Will carbon taxes pay for the nuclear renaisance in the U.K? 

The role of carbon taxes as a source of financial support for new nuclear plants in the U.K. is shaping up to be an election issue.  Britain will have a general election in May.  The ruling Labour Party and the challengers from the Conservatives agree on only one thing, and that is no direct government subsidies for new nuclear plants.  That doesn’t stop either party from talking about carbon taxes which are transfer payments from fossil utilities and ratepayers.

The Telegraph London reported April 10 that nuclear utilities hoping to build at 11 new reactor sites in the U.K. are worried about a backlash from voters over carbon taxes.  The current 'climate change levy', about 13 Euros/ton, is set low despite its objective of discouraging new fossil energy development. 

Paul Golby, the CEO of EON UK, which is one of the major European utilities planning to build reactors in Britain says he has two worries. The first is energy prices are already high and carbon taxes will not go down easy with consumers.  The second is the money raised by the government setting a "carbon floor price" might not wind up helping to pay for new nuclear plants or any other "green energy" projects.  The amount of revenue might be so substantial that members of both parties in Parliament might be unable to keep themselves from diverting it to pet projects.

"I'm not a great supporter of a carbon floor price, because it seems to me to be a tax," he told The Sunday Telegraph. "The money doesn't always go to the purpose it was originally intended."

EON is planning to invest in two nuclear power stations on Anglesey and in Gloucestershire by 2025.  Golby said the government is dreaming if it thinks the plants will be built without incentives.

French nuclear giant EDF is also planning to build new reactors in the U.K.  it’s CEO in Britain told an energy conference there March 2 “an interventionist policy is needed” for the firm to build new reactors.  Alan Raymant said the government’s policy of no incentives “is not an option.”

He warned that a decision not to build new reactors in the U.K. because of unrealistic government policies “would be enormously damaging” to the U.K. economy due to resulting power shortages as older reactors are shut down with no replacements.

Conservatives would raise carbon taxes

The Conservative Party is proposing to set a 48 Euro/Ton floor on carbon emissions to raise money for new energy infrastructure.  Conservative Party leader David Cameron told Dow Jones Newswires March 19 “British energy policy is out of date.”  He wants a carbon price floor, a move welcomed by nuclear utilities.

Dow Jones Newswire also quoted Julian Critchlow, of Bain & Co., who said the U.K. is facing a need to balance costs and energy security.  “If you want more energy security, you have to pay for it.”

The Financial Times reported March 20 that some interests think the Tory energy plan does not go far enough.  An association of engineers called for development of a “national infrastructure investment bank” to capture revenue from carbon taxes and to prevent them from being diverted to other uses.

There is a cost to energy security

What it boils down to is that politicians in both parties are facing the need to find the money to pay for a massive new nuclear build.  The current carbon tax is not only ineffective, it is also too low to generate the revenue needed to build the reactors.

The general election is coming up fast.  The Labour Party punted when asked what it will do about incentives for nuclear plants.  Malcom Wicks, an energy advisor to Prime Minister Gordon Brown, told World Nuclear News in March the government would take “18-30 months” to come up with a new financial plan for building reactors. 

Seeing a political opening, the Conservatives are flogging the energy security issue.  They also are painting the Labour Party as failing to address the issue which has the very real prospect of brownouts from 2017 on as natural gas supplies wind down.

Exelon’s Rowe still champions putting a price on carbon

There isn’t a similar debate in the U.S. nor in as stark a set of terms as those which frame the election-driven debate in the U.K.

In a keynote address at the Pew Center for Global Climate Change conference, Exelon CEO John Rowe said April 8 federal legislation that puts a price on carbon is the most economical option to transition to a low-carbon future.

“The critical first step is legislation that places a price on carbon, because it will result in cleaner energy, greater security and more jobs – all at the lowest cost,” said Rowe. “Nothing else we can do will ensure we do the cheapest things first, including regulation by the Environmental Protection Agency.”

Rowe credited U.S. Senators John Kerry, Lindsey Graham, and Joe Lieberman for their efforts to craft a bipartisan compromise on reducing greenhouse gas emissions and issues such as oil and gas drilling and expansion of nuclear power.

Legislation that puts a price on carbon emissions will effectively encourage low-carbon investments such as energy efficiency and nuclear uprates, said Rowe.  Exelon has committed to uprates of about 1,500 MW across multiple plants.

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