The collapse of Toshiba’s project underlines the fact that new nuclear is a more unreliable proposition than wind and solar
Toshiba’s decision to pull out of building a nuclear power station in Cumbria last week will cause shockwaves far beyond the north-west of England.
The outcome is a disaster for the surrounding area, which is heavily reliant on the nuclear industry for jobs and prosperity. Local politicians admit it is a blow and a disappointment for Cumbrians hoping for roles at the proposed Moorside plant. They say they genuinely believe a new buyer for the site will come forward. But that looks like wishful thinking.
We have launched the £200 million Nuclear Sector Deal in North Wales to create the right business environment to ensure the sector remains cost competitive with other forms of low-carbon technologies, which helps us to deliver our Clean Growth Strategy.” Emma Pinchbeck, of RenewableUK – which represents the wind industry, said: “Today’s announcement risks blowing a hole in the Government’s plans to meet our carbon targets.
To an extent, the demise of Moorside can be attributed to problems with it as a specific project. It has looked doomed since Toshiba’s US nuclear unit, Westinghouse, declared bankruptcy in 2017 and the company ruled out new nuclear investments outside of Japan. Efforts to woo the South Korean energy company Kepco as a buyer then floundered . The executive leading the sale for Toshiba blamed the failure to find a buyer on being “caught between a series of unplanned and uncontrollable events”.
But the end of Moorside is also emblematic of the wider challenges that new nuclear faces. It took a decade from Tony Blair signalling the UK’s renewed interest in nuclear power in 2006 for France’s EDF Energy and the British government to sign a generous subsidy deal and green-light Hinkley Point C , the UK’s first new nuclear plant in a generation. In all likelihood, it will not be generating electricity until 2027.
Ministers insist new nuclear power stations are still an essential way of hitting the country’s greenhouse gas emission targets and providing energy security as old plants are switched off in the 2020s.
In 2009, consumption of renewable sources in the United States totaled 7.7 quadrillion Btu—or about 8
Losing Moorside means there are just five other new nuclear projects planned, including Hinkley Point C . Eyes will now turn to Hitachi’s proposed Wylfa Newydd plant on Anglesey. The project is the furthest along the line after Hinkley, but it’s far from a done deal.
The new nuclear drive was meant to be solely funded by the private sector, but the government has already made a striking exception in the case of Wylfa. Ministers have promised Hitachi they will use public money to take a £5bn stake in the scheme. Such a dramatic U-turn on policy is explained by the fact that Wylfa is about more than the UK’s desire for new nuclear: it is also about cooperation with Tokyo and bringing forth other investment from Japanese firms, such as carmakers, after Brexit.
There is a pattern here. The subsidy deal for Hinkley was declared exceptional because it was the first new nuclear plant and the risk was loaded on to the developer. Now the second one will be exceptional too. What’s to say that the third, fourth and fifth will be any different?
The collapse of Moorside should be cause for the government to look again at whether it is backing the right horse by doggedly pursuing new nuclear. Even the government’s own advisers, the National Infrastructure Commission, are urging a rethink . Renewables, they point out, are simply less risky.
Ministers will probably invoke the spectre of missed climate-change targets to argue for nuclear. But the statutory advisers on those targets recently said the 2030 goal could be achieved with Hinkley alone.
The momentum is with renewables. The technology is becoming cheaper, investors view it as an increasingly safe bet and the need for subsidies is diminishing . Next year we will find out how much cheaper offshore wind, which has already halved in cost , can become in a new round of government auctions.
Ditching new nuclear would require a huge increase in the amount of wind and solar power already expected in coming years. It would need dramatic progress on energy storage, smarter grids and even more efficient use of energy. All those things will be difficult. But pursuing an impossible atomic dream, as Moorside demonstrates, looks even harder.
A dam is a great visual for the power grid. Water is one of those never-ending renewable energy sources that we often forget about. If you want to teach kids about the electricity grid, visit a dam. It’s a huge visual representation of a battery that illustrates the energy the world needs. The lake formed by the dam is, essentially, the battery storage. When energy demand is high, water tumbles through the dam into the small river below. When demand is low, water is pumped back up into the dam, creating more energy reserves. Take a tour if you can.
Sky’s secret weapon?
Sky’s departure from the FTSE 100 last week signalled the end of almost three decades of Murdoch control and set the scene for new owner Comcast to grapple with a big strategic challenge: the rise of streaming services.
Comcast’s boss, Brian Roberts, has pledged to avoid meddling with Sky - Comcast may be the biggest cable operator in the US but it has zero European pay-TV experience - but he has admitted one Sky jewel has caught his attention. Now TV, an on-demand streaming service, is Sky’s riposte to Netflix and Roberts believes it could become a global product.
Roberts failed with his initial streaming effort, Watchable. Since then he has sat on the sidelines while the likes of Disney and Warner owner AT&T have joined the streaming battle against Netflix and Amazon. The acquisition of Sky will allow him to try again.
Now TV has about 1.5 million UK subscribers, which is hardly a threat to Netflix’s almost 10 million, but it is being used as a springboard into Sky-free European markets like Spain. The world might follow.
The streaming competition also threatens a cornerstone of Sky’s business: content. Sky’s content deal with Disney, which narrowly failed to buy Sky this year , expires in 2020 and the Hollywood giant has considerable leverage after it acquired Murdoch’s Fox this year.
If Disney’s plans for a US streaming service prove wildly successful it may look to pull its content from Sky to bolster international ambitions. However, that would be a very big call given its content is viewed in 23m Sky homes across Europe.
Iceland Is Doing Things Right. If you are looking for the top country using renewable energy, you might assume it’s one of the big dogs. While China leads the world in hydropower production and Germany has its finger on solar energy, there’s no country doing things quite like Iceland. Yes, that little northern country famous for pop-culture exports like Bjorn has quietly been doing renewable energy right. Hydroelectricity makes up over 75% of Iceland’s power production. The rest comes from other renewable sources like solar, wind, and geothermal. Since there are plenty of volcanoes around the country, they have no shortage of heat to keep themselves warm all year long.
At least one thing off the “to-do” list appears to be the three-year cycle of worry that is the Premier League. BT has raised the white flag in the football rights bidding wars and there is no serious competition elsewhere. Streaming however, is a different ball game.
Has the penny really dropped for Persimmon?
So farewell Jeff Fairburn, probably the most egregiously overpaid boss in modern corporate history.
Last December Fairburn, the boss of housebuilder Persimmon was handed a £100m bonus from an atrociously badly designed long-term incentive plan (LTIP) set up in 2012.
That LTIP morphed into a winning lottery ticket when George Osborne unveiled his help-to-buy scheme for first-time buyers in 2013, backed by billions of pounds of taxpayers’ cash. It put rocket fuel into new house sales, and housebuilders’ profits. The Persimmon share price had risen fivefold when the LTIP matured last Christmas. Other housebuilders’ shares rose just as much, but they did not have LTIPs modelled on those Las Vegas fruit machines which spew out coins like a golden waterfall.
The then chairman of Persimmon and the director who signed off the LTIP tried to persuade Fairburn to take a smaller sum and donate a large portion to charity. He refused. They quit.
Costa Rica went entirely renewable. Well, almost. The residents still drive gas-powered cars, but the electrical grid used 98% renewables for the year. That’s an incredible feat, and one that larger countries have been unable to accomplish. Of course, the smaller population and the pleasant temperatures have some effect but does little to dampen the accomplishment. Costa Rica has become a positive example to encourage larger nations to follow suit.
The ensuing furore persuaded Fairburn to forgo £25m. Too little, too late. He promised to set up a charitable trust. When? How much? He wouldn’t say.
Last month, when a BBC reporter asked about the payout, Fairburn stomped off, telling the journalist it was “unfortunate” he had asked that.
Last week, at long last, Persimmon realised that Fairburn has done lasting damage to the company’s reputation and he was shown the door.
There are lessons from this saga: all incentives should have a maximum payout; LTIPs which generate cash from external factors – like help-to-buy – are a reward for luck, not performance; shareholders should wake up and realise the damage done to business by executive greed (more than half of Persimmon shareholders backed this payout even amid the furore).
Persimmon will now be linked with executive excess for years. To escape the Fairburn stain it may have to change its name. But has the penny properly dropped, even now? Because the interim boss, David Jenkinson, got £40m from that LTIP. But for Fairburn it would have been Jenkinson branded one of the UK’s greediest bosses.