Where is UK nuclear going?

Where is UK nuclear going?

Written by Harry Spencer, Senior Account Manager, Energy Practice

With the Committee on Climate Change expected to call for a net zero carbon economy by 2050 later this week, this week’s Madano energy event on ‘What next for UK nuclear’ with Dr Tim Stone, Fiona Reilly and Matt Rooney could not have been timelier.

Achieving a net zero carbon economy by 2050 will require deep decarbonisation across the board. Nuclear can play a key role in achieving this target, and not just through power generation. Event attendees pointed to the potential role of nuclear energy as a source of heat for residential or industrial networks and for use in hydrogen electrolysis.

However, there are significant barriers to achieving this new role for nuclear.

Firstly, outside investors are concerned at the lack of a market framework to deployment for most nuclear projects – a major problem given the extended cost and length of nuclear development when compared to competitors. As observed by one attendee, institutional investors from home and abroad are desperate to invest in UK infrastructure, but feel that the lack of policy certainty makes this impossible.

Another related barrier is a regulatory regime that focuses on the “strike price” of a given technology, a calculation which ignores the wider benefits for the UK’s energy system of nuclear according to one of our guests.

This means that the benefit of nuclear in providing more system inertia is not included in assessments of value. This approach also struggles to account for innovative new proposals, which could see a nuclear energy plant delivering power, heat and hydrogen electrolysis, for example.

Finally, while the Government can adopt a new long-term pathway for nuclear technologies, and a tweaked regulatory regime to ease deployment, several voices opined that the industry itself needs to change by working together.

In particular, the industry needs to be more collaborative and proactive, in making clear the role it can play in decarbonisation – and in what it needs from Government to do so. It cannot wait for Government to take the lead. If it can do so, there is clearly a major role for nuclear energy of all kinds in the new decarbonised economy.

What next for UK nuclear?

What next for UK nuclear?

Political uncertainty. Business concern. Impassioned debate.

For once, I am not talking about the future of Britain’s relationship with our European neighbours – instead, I am referring to the future of Britain’s nuclear sector.

A few years ago, there was a general expectation that a fleet of conventional new nuclear power stations would be delivered across the UK. This policy commanded a strong political consensus, clear business support, and the debate was when and how, not if, it would be delivered.

But with the announcements that planned developments at Wylfa and Moorside are now indefinitely suspended, the landscape looks very different. Political support remains there in principle, but is less tied to the vision of a fleet of conventional new nuclear. Businesses are looking to the Government for future direction. And there is a major debate in the industry about the way forward.

At a recent meeting organised by the Nuclear Industry Association I was struck by two main themes: the near universal view that the industry stands at a crossroads; and secondly, by the enduring strength and innovative qualities of the sector.

The industry is pushing technology and techniques to new levels to tackle some of the biggest challenges in any sector, such as decommissioning decades-old nuclear facilities, but without a clear future direction for the industry these skills will be lost to other sectors and countries.

Standing at a crossroads can be scary for some, but it is also an opportunity. The previous vision for the future of nuclear in the UK is in serious question, but this opens up space for alternative options, such as smaller reactors, or for new commercial models which could deliver projects at reduced cost.

This is why we are really looking forward to hearing from leading sector experts, Dr Tim Stone, Fiona Reilly and Matt Rooney who will be joining us at Madano next Tuesday for their take on where the sector is going and what the future for UK nuclear might look like.

There is both an opportunity and need for the sector to reinvent itself to meet the challenges of this century. But before that reinvention, there needs to be a full debate about nuclear’s role, which needs to start now.

What the energy credit bubble tells us about trust in the sector

What the energy credit bubble tells us about trust in the sector

News this week that around twelve million customers have overpaid energy firms by £1.5 billion comes as little surprise for UK energy consumers who for years have paid upfront for estimated bills.

Comparison site uSwitch has found that credit built up from overestimated gas and electricity direct debits – a result of the mild winter and less energy usage.

Not only have energy companies overcharged but according to the research 55% of customers will have to chase the firms themselves in order for the credit to be repaid.

Given that most energy consumers devote scant attention to their energy bills in the first place, it is safe to assume that much of the credit will languish with the energy companies for many months if not years.

According to the research featured in today’s Mail and Sun, nearly half of the 12 million customers are owed an average of £126. One in ten is owed as much as £200, though the energy firms dispute these figures.

On top of this, over the past year the consumer has seen higher energy bills kick in due to rising wholesale costs to the extent that UK household energy debt surged by 24% by late 2018 over the previous year.

You wouldn’t see it elsewhere

Is there another sector where companies could get away with using the ‘culture of credit’ to manipulate consumers in quite the same manner? After all, you’d be pretty miffed if you went to the supermarket every week and saw that your grocery bill was regularly 25% higher than it should be.

If that was the case, you’d start shopping elsewhere, possibly tweet Martin Lewis, and ask for the cash to be refunded immediately.

Despite a headline or two, the media’s muted response to the survey findings speaks volumes. This could be because media outlets have become blasé towards survey findings but it’s more likely a result of the fact that we expect so little of energy companies, many of which are disappearing from the market. There is no longer currency in the outrage over energy companies.

What next?

It’s probable that this current story will run for a day or two with a few of the companies mentioned in the research scrambling their press teams to mitigate the negative publicity.

But it is self-evident that this issue runs beyond communications. Energy firms need to get back to putting the customer first.

What would be welcome is to see the energy firms come together to address the overcharging issue by taking measures to prevent it in the first place.

If this isn’t immediately possible and I suspect it might not be due to shareholder pressure, energy companies can at least take the issue seriously by communicating to the public that it is holding onto their credit and that there is a mechanism through which they can be repaid.

A simple campaign on different channels including social media (Facebook / Twitter) that informs the general public about the credit and how they can get it back isn’t an ideal solution but at the very least shows that they care about the financial pressures faced by UK energy consumers in uncertain political times.

What is truly frustrating is that the level of the overcharging by energy companies is brought to light by uSwitch and not the energy companies themselves.

Madano advises clients across the energy and industry sector space – if you’re interested in learning more please drop me or my colleagues a line. You can also follow Madano on Twitter.

Why “The Others” are coming in UK politics

Why “The Others” are coming in UK politics

Readers of the Game of Thrones books will know that the original name of the white walkers was “The Others”.

Examining the most recent polling figures, Theresa May and Jeremy Corbyn might be able to relate to a Ranger of the Night’s Watch. While the white walkers are probably not about to enter British politics, the Others most certainly are.

Just this week, some polls have shown combined support for Labour and the Conservatives at just 60%. If repeated at an election this would be the lowest combined share for the parties in over a hundred years. The upcoming European elections could be a bonanza for both the new parties like Change UK and the Brexit Party and established parties like the Liberal Democrats and UKIP.

There are two obvious reasons for this, and they both sit on the frontbench. Whatever the truth of Theresa May and Jeremy Corbyn’s qualities and capabilities, the verdict from the public is a thumbs down. Theresa May’s approval ratings are on a par with Gordon Brown’s when he lost in 2010. Not to be outdone, Jeremy Corbyn is literally the most unpopular opposition leader since surveys have existed –less popular than the likes of Iain Duncan Smith.

There are many reasons both are so unpopular, but the inability to offer a clear message on the pre-eminent political issue of the day is a key one – and is what separates Labour and the Conservatives from all The Others.

So far as Theresa May’s deal goes, it is an attempt at a fudge which can command Conservative parliamentary support. It has failed even in that regard. As a fudge, it has proven very difficult for the Government to communicate why the deal would be a desirable outcome in and of itself.

This is why the Government has tried using mutually contradictory threats to gain support for it, telling the hardline European Research Group that they have to vote for it or risk remaining in the EU, and telling her party’s moderates that they have to back it or risk a no-deal Brexit.

Trying to convince two different audiences with two directly contradictory messages is a challenge at the best of times. When those two different audiences work in the same building it is probably not even worth trying. It is an approach that has left politicians and the public both confused and mistrustful of the Government.

Meanwhile comprehending Labour’s Brexit policy has been almost impossible from the beginning. For as long as possible it promoted the line that it would negotiate a “Labour Brexit”, despite the fact that this isn’t possible in opposition. Meanwhile its position on a second referendum has been through so many iterations that even party spokespeople find it difficult to keep up, and as of this week, could not even say which option they would campaign for if one was held.

As a rule simple messages are more effective than complex ones, and the rise of the Others reflects this. Whether it is parties committed to a second referendum and reversal of Brexit, such as the Lib Dems and Change UK, or committed to an immediate no-deal Brexit, such as the Brexit Party and UKIP, simple messages are finding traction. It may be that in the end, the resolution to this situation will be that a party offering ones of these messages wins a General Election – winter is coming for those that can’t.

Cruz Missile for Microsoft (The Week in AI)

Cruz Missile for Microsoft (The Week in AI)

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Reporting by Madhumita Murgia and Yuan Yang at the FT revealed that Microsoft researchers had collaborated with the Chinese Military University on work that could be used in surveillance and censorship. One of the papers described a new AI method to recreate detailed environmental maps by analysing human faces, stoking fears that this approach could be used in advanced surveillance.

Politicians in Washington reacted testily, with former Presidential-hopeful Ted Cruz chastising Microsoft. “American companies are increasingly at risk of boosting the Chinese Communist party’s human rights atrocities,” said Cruz.

This story comes in the same week that Google announced a new external advisory council to guide it’s use of AI in thorny areas and the EC issued its AI ethics guidelines (see below).

News in Brief:

Around Whitehall:

Commentators Call on Social Media Firms to Use AI in Fight Against Online Harms

Jeremy Wright and Sajid Javid called on big social media players to better police their content as DCMS and the Home Office jointly published their long-awaited white paper on online harms. Commentators across the media posited that the only solution for doing so at scale was AI. The next stage is a consultation which will feed in to the development of legislation and the establishment of new regulatory powers. The 12 week consultation includes a question around what safety technologies can be deployed and how the Government can support innovation in this area.

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