Yes, more nukes?

Photographer: MAXIM MALINOVSKY/AFP/Getty Images

U.K. Energy Security Is About More Than Just China

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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The British government is debating whether to proceed with building an 18-billion pound ($24 billion) nuclear reactor at Hinkley Point in southwest England. A data visualization released by the U.K. Office for National Statistics this week shows just how dramatically the nation's energy-supply picture has changed in recent years -- and how crucial new sources of domestic power are.

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Prime Minister Theresa May's administration last month announced it was delaying a final decision on Hinkley, saying it needed to "consider carefully all the component parts" of the project, which will be led by Electricite de France SA and includes China General Nuclear Power Corp. The government says a decision will come in the early autumn.

The fallout from the choice will be both economic and political. Canceling the plan risks angering China at a time when Britain needs all the post-Brexit trading friends it can muster. Going ahead with the project means locking in energy costs that may look ridiculously expensive if engineering advances combine with power-storage technology to slash electricity prices from renewable energy sources.

The government has guaranteed a subsidized price of 92.50 pounds per megawatt-hour for 35 years for Hinkley, more than double the current wholesale price. That's quite a gamble to be taking on the future of energy costs when Elon Musk is trying to change the world and urging us all to "fight the propaganda of the fossil fuel industry which is unrelenting and enormous."

The political angle of the delay is incredibly sensitive. Nick Timothy, now one of the prime minister's joint chiefs-of-staff, warned last year that involvement by China in nuclear projects might allow it to "shut down Britain's energy production at will." The deferment comes even as the relationship between China and the U.K. "is at a crucial historical juncture," Chinese Ambassador Liu Xiaoming wrote in the Financial Times last week. "Mutual trust should be treasured even more. I hope the U.K. will keep its door open to China and that the British government will continue to support Hinkley Point."

The new reactor is designed to meet about 7 percent of the U.K.'s energy needs for more than half a century, coming online in a bit less than a decade. It's clearly needed: After years of energy independence, the U.K. now faces a similar situation to that of its European peers because of a sustained decline in North Sea oil and gas production. It now depends on imports to meet almost 50 percent of its energy needs:

The ONS says that more than a third of Britain's imports were in the form of crude oil with another third as natural gas (more than half of each coming from Norway). Petroleum products and coal make up almost all of the balance.

Nuclear isn't the only source of power being introduced as the U.K., along with many other countries, weans itself off dirty coal-fired stations. The contribution from renewable sources of energy to meeting the U.K.'s needs has more than doubled this decade; the bad news is, it's still in single digits:

There's more of that on the way. Offshore wind farms are becoming more efficient, and the combination of shallow coastal waters and expertise gained from building oil rigs in the North Sea gives the U.K. a unique advantage; it already has more capacity in offshore wind than the rest of the world combined. Tidal power projects, which also seek to take advantage of U.K. island geography to generate power, could also become world leaders.  

But as the ONS charts show, the U.K. is a long way from being self-sufficient in power generation. The decision about whether to give Hinkley the go-ahead has as much to do with whether the government is willing to rely increasingly on imports from other countries to meet its needs as it does about fears that China might plant electronic Trojan horses in power station equipment that could turn out Britain's lights.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
James Gibney at jgibney5@bloomberg.net