Lib Dem MPs set to rebel over ‘back-door’ nuclear power subsidy

by Stephen Tall on July 2, 2011

‘Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects (under a new National Planning Statement), and also provided that they receive no public subsidy.’

So declares the Coalition Agreement. However, as the Guardian reports, the finance bill due to be debated this coming week introduces a form of subsidy, and it’s attracted opposition among the party:

A large group of Lib Dems are concerned about clause 78 of the bill, which MPs will consider on Monday or Tuesday, that asks them to support a carbon floor price. This mechanism penalises fossil fuels but not low-carbon energy sources, such as nuclear and renewables, and the MPs believe it hands a large financial windfall to nuclear power – effectively a subsidy.

The government has admitted that because of the size of the nuclear industry, it stands to gain up to twice as much as renewables from the proposed carbon floor price. In a written reply, the Treasury economic secretary, Justine Greening, said: “The existing nuclear sector is likely to benefit by an average of £50m per annum to 2030 due to higher wholesale electricity prices. Similarly, the renewable energy sector is expected to benefit by an average of at least £25m a year to 2030.”

Of course it should be remembered that the proposed carbon floor price was also part of the Coalition Agreement:

We will introduce a floor price for carbon, and make efforts to persuade the EU to move towards full auctioning of ETS permits

However, as Lib Dem Federal Policy Committee members Louise Bloom, David Boyle, Gareth Epps and Manchester Withington MP John Leech note in a strongly worded letter also in the Guardian:

We were proud that our party democratically decided at our conference in September 2010 to “ensure that any changes to the carbon price do not result in windfall benefits to the operators of existing nuclear power stations”. We are therefore dismayed that the finance bill will result in a windfall of £50m per year from 2013 to 2030 to existing nuclear operators for doing nothing different – pushing up consumer electricity bills.

Support for a Conservative party-inspired policy on nuclear power must not become another tuition fee debacle for our party. We need to make a stand and ensure that the nuclear industry does not benefit from being an unintended beneficiary of tackling carbon emissions.

Two other members of the Federal Policy Committee, Tim Farron and Danny Alexander, are also, according to the Guardian, in active discussions on the issue:

… the president of the Liberal Democrats, Tim Farron, is so concerned about the legislation he has asked Danny Alexander, the chief secretary to the Treasury, to withdraw the clause. However, it is thought the bill is too complicated to allow for one element to be unpicked. Instead Lib Dems would like to propose a “windfall tax” to claw back some of the financial gains they think the nuclear industry stands to make.

When last Lib Dem Voice asked party members’ about their attitude to nuclear power, there was clear majority support for nuclear as part of the UK’s energy mix — though for many that consent was conditional on there being no public subsidy.