As Nick Butler has said in the FT this morning:
There is, it seems, no limit to the lengths to which George Osborne, the UK chancellor, is prepared to go to please China. The most recent example is the latest chapter in the saga of the proposed Hinkley Point nuclear power plant in south-west England. Mr Osborne, on a visit to Beijing, has offered the Chinese £2bn of government guarantees in return for their investment in the much delayed project.
There is straightforward perversity in the logic behind this deal, which is (it should be recalled) for a French controlled nuclear power project.
First, it shows that the government can have an industrial strategy when it wants one, although in this case why nuclear is in the mix and renewables are out is hard to assess.
Second, it shows it is more than willing to back that strategy with money.
Third, it is willing to engage with loan arrangements in financial markets to achieve this goal.
The question then is why is it willing to intervene in this particular way? Wouldn't it be much wiser, if it is willing to take such risks, to raise the money as a bond issue by a National Investment Bank and to then lend the funds from that Bank to this project directly?
When there remains demand for UK gilts (and it is down at present because of interest rate uncertainties, but has by no means gone away) why spend so much money aiding the Chinese to provide this funding when it is readily available at home at what will, almost certainly, be lower overall cost?
It is genuinely hard to see how the proposed deal comes close to economic competence when there could, so easily, be a better deal on the table.
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Especially as:
http://www.telegraph.co.uk/finance/newsbysector/energy/11721506/New-Hinkley-Point-nuclear-plant-faces-legal-challenge-from-Austria.html
The problem with renewables Richard is that they are, except in a very few cases, not dispatchable. Now, if we had a large proportion of generation as hydroelectric, that would be ok: Power when you want it, as you want it. Without that, you have an unstable grid. One that has to be regulated by demand control (power cuts). I know one company that has installed backup generators in all its premises, because it has been advised that grid instability could present it with severe problems in the near future. Its computers are on UPS units, and they power the systems until the generators come online.
To be clear I used to work for a UK DNO. Renewables – yes – not dispatchable – however, this is not a problem for large power networks.
http://climate-energy.blogs.panda.org/2015/04/02/stories-from-the-grid-how-renewable-energy-changes-the-electricity-business/
This link takes you to an article by the CEO of the German TSO 50Hz who has 40% RES generation connected to his network. Much the same comments were made by Nat’ Grid the Uk TSO. There is not a problem handling very high levels of RES in a network. Note the 50Hz comments on reliability. The UK network @ transmission level is equally reliable. Nat Grid is developing demand response capabilities in the Uk & estimates a technical capability of around 9GW – more than enough to cover “winter peaks”. These are “facts” and the professionals I speak to in the industry know that the UK can handle far higher levels of RES than currently exist. Furthermore, Nat Grid regards very large generators such as Hinkley as a problem since they have to take account the instant loss of a single generator (660MW). This is more difficult to do than for example, losing a wind farm (200MW) or PV site (50MW).
Hinkley is a very bad deal anyway you cut it. The money could be spent an a wide range of other areas (e.g. energy efficiency measures) that would have a much greater economic impact on the UK than a nuclear station where most of the high value-added comes from outside the UK.
I agree that right now renewables are not the whole answer
They cannot be without storage
But that is where the investment is needed
‘Storage’ is on track:
http://www.businesswire.com/news/home/20150910005750/en/Samsung-SDI-Unveil-Mega-Commercial-ESS-Product#.VgPkAEOhfIU
http://www.catalyticengineering.com/top-ten-facts-about-teslas-350kwh-powerwall-battery/
By the time that Osborne’s dinosaur is operational ‘storage’ will be quite advanced.
I hope so
An interesting thread on ZH today…
http://www.zerohedge.com/news/2015-09-21/mystery-missing-inflation-solved-and-why-us-housing-crisis-about-get-much-worse
Seen any UK equivalent data?
@JohnM
One day somebody will look back at history and wonder why whole nations never watched the movie “The Revenge of the Rentiers and The Great Moderation”!
Bigger question: why is the unpatriotic Mr Osborne prepared to put money in the pockets of Chinese and French industry, but not help British business?
James, I suspect Osborne’s willingness to act in the way you set out is yet another example of neo-feudalism. In the original feudal system there was FAR more common ground between members of the chivalric class, whatever their “country” of birth than with the alleged “countrymen” of those chevaliers. We’re now seeing a similar phenomenon here, I would argue, with Osborne having FAR more in common with the authoritarian capitalists of the alleged “Chinese People’s Republic”, than with struggling British businessmen and inhabitants, who are only “little people”.
What industry.
We exported much of it a while ago.
Let the Chinese make it in their country, and the mess also stays in their country.
Let the French make it in China, and then import it back, same with the environmental damage.
Why should ozzie care about Britain, his family trust doesn’t.
In the pea-brain ideology of the neo-liberal, awarding the contract to a Briton would be “protectionist”.
I’m not sure you understand how loan guarantees work. The government is not giving China 2bn. China is investing in Hinkley Point and the government is simply underwriting 2bn of the investment. It’s a pretty big difference really.
I fully understand loan guarantees
They are contingent liabilities that can crystlise
Print £25b worth of £10 notes.
Give said £10 notes to people who build power stations (ideally UK based to get money circulating locally).
When power station generates power charge people for it.
Take £10 notes paid for power and burn in power station.
You now have a power station and amount of money circulating in the economy is unchanged in the long run so no additional inflation.
I’m starting to think it really is that simple.
Will this deal lead to a PFI effect, leaving a vital utility in forieign hands and debts and charges that go with this, into a longterm future?
Osbourne would rather give money to the French, the Germans or anyone else, it seems, rather than help a British firm by investing in power stations here, built by us and ran by us so the profit stays in this country.
Some of the recently privatised industries have been bought by nationalised firms in the EU, and much of the money generated from these privatised industries will go towards the pension funds of these nationalised counterparts.
To say this doesn’t make any sense is an understatement.
On the other, smaller, hand:
http://www.lockheedmartin.co.uk/us/products/compact-fusion.html
Fusion requires investment
Big time