Budgeting for a Better Britain?
It should come as no surprise, with the current state of the economy that one of the first actions of the coalition government was to carry out a review of Labour spending decisions.
However, what is surprising is the immediate retraction of the offer of an £80 million loan to nuclear industry components supplier Sheffield Forgemasters. The loan which was announced in March by former Business Secretary Lord Mandelson, would have made the Sheffield company one of only a handful in the world able to make large forgings for the nuclear energy industry.
Members of the new government have spoken out to underline the fact that the withdrawal of support funds is not a reflection of their stance on nuclear power generation but is simply a result of a lack of funds. The current Business Secretary Vince Cable pointed out that with the massive deficit and a reduction in public spending, available funds should be directed into creating the appropriate business environment and skills base, rather than to support individual projects. That said, only 24 out of 217 projects re-submitted for approval have been cancelled or suspended, a measure deemed necessary to tackle the £155 billion public deficit. Cable is confident nonetheless, that Forgemasters will be able to secure private funding and the Department of Business, Innovation and Skills have offered support to the company in finding such investors.
However, Graham Honeyman, chief executive of Sheffield Forgemasters, said the announcement was a disappointment.
"Today's government announcement to overturn the loan offered to Sheffield Forgemasters' plans to install a 15,000 tonne press is a huge disappointment to all at the company," he said in a statement.
"While the press would have placed the company at the forefront of civil nuclear manufacture, it is important for us now to focus on other elements of the company's development."
Analysts have questioned the decision, warning that it could undermine the level of commitment shown from the new government in relation to nuclear as a form of low-carbon power generation. In the same spending review, £30m for the planned National Renewable Energy Centre in Blyth has been protected, as has funding to support wind power and green vehicle manufacturing. Wind will receive a similar level of funding to that denied to Forgesmasters, whilst around 5 times that amount has been approved for green vehicle manufacturing.
Maybe the Treasury looked at the lifetime costs of low-carbon energy generation projects when making the recent cuts. Have you ever considered the investment needed in such technologies beyond the point of producing clean energy? Just this month the ongoing investment needed to support safe decommissioning and handling was highlighted, when the bid to speed up Trawsfynydd's nuclear decommissioning was reported on by Magnox North.
The twin-reactor, situated in Snowdonia National Park, was designed in 1959 and began producing power in 1965. The reactors were shut down in 1991 and the power station closed a couple of years later. Decommissioning began in 1995 and at the current rate is expected to continue until 2022. However, by switching to 24 hour waste removal, it is hoped this would finish in 2014, saving £150 million of public money in reduced costs. Even if these plans are followed, the site will not be closed but will enter a period of care and maintenance. This will last until 2088, when the site will be start to be cleared, which could take around a decade to complete. It is worth noting that for 30 years clean electricity generated through nuclear power, investment is required for an entire century after plant closure. This begs the question; is nuclear the cleanest and most cost effective low-carbon energy solution after all?.
In the recently released report, "Unlocking investment to deliver Britain's low carbon future" by the Green Investment Bank Commission, the authors have highlighted the need to raise, in the region of £55 billion annually for the next decade in order to support the transition to a truly low-carbon economy. One of the barriers to investment highlighted was "confidence gaps among investors given technology risks, lack of transparency in government policy and high capital requirements for commercialisation". The Commission notes that for a Green Investment Bank to be successful, the government must ensure investment routes are accessible and must mitigate and manage risks effectively.
The Commission has recommended immediate critical actions to guarantee success of the Green Investment Bank, namely that the Bank is established and becomes active before the end of 2010. They note that swift mobilisation will encourage investors to take action now rather than sitting on the fence for any length of time. They suggest a "strong and effective" board should be selected to ensure the bank is functioning and that products are defined and established within the year. Appointment of the board is expected within a quarter, and a non-executive chairman should be in place by August 2010.
With this in the pipeline, there is surely a glimmer of hope that investment for green projects such as Forgemasters will be available from alternate sources and will no longer be in the fragile position where the plug could be pulled at any point by a government chasing spending cuts.
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