built to time and cost. The new generation of nuclear
designs which the nuclear industry claimed would address
the issues of high cost and high technology risk have failed to deal
with these issues (Thomas, 2015).
The Generic Design Assessment process has the apparent attraction
of ensuring there will be no construction delays due to
regulatory issues once construction has started. However, the
process is lengthy taking ﬁve years for the one reactor that has
completed the process in the UK. A comparable procedure is in
place in the USA but here, the duration of reviews is even longer,
more than nine years. The process remains unproven in practice in
the UK and the USA, with the four reactors under construction in
2016 in the USA using this method three years into construction.
All of these are at least three years behind schedule.
5. The policy process
5.1. Party politics
Nuclear power has generally not been a party political issue
with the two main parties never anti-nuclear as a matter of
principle. There have been concerns about costs and an awareness
of the continuing failure of government policies towards
nuclear power and the parties have always contained dissenting
minorities. What is remarkable is how many of the key policymakers
appear to have either reversed their position on nuclear
power or have at least shifted dramatically. These include Prime
Ministers Tony Blair and David Cameron and the Energy Ministers
in the 2010–15 coalition government, Chris Huhne and Ed
Davey.
Some see the nuclear programme as part of Tony Blair's legacy.
At the time of the Blair announcement in 2006 there were reports
that anti-nuclear elements in the Cabinet had been sacked.78
Blair
had already appointed Malcolm Wicks, a strong supporter of nuclear
power, as Minister for Energy in May 2005. Wicks was
moved from this post in November 2006 to be replaced by Alistair
Darling. However, under Gordon Brown, Tony Blair's successor,
Wicks was moved back to his former position in Gordon Brown's
ﬁrst reshufﬂe in June 2007 and held that position until October
2008, when he became Gordon Brown's special representative on
international energy issues. He was replaced by Ed Miliband who
held that position until the May 2010 general election.79
In June
2007, John Hutton became a Minister at the ministry (Business &
Enterprise and Regulatory Reform, BERR) that then contained the
energy portfolio, a position he held until he announced in June
2009 that he would not be standing for re-election. In June 2010,
he became a member of the board of a US nuclear power company,
Hyperion Power Generation. In June 2011, he became Chair of the
Nuclear Industry Association, the Trade Association for the UK
nuclear power industry.
The Liberal Democrats had, up to the 2010 election, been antinuclear
and their 2010 Election Manifesto said Liberal Democrats
would:
‘Reject a new generation of nuclear power stations; based on
the evidence nuclear is a far more expensive way of reducing
carbon emissions than promoting energy conservation and
(footnote continued)
rities-concerning-components-manufactured-in-its-Creusot-Forge-plant (Accessed
June 7, 2016).
77
Guardian. This nuclear agenda is losing power, Comment is Free, June 12,
2008. http://www.theguardian.com/commentisfree/2008/jun/12/nuclearpower.nu
clear (Accessed September 14, 2015).
78
Sunday Herald. Tony Blair says he’s seen a ‘ﬁrst cut’ of a DTI energy review
when a summary does not even exist. Anti-nuclear Cabinet have been reshufﬂed,
May 21, 2006.
79
Malcolm Wicks died in September 2012.
S. Thomas / Energy Policy 96 (2016) 421–431428
renewable energy’.80
The Coalition agreement that made Liberal Democrats junior
partners in the coalition stated:
‘We will implement a process allowing the Liberal Democrats
to maintain their opposition to nuclear power while permitting
the Government to bring forward the National Planning
Statement for ratiﬁcation by Parliament so that new nuclear
construction becomes possible’.81
Under the Cameron coalition, the Secretary of State for Energy
& Climate Change, was from the Liberal Democrat party, Chris
Huhne and Ed Davey from February 2012 onwards. Despite their
Manifesto and Coalition Agreement commitments, Huhne and
Davey have been no less enthusiastic than their predecessors in
promoting the nuclear policy.
It might have been expected, given the poor record of public
expenditure on nuclear power, the huge liabilities that had fallen
on the public purse following the collapse of British Energy and
BNFL and the major commitment of public money that a 35 year
CfD and the loan guarantees represented that the Treasury would
have concerns about a nuclear programme. However, there had
been no sign of opposition from the three long-serving Chancellors
of the Exchequer (the Chancellor is the minister in charge of
the Treasury) since 1997 until the conditions on the loan guarantees
appeared to tighten from 2014 onwards.
In the May 2015 general election, nuclear power barely featured
in any of the three parties' manifestos with no more than
bland acceptances of the need for nuclear power.
There seems no clear evidence that the nuclear programme
was a product of a particular politician. Blair appeared to have a
strong commitment to nuclear power, but given that the succeeding
Brown and Cameron governments have pursued the nuclear
policy with equal zeal, this does not seem to have been a
decisive factor. Similarly, the ministers and advisors in the Blair
and Brown governments were well disposed to nuclear power but
again, their successors, even ones who had previously been antinuclear,
have not been any less enthusiastic in their pursuit of
nuclear power. The lack of opposition politics may have been
important in the failure to challenge the suspect cost data that the
programme was based on.
5.2. Parliamentary scrutiny
Various Parliamentary committees should have provided critical
analysis of the programme. The most regular scrutiny should
have come from the Committee that monitors the energy ministry.
Various reports were published. For example, in March 2013, the
Energy & Climate Change Committee published a report.82
However,
the report was equivocal and addressed mostly delays in the
process rather than reviewing the underlying policy. The Chair of
this Committee, Tim Yeo, was known to be a strong supporter of
nuclear power while members of the Committee have been strong
critics, so the lack of a clear voice is not surprising. The Committee
formed after the 2015 General Election asking for submission ‘on
which Government policies require scrutiny over the coming
years’. This mentioned affordability, energy security, and
sustainability but there was no reference to nuclear power.83
The Environmental Audit Committee is not yet a powerful
voice. The main inquiry relevant to nuclear power examined energy
subsidies. In relation to the government's continued claim
that nuclear was not being subsidised, it concluded in 2013 that.84
‘It makes no sense to claim that a subsidy applicable to more
than one technology therefore does not constitute a subsidy. It
is already clear that new nuclear is being subsidised. The contractor
for Hinkley Point will be able to use the guaranteed
strike price for the electricity generated to raise capital at lower
cost’.
The Public Accounts Committee (PAC) and the investigatory
body that reports to it, the National Audit Ofﬁce (NAO), are generally
seen as powerful. However, their function is to review ‘value
for money’ for public expenditure that has been committed. So
they inevitably become involved late in the process too late to
inﬂuence the basic policy. The NAO announced in October 2013
when the provisional terms of the Hinkley deal were announced
that it was examining the deal but by August 2015, the NAO website
still stated: ‘We will publish this report at an appropriate time
after the conclusion of the deal’.85
Overall, the contribution of the
Parliamentary Committees has been weak and has had no impact
on government policy.
5.3. The civil service
The record of decisions on nuclear power made by the civil
service department responsible for energy is poor. Dating back to
the mid-1960s and the decision to adopt Advanced Gas-cooled
Reactor technology, none of their decisions have proved wellfounded
in the Department's analysis. Whether this record is
worse than that of other departments is hard to say, and government
decisions are always ultimately taken by politicians but their
apparent complicity in ill-conceived policies over a period of 50
years suggests an institutional failure.
Unlike its predecessor which was based on analysis by the part
of the Cabinet Ofﬁce, the Energy White Paper of 200686
was based
on analysis carried out by the line ministry, DTI/BERR and was
much more favourable to nuclear power. A public consultation was
opened, as required by the 2003 White Paper as a condition to relaunch
nuclear ordering. Greenpeace won a High Court decision
that found that the consultation was ﬂawed and the consultation
had to repeated, albeit with similar results but the Nuclear White
Paper was not published until January 2008.87
The White Paper foresaw construction costs of d2bn per reactor
and generation costs of as little as about d30/MW h, ﬁgures less
than a third of those likely to be included in any contract to build
Hinkley Point C. The government seemed to accept uncritically the
assurances of the three consortia formed to build in the UK that
they would go ahead without subsidies. In July 2008, soon after
the publication of the White Paper, the government formed the
80
Liberal Democrats. 2010, ‘Liberal Democrat Manifesto 2010’ http://network.
libdems.org.uk/manifesto2010/libdem_manifesto_2010.pdf (Accessed September
27, 2013).
81
HM Government, 2010. The Coalition: Our programme for government.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/ﬁle/
78977/coalition_programme_for_government.pdf (Accessed September 27, 2013).
82
Energy & Climate Change Committee ‘Building new nuclear: The challenges
ahead’ http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenergy/
117/11703.htm (Accessed September 14, 2015).
83
http://www.parliament.uk/business/committees/committees-a-z/com
mons-select/energy-and-climate-change-committee/news-parliament-2015/eccpriorities-tor/
(Accessed 7 August 2015).
84
Environmental Audit Committee, 2013. ‘Environmental Audit Committee –
Ninth Report: Energy subsidies’. http://www.publications.parliament.uk/pa/
cm201314/cmselect/cmenvaud/61/6102.htm (Accessed August 6, 2015).
85
https://www.nao.org.uk/work-in-progress/ (Accessed August 6, 2015).
86
Department of Business, Enterprise & Regulatory Reform, 2007. Energy
White Paper: Meeting the energy challenge, HMSO. http://www.berr.gov.uk/ﬁles/
ﬁle39387.pdf (Accessed August 15, 2015).
87
Department of Business, Enterprise & Regulatory Reform, 2008. Meeting the
energy challenge: A White Paper on nuclear power, HMSO, London. http://webarc
hive.nationalarchives.gov.uk/þ/http://www.berr.gov.uk/ﬁles/ﬁle43006.pdf (Accessed
September 14, 2015).
S. Thomas / Energy Policy 96 (2016) 421–431 429
Ofﬁce for Nuclear Development (OND) within DECC and since then
it appears to have operated as a promoter of nuclear power, apparently
at arm's length from the rest of DECC rather than the
normal role of civil servants giving impartial advice to ministers.
The Treasury is often seen as the most powerful ministry and
its public expenditure teams would be expected to have a policy
view on the main policy issues which the Departments they shadow
have to deal with and it can generally veto projects it considers
to be an imprudent use of public money. However, it appears
to have only got substantively involved late in the process
when contract negotiations began, by which time it was too late to
have an inﬂuence to question the fundamentals of the policy. It
may have been that the Treasury was critical but with strong
support from Gordon Brown who had been the Chancellor
throughout the period of ofﬁce of the Blair government and
George Osborne, the Chancellor in the Cameron governments, it is
likely that even if there were concerns within the Treasury, they
were overridden.
5.4. The media and the public
While energy remains a major public policy issue, media expertise
in this area has declined. In the past, major newspapers
had correspondents whose brief was to cover energy. Now, energy
is covered by a range of general correspondents including industrial,
environmental and political correspondents who do not
have the expertise to cover the issue in the depth needed. Media
expertise in energy is increasingly concentrated in specialist
newsletters that do not have the reach to inﬂuence public opinion.
One of the more puzzling aspects for those outside the UK is
the apparent lack of interest by the British public in nuclear power
decisions. There are determined local opposition groups, for example,
Stop Hinkley,88
but at a national level, the environmental
NGOs such as Greenpeace and Friends of the Earth gave up any
capability in nuclear power policy long ago and have not campaigned
strongly. There are a number of possible explanations for
this apparent lack of interest. It may be that:
 This is symptomatic of a more general lack of interest by the
British public, as compared for example with Germany, in longterm
strategic issues.
 The public believes that it has no ability to inﬂuence government
decisions.
 After 50 years of failed attempts to launch major nuclear programmes
in the UK, the public expects the policy to fail without
the need for intervention.
It is clear that the only impact opposition has had is when the
public consultation process was deemed to be ﬂawed in 2007 and
had to be redone. However, this caused minimal delay.
5.5. The nuclear lobby
There is a common perception that there is a strong nuclear
lobby in Britain orchestrating the process. It is hard to see how the
nuclear policy of 2006 could have survived to 2016 without such a
lobby. However, it is not readily apparent who that lobby might
contain. 30 years ago a convincing UK lobby group based on selfinterest
of its members could have been constructed comprising:
the state-owned generating company, the Central Electricity
Generating Board; state-owned nuclear R&D and fuel cycle companies,
the United Kingdom Atomic Energy Authority and British
Nuclear Fuels Limited; and the national champion engineering
company, GEC. However, by 2006, none of these existed. There are
companies that will proﬁt by supplying some of the components
or bulk commodities such as steel and concrete but hardly likely to
be able to mount the effort required to have a major inﬂuence on
government policy.
Nevertheless, inﬂuential organisations have consistently supported
nuclear power, including: the Confederation of British Industry
(CBI)89
; most of the major Trades Unions; the broadsheet
press. It can also be argued that the Ministry of Defence has a
vested interest in retaining a nuclear power programme so that
some of the skills and facilities needed for a nuclear weapons and
the submarine programme are retained.90
The government's chief
scientiﬁc advisor from October 2000-31 December 2007, Sir David
King, is often seen as inﬂuential in convincing Blair to pursue
nuclear power. When the energy policy review in December 2005
was opened, he said: ‘Thus it is my scientiﬁc, not political, opinion
that nuclear energy should be part of a wide portfolio of approaches’.
Although he added: ‘I emphatically do not believe in
direct government subsidies for nuclear energy’.91
By 2014, his
position had changed and he was reported as saying: ‘Britain
“might well” be able to do without atomic power altogether’.92
Gordon Brown's younger brother, Andrew Brown, became an
employee of EDF in 2004 as its head of media relations and later
Director of Communications and was still with EDF in 2016. He is
sometimes seen as having inﬂuenced his brother to support nuclear
power. So whilst the identity of the members of a lobby, if it
exists, is difﬁcult to identify, many of the opinion formers remain
well disposed towards nuclear power.
6. Broader issues
The analysis above, particularly the apparently very poor advice
given by civil servants to their political masters leads to a number
of questions that are beyond the scope of this paper but deserve
further investigation:
 Has the policy-making process got worse for this latest policy
on nuclear power or is it merely a continuation of previous
failures?
 Is the record of poor advice on nuclear power given by the
British civil service signiﬁcantly worse than that of civil services
in other countries?
 Has the policy-making process on nuclear power been any
worse than that on other energy issues; and
 Is the record of the Energy Ministry any worse than that of other
ministries or is this failure symptomatic of a more general
failure of the policy process.
This is far from an isolated failure of policy towards nuclear
88
http://stophinkley.org/ (Accessed August 12, 2015).
89
For example, in response to the Fukushima disaster, the CBI stated: ‘The
Government should press ahead with plans for new nuclear if we are to ensure
investment in a secure, low-carbon energy supply’. http://www.cbi.org.uk/media-
centre/press-releases/2011/05/cbi-comments-on-chief-nuclear-inspectors-report/
(Accessed September 27, 2013).
90
On the submarine case, see http://www.theguardian.com/science/politicalscience/2015/aug/07/shining-a-light-on-britains-nuclear-state
(Accessed August 6,
2015) and for nuclear weapons see http://www.theecologist.org/blogs_and_com
ments/commentators/2530828/bombs_ahoy_why_the_uk_is_desperate_for_nucle
ar_power.html (Accessed August 6, 2015).
91
The Guardian. The nuclear option is not political expediency but scientiﬁc
necessity, December 16, 2005. http://www.theguardian.com/politics/2005/dec/16/
greenpolitics.environment (Accessed August 6, 2005).
92
The Telegraph. Nuclear power may not be needed, says top atomic advocate,
November 21, 2014. http://www.telegraph.co.uk/news/earth/energy/nuclearpower/
11244499/Nuclear-power-may-not-be-needed-says-top-atomic-advocate.html
(Accessed August 6, 2015).
S. Thomas / Energy Policy 96 (2016) 421–431430
power and over the past 50 years, it is hard to identify any government
policy towards nuclear power that can be regarded as
having been anything other than seriously misconceived. Further,
there is strong evidence that British governments have made
spectacularly bad decisions on large projects in general all too
frequently. In 1976, Henderson gave a public lecture on two costly
British-government sponsored errors, the AGR programme and the
Concorde supersonic airliner.93
In 2013, King and Crewe (2013)
wrote of the large number of costly failures mistakes made by
government, while Flyvbjerg (2014) argues that mega-projects end
up costing more with smaller beneﬁts than forecast and almost
always end up with costs exceeding the beneﬁts. Any policy initiative
to address the failings in civil service advice need to address
these questions to understand whether the issues raised are
speciﬁc or whether they are symptomatic of a general malaise in
the UK policy process.
7. Conclusion and policy implications
The attempt to re-launch nuclear power ordering in the UK
appears to represent a failure of the policy process. A policy that
has failed to deliver on nearly all the promises on which it was
based has been allowed to proceed with no effective means to
require that it be re-considered.
By 2016, the risk that the Hinkley Point project would not go
ahead appeared to be signiﬁcant despite the apparent unﬂinching
determination of the British government to force the deal through.
It may well be that, as with the previous two attempts no more
than one or two reactors will be built before the programme collapses
under the weight of high costs and, perhaps, poor performance
in controlling costs and construction time.
If this happens, the real damage will not so much be the wasteful
expenditure of public money on a failed policy: this is regrettable
but in the context of overall public expenditure and expenditure
on the electricity industry, the costs are not calamitous.
The real problem is the opportunity cost and the fact that, as for
the past half a century, British governments have operated in the
belief that nuclear power can solve our major energy policy issues
whether they are security of supply, affordability or environmental
performance. The result is that options that might have been deployed
more cost-effectively and more reliably, like energy efﬁciency
and renewables have been neglected.
The general issue of how we can prevent misconceived policies
from being pursued long after it is clear they should be abandoned
is difﬁcult to solve. It would be unrealistic to believe it would be
possible to prevent national leaders pursuing ‘pet’ projects, putting
ministers in place who are sympathetic to these projects and
being heavily inﬂuenced by persuasive advisors.
Where policies have cross-party support, the normal process of
opposition politics testing policies does not work. Parliamentary
committees can identify where policies are being poorly implemented
but are less comfortable questioning the basis of the
policy. Politicians are also vulnerable to powerful industry lobbies
especially where they can convince them that their proposals will
bring employment and national prosperity.
The lack of critical scrutiny by the media and the public has also
contributed but the key role to ensure policies are well-conceived
appears to be that of civil servants. It is their duty to provide politicians
with impartial high quality analysis, identifying where
policies are misconceived and providing a counterweight to industry
lobbies. This is an area where the energy part of the UK civil
service has consistently failed over the past 50 years. One simple
explanation might be that support for nuclear power dates back to
the early days of nuclear power when there was little challenge to
the view that nuclear power was the future for energy. This
‘conventional wisdom’ has been passed on uncritically to new
incumbents who do not have the courage to question such a
fundamental act of faith. With civil servants often moved onto
different ministries on a regular basis, expecting them to potentially
blight their careers by questioning the perceived wisdom is
perhaps not realistic.
Giving civil servants the power and conﬁdence to provide this
advice is not something that civil servants can easily instigate. It is
something that must come from politicians and runs against current
trends under which politicians make their own appointments
to key positions in the civil service. In 2012, Prime Minister Cameron
launched a plan to reform the Civil Service.94
However, the
emphasis seemed to be on making the Civil Service ‘sharper and
quicker’, giving civil servants scope and freedom to provide advice
that ministers would not want to hear was absent. The Public
Administration Select Committee carried out a year-long investigation
into these plans and it described its report as ‘brutal’.95
It concluded the government's policy was bound to fail and that
‘the present atmosphere promotes the ﬁltering of honest and
complete assessments to ministers and has in some parts of government
become the antithesis of “truth to power”’. Despite this
damning verdict, the likelihood that government will change its
reform policy is low.
Acknowledgements
I am grateful to Professor David Hall, Jonathan Sibson, Professor
Andrew Blowers and Professor Michael Jefferson for their encouragement
and for valuable comments on earlier drafts.
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