With Hinkley’s costs astronomical and renewables unreliable, how else can we offer a fair deal to the less well off?
If Hinkley Point C nuclear power station goes ahead, the cost for consumers of subsidising it could be £30 billion, according to the National Audit Office — five times what was originally estimated. The increase comes largely from the fact that fossil fuels are cheaper than even the lowest possibility envisaged by the late and unlamented Department of Energy and Climate Change.
The purpose of this subsidy is to ensure that we have very-low-carbon electricity to replace ageing coal and nuclear plants, the better to mitigate global warming. Since Hinkley would emit half a billion fewer tonnes of CO2 during its 35-year life than comparable gas-fired projects, that implies a cost per tonne of carbon dioxide avoided of £60.
How does this compare with the cost of the damage that global warming will do in the entire future, per tonne of CO2, a number known as the “social cost of carbon”? The US government uses a figure of $37 per tonne (£28), so we are being asked to pay more than twice as much.
Even that probably overstates the cost of carbon. Taking into account more than ten recent studies of climate sensitivity using real-world data, assuming a normal 3 per cent discount rate, and employing two widely used models of climate change, Professor Ross McKitrick of the University of Guelph in Ontario and two colleagues at the Heritage Foundation in Washington DC found that a realistic social cost of carbon was somewhere between $3 (£2) and $30 (£22) per tonne of CO2.
Indeed, there is a 40 per cent chance in one model that the social cost of carbon is actually negative — which is to say that CO2 emissions will prove in the end to have done more good than harm. Since that study was published, satellite evidence has confirmed that there has been a 14 per cent increase in green vegetation over 30 years, 70 per cent of which is directly attributable to increased CO2.
This “global greening” has affected all habitats, from the tropics to the tundra, but especially arid areas such as the Sahel region of Africa, where the poorest countries are. More carbon dioxide makes plants less susceptible to drought. In terms of its cumulative impact on harvests and human welfare, global greening is worth trillions of dollars.
By contrast, the damage done by climate change has so far proved smaller than predicted — there does not seem to have been a consistent increase in storms or droughts — and even this year’s El Niño temperature spike, now fading, has failed to push the rate of change of temperature above the middle of the range predicted by the models. Disaster could still be round the corner, but so far it is looking increasingly possible, indeed probable, that the social cost of carbon is far lower than the premium we are being asked to pay for low-carbon energy.
Having an indirect commercial interest in coal — although I champion gas and cheaper versions of nuclear power for our electricity needs in the future — perhaps I am biased in favour of low estimates of the social cost of carbon. But then the proponents of renewable energy also have a vested interest in the social cost of carbon being high.
Renewable subsidies are even worse value for money when compared with the social cost of carbon. According to a new study by John Constable and Lee Moroney, small solar costs the UK consumer at least £253 per tonne of CO2 mitigated, offshore wind £183 and onshore wind £91.
At least if we build Hinkley, the power will be available whenever we need it; not true for wind and solar. California is already experiencing problems with solar power dumped on the grid during the day when demand is low, but not being there in the evening when demand spikes. The result is that nuclear power faces being phased out for more flexible gas, which means an
increase in emissions.
South Australia, meanwhile, has experienced what an excess of wind does to a grid. Coal plants, made unprofitable, have shut down, so electricity prices now shoot up on days when the wind is not blowing, causing economic havoc and leaving the grid to rely on expensive diesel and open-cycle gas generators (not helped by higher gas prices), which can respond quickly and which have relatively high emissions.