The U.K. government could be asking for trouble in next Wednesday’s budget if it goes ahead with plans to set a carbon price floor, which could result in a £3.4 billion windfall for the country’s nuclear industry.
As footage from Japan depicts helicopters dousing reactors at the Fukushima complex in a last ditch attempt to prevent a full meltdown and large release of radioactivity, it’s hardly the time to be seen to be rewarding existing nuclear generators for simply producing power.
The Treasury wants to put a floor under the carbon price to stimulate investment in low-carbon electricity such as new nuclear power stations and offshore wind farms.
This is because the U.K. has to transform its electricity generating network away from high-carbon fossil fuels towards renewables and low-carbon power to meet the EU’s 2020 climate change targets.
But the carbon price trading under the EU’s Emissions Trading Scheme is currently too low to encourage companies to make the estimated £200 billion required in the U.K. over the next decade to make that change.
According to Greenpeace, calculations using power price forecasts, a carbon price floor that would rise to £40 a metric ton by 2020 would give existing nuclear power stations windfall profits of £3.4 billion over the 2013-2026 period.
That’s because the higher carbon price would get factored into prices for coal and natural gas—fuels which are used for power generation, and these costs would result in higher wholesale power prices.