Afternoon:
10°c
Government Minister Ed Miliband went on the Andrew Marr show on Sunday to tell us that the electricity industry was safe in his hands. He said he was confident that there would be no problems with supply in the UK after 2015.
Next time Miliband wants to appear on television, he should lie down until the feeling goes away. If he genuinely believes there is no risk of brown-outs and power cuts in this country in six years' time, then he has not being paying attention.
It is, of course, true that there are no problems which could not be resolved by a bit of clearsighted, consistent Government action, provided it comes quickly. But it is equally true that even after 12 years in office, there is little sign of that in energy policy.
The proclaimed reasons for Miliband's confidence are bizarre. The recession has reduced the amount of electricity used in the economy -demand destruction in the jargon. However, it is a bit of a leap to believe that because demand has tailed off now, it will still have tailed off in six years' time. It may be lower than it might otherwise have been, but that simply means the supply shortage may bite a year later, not that it won't bite at all.
Unless, of course, he thinks demand will never recover - in which case he needs to have an urgent word with Gordon Brown, who is rather banking on a recovery somewhat earlier than 2015.
The other reason not to believe Miliband is that the issue is about supply not demand. Britain faces a possible electricity shortage because we will have to phase out most of our remaining nuclear plants, accounting for 20% of supply, as they are obsolete. We will also lose the majority of our coal-fired generating plants, which account for at least as much again, because of emission controls being brought in to combat global warming.
The programme to build renewable generation based on wind is in disarray; with several key companies pulling out. The even more important programme to build new nuclear has still to get to first base.
Government believes the first of our new nuclear stations will be on stream by 2018, but outsiders reckon it will be at least 2020. The theory is that French company EDF will build four plants, and that Eon and RWE, the German utilities, will build four more between them.
But these organisations have desperately stretched balance sheets - so much so that EDF is expected to try to sell its three UK electricity distribution networks in the next few months to raise some cash, and it is by no means sure that they could raise the £1 billion each nuclear plant will need without some form of Government subsidy or guarantee - which is as yet not forthcoming.
It makes for an interesting issue of public policy. The test for our electricity industry is in fact whether the market can come up with the solution. With foreign-owned firms dominating the industry, will they actually care enough to keep the lights on? The odds are that they will, but there are no guarantees - and there are not many precedents from abroad to give us comfort either.
The position is further complicated by the fact that other countries are also flirting with a new generation of nuclear. Italy has re-committed to it already. If Angela Merkel wins in Germany, she may well lift that country's ban. Given the limited capacity around to build these things, we will then need to form an orderly queue. But if by then, the need in both countries is desperate, can we be confident that German utilities would build in Britain in preference to Germany.
Again our politicians stay relaxed because, they say, if the worst comes to the worst, we can build a load of gas-fired plants in a hurry. They would use cheap Russian gas and that would get us over the hump. But even that is not certain. Gazprom, the Russian supplier, has been seriously hit by the credit crunch, and has shelved plans to bring various new fields on stream. Without these fields, it is not going to have vast amounts of gas available to export in six years' time, and neither will it be cheap. And anyway, the people who might build new gas plants in this country - companies such as Centrica - have just had their noses put out of joint by Government proposals to subsidise the development of carbon-capture technologies for the next generation of coal-powered stations.
They don't want to be the only people playing by the market rules in a world where everything else is subsidised - wind already, nuclear probably and carbon-captured coal certainly. Why would you build a plant with a 30-year life in the face of that kind of competition?
Finally, there is the fact that not only do new plants have to be built but the power has to be transported to where it will be used. That means National Grid is going to have to string a load of new pylons from Sizewell across some of the most beautiful countryside in Suffolk and from Dungeness across the South Downs. Already the opposition is mobilising.
So it is good to know Ed Miliband says there is nothing to worry about. It makes one feel much better.
