Private Island: Why Britian Now Belongs to Someone Else

by James Meek

  Cottam coal station (there’s also a gas station, owned by E.ON, on the same site) was privatised in 1991 and bought by EDF in 2000. When I asked the predominantly middle-aged engineers how they felt about working for the French, they told me their first loyalty was to the power station itself. But beyond that, working for EDF reminded them of the old British public service they started out in. ‘It’s very much along the lines of the CEGB as we knew it years ago – very structured procedurally, which is a good thing to have,’ said Dave Owen, a boiler engineer. He took me inside a boiler that had been shut down for cleaning. The mass of hot dust had been vacuumed out but every surface was still covered in brown powder. A gut-tangle of tubes and steam condensers at the top resolved itself into a vertiginous shaft lined with a delicate layer of tightly packed tubes that parted at the base to take coal from the feeders.

  ‘I don’t mind it going to other countries, but I believe there should be an engineering base in the UK,’ Owen said. ‘As a country we’re losing out, from engineers who design to people who maintain.’

  Boyd Johnson, who looks after the mass of machinery – itself the size of a large factory – that strips polluting sulphur from the gas given off by the burning coal, said that Powergen, the company that inherited Cottam from the CEGB, hadn’t seemed committed to the future: it never invested in the full anti-pollution gear. EDF was different. ‘As engineers, we’re all about investment in the kit.’ Being with EDF, he said, was ‘like going back to the CEGB, but a little bit crisper.’ France, to be sure, had different priorities, but ‘at the end of the day, the French are investing. OK, you could say that in the future, when all the nuclears are built, they’ll get quite a large say in how the industry is run. But then we have government regulators.’

  Chris Wild, in charge of milling the coal into powder, showed me the troughs where conveyor belts deliver the raw mined nuggets into the plant. I asked where the coal came from. The last deep mine in Nottinghamshire, Thoresby, is twenty miles away. ‘We have such a varied diet,’ he said. ‘I think this is from Kentucky.’ Wild was among the last batch of apprentices taken on by the CEGB before it was broken up and sold. ‘It doesn’t matter,’ he said. ‘I don’t think “My boss is wearing EDF overalls” if he rings up at two in the morning and says some bit of kit’s broken down.’

  Cottam operates with hundreds fewer staff than it did in the CEGB days and no apparent problems. ‘If this downsizing had been done under the auspices of the CEGB, would it have worked?’ Wild asked. ‘How do you measure the loss of such things as the Hams Hall workshops and the apprentice workshops at Burton on Trent, or the CEGB engineering programme? It makes you wonder if it could have remained as a privatised, streamlined CEGB. Would it have been better?’

  The cumulative effects of Littlechild’s RPI-X regime, two decades’ idealisation of shareholder capitalism, and the relentless promotion of the notion that it is socially acceptable for senior managers to be motivated by nothing other than a desire for personal enrichment, have left the electricity system on which Britain relies worn out. A fifth of the British power stations running today are due to close by the 2020s, and the government wants some mix of new nuclear, wind and gas, together with a smattering of coal and a rejig of the Grid, to make good the shortfall. In 2012 one government minister said the figure of £110 billion often bandied about for how much this would cost was only the beginning.

  The new imperative to be good world citizens by burning less fossil fuel makes matters harder. Our nuclear power stations are clapped out, our coal and oil stations are greenhouse gas factories, and since we’ve burned through most of our own North Sea gas reserves we’ve become reliant on shiploads of liquefied gas from Qatar, routed through the Strait of Hormuz, which Iran promises to close if foreign powers give it trouble. Onshore wind farms are unpopular with rural Tories; offshore wind farms are expensive and far from the Grid, and besides, wind power needs to be backed up with alternatives, since the wind doesn’t blow all the time.

  The three main sources of Britain’s future electricity supply are gas, wind and nuclear, with coal’s weight in the mix supposed to diminish. There is an argument that the best way to replace the climate-altering force of coal would be to simply enlarge the network of gas-fired power stations and offshore wind farms. The most modern gas plants can be built quickly, started up from cold in half an hour and switched off when not required. They can be run with a staff of a hundred. Proponents of increased gas use argue that gas is environmentally friendly in the sense that it’s less filthy than coal, and that it allows Britain to ramp up the number of wind farms without jeopardising reliability of supply. A gas–wind powered electricity grid would be a transitional system, like a hybrid car – green as far as it goes, but with a carbon fuel engine in there so you wouldn’t get stranded. Yet despite the new technology of fracking, which promises to make natural gas cheaper and easier for Britain to buy, there’s unease over reliability of supply. New nuclear power stations, always on, pouring out a steady baseline of electricity with one seventh the carbon emissions, watt for watt over their lifetime, of natural gas, remain central to the government’s hopes.

  The original idea, formulated under Labour and inherited by its successors, was to unleash the pent-up atomic yearnings of the private electricity sector by giving the go-ahead for four new nuclear stations, each with a pair of reactors. Two pairs would be built by EDF at Hinkley Point in Somerset and Sizewell in Suffolk; two would be built by the Germans, E.ON and RWE, at Wylfa on Anglesey and Oldbury in Gloucestershire. At least four and possibly all eight would be a single model, the efficient, super-safe EPR† designed by Areva of France. Making all eight of one type would reduce costs: they would effectively be mass-produced. It was argued by the nuclear lobby that since nuclear power stations, like wind farms, don’t produce much in the way of greenhouse gases once they’re up and running, they should benefit from the same sorts of subsidy as wind. If the French and Germans were being asked to pony up the billions, it was reasoned, they needed some guarantee of payback over the decades of the stations’ working life. Hinkley Point would go online in 2023, and within a few years nearly a quarter of Britain’s peak electricity demand would be supplied by safe, clean, reliable new nukes.

  And what was wrong with that? Almost everything, it turns out. The triple meltdown of reactors at Fukushima after the earthquake in Japan last March prompted the German government to shut down its nuclear sector entirely, which in turn led RWE and E.ON to abandon nuclear investment in Britain. The Japanese firm Hitachi, which has taken over the Wylfa and Oldbury projects from the Germans, now proposes building pairs of Advanced Boiling Water Reactors (ABWR), made jointly with the US firm General Electric, on the sites. The French achieved economies of scale in the 1970s and 1980s by building nearly sixty reactors of identical design. Eight reactors for Britain already sounds more like an artisanal than an assembly-line product; four of one and four of another sounds frankly experimental.

  And experimental is what the first of the new reactors is. Four ABWRs were running, not particularly reliably, in Japan before Fukushima. But no EPR is or ever has been operational. Two EPRs are being built in China, one in Finland and one at Flamanville in Normandy. The Finnish and French EPRs will cost at least twice as much as they were supposed to. Flamanville is running four years late, the Finnish station five. The Chinese versions are due to go online in 2015, a year late.

  The French themselves seem to be cooling on the EPR. François Hollande wants to cut the nuclear component of France’s electricity from 75 to 50 per cent. In a 2010 report on the future of the French nuclear industry François Roussely, a former head of EDF, warned that the EPR was too complex and needed a redesign. He said customers should be offered a smaller, simpler reactor called the ATMEA. The previous year, taking over as EDF’s new boss, Henri Proglio mocked Areva for pushing the EPR abroad. ‘Do you know how many companies have just one product in their catalogue?’ he sneered. ‘There was Ford and
his Model T. But that was a hundred years ago, and at least he knew how to make and sell it.’ Proglio now wants to build EPRs in Britain. His comments were widely interpreted in France as a power play within the febrile world of French industrial politics, and it is this world – a world over which the British electorate has no control – to which the British public is being shackled.

  Britain’s prospective investment in the EPR is disturbingly reminiscent of the prelude to the catastrophic demise of Railtrack, the privatised company that had to be renationalised in 2001. There, too, as we saw in Chapter 2, the government allowed a private network on which the country depended to invest in an unproven technological fix, despite warning signals from Europe that the technology wasn’t ready. In the free-market utopia envisioned by Littlechild and Lawson, this shouldn’t have been a problem. In their vision, state planners don’t know what people want: people know what people want, and entrepreneurs will invest and compete to supply those wants. If the product or service supplied is underused, useless or too expensive, it’s the entrepreneur who loses out, not the customers. This perspective takes no account of people’s susceptibility to marketing, yet it’s a reasonable principle, and applied to restaurants, or cars, or furniture, there’s much to be said for it. Were banks to face real competition it would be a good thing. Applied to Britain’s electricity industry, however, it gives rise to two formidable problems.

  The first is that a nuclear power station isn’t a restaurant. If I own a café on the market square and it goes belly up, my livelihood suffers, but the townsfolk won’t lack for coffee. If the National Grid pencils in thirteen gigawatts of nuclear electricity for the 2020s, however, and it doesn’t arrive, the country is in peril. It’s a variant of the old joke about you having a problem if you owe the bank a hundred pounds, but the bank having a problem if you owe them a million. If Henri Proglio plans to move into a new house by Christmas and it isn’t ready, Henri Proglio has a problem. If Henri Proglio’s new reactor isn’t ready for 2023, Britain has a problem. A wind farm that is nine-tenths finished is nine-tenths operational. A nuclear power station that is nine-tenths finished is a white elephant – a £16 billion white elephant, in the case of Hinkley.

  The possibility that companies might get part-way through building a set of new nuclear reactors in Britain and have to stop due to cost overruns is less likely than the other variant: that, once begun, the new nukes will be finished whatever the cost. Which is the second problem. Expensive to build and difficult to dispose of, nuclear reactors aren’t profitable. The only reason nuclear power is on the table is global warming. The only way it can be financed is by government subsidy. And the subsidy the British government is offering EDF and its minority partners (Areva and two Chinese state-owned companies) to build Hinkley is gigantic: a guaranteed minimum price for the electricity Hinkley produces, indexed to inflation for thirty-five years, of £92.50 per megawatt hour – about twice as much as the average wholesale price of electricity in Britain today. They have given EDF an incredible nine years to start and finish the project (the Japanese ABWRs were built in four). The Treasury is also guaranteeing loans EDF and its partners will take out to fund construction. An analysis by Peter Atherton and Mulu Sun of the London brokerage firm Liberum Capital pointed out that just to get Hinkley up and running would make it the world’s most expensive power station; once it was generating, the price of gas would have to have increased by around 130 per cent for it not to get subsidies. ‘The UK government is taking a massive bet that fossil fuel prices will be extremely high in the future,’ wrote Atherton and Sun. ‘If that bet proves to be wrong then this contract will look economically insane when [the plant] commissions. We are frankly staggered that the UK government thinks it is appropriate to take such a bet.’

  This subsidy won’t come from general taxation. It will come, as wind farm subsidies already do, from British customers’ electricity bills. It’s a stark illustration of the realities of privatising essential services – that what is being sold is not infrastructure, but bill-paying citizens, and what is being privatised is not electricity, but taxation. Effectively the French and Chinese governments are buying the right to tax British electricity customers through their electricity bills; to use British money and British sites to finance a world showcase for unproven French nuclear technology. And because the unacknowledged taxes in electricity bills take no account of people’s earnings, the poorer you are, the higher your tax.

  That’s not to say the French people will be winners as a result of the deal (although Hollande has at least acknowledged that in France electricity bills are a form of taxation, and should be adjusted according to income). There is tension between the British, French and Chinese partners. Given that all the options are expensive and politically charged, the British government might still decide the EPR is too risky and go for the gas–wind hybrid option – allow extra gas stations to take up the slack, while assuaging the green lobby with continued offshore wind subsidies and investment in more esoteric future technologies: tidal power, clean coal, thorium reactors, a European supergrid linking northern windmills and Mediterranean solar farms, a cable feeding green electricity from Iceland. In which case the French people would be on the hook for EDF’s expensive acquisition of British Energy and its existing, worn-out British nukes.

  Free marketeers like Littlechild and Lawson might argue that, left to its own devices, the market would never have built nuclear power stations; it would always have gone for the cheapest option. But this is disingenuous. With electricity, the market can never be left alone. Coal might be the cheapest option, but it’s too dirty. Gas might be the cheapest option, but the more the country relies on gas, the more emergency reserves it will have to keep in storage – which the market won’t pay for. Helm’s most devastating point about electricity (and gas) privatisation in Britain is that these are not naturally public industries; nor are they naturally private. ‘It is extraordinary,’ he writes, ‘that anyone could have regarded these as anything other than political industries.’

  Electricity privatisation hasn’t been a success in bringing down prices. Most recent figures suggest British prices are typically right in the middle of the European average – higher than France’s, lower than Germany’s.‡ It has been a failure in terms of British industry and management; the best measure of the scale of folly and betrayal by politicians of both parties is the simple fact that a reliable, badly run British electricity system was destroyed, rather than being reformed, only so that a large part of it could be taken over by a foreign version of the original. And it has been a failure in terms of clarity, in the sense that in order to fund investment, governments that boast about not raising taxes, or of taking low-earners out of the tax bracket, permit predominantly foreign-owned electricity companies to collect flat-rate taxes that hit the poor disproportionately.

  How to explain the sense in this country that EDF is a manifestation of the French state, and the sense in France that it is and it isn’t – that by expanding abroad it somehow eluded the people who are supposed to own it? ‘EDF is the biggest electricity company in the world but it is still Franco-French,’ Denis Cohen said, expressing the paradox. ‘The strategy of this company, even though it is Franco-French, is to try to get out of France.’

  What matters about EDF’s enormous acquisitions in Britain is not that it’s French, but that by crossing the Channel so decisively it has become something that is neither altogether French nor altogether British. It has become one of those transnational entities that uses national jurisdictions as conveniences, in the same way as the wealthy use national jurisdictions as conveniences for tax avoidance. By presenting itself in France as a champion of French national interests, sheltering behind the shield of the French state, while presenting itself in Britain as committed to the global free market and fair competition, it is taking advantage of the fact that the two countries’ governments, electorates and media are separate: the two eyes of supervision are attach
ed to divergent brains, and EDF can exist in a state of institutionalised hypocrisy.

  EDF is still the French CEGB, though more technically skilled than its former British counterpart. Tony Cooper, who in the 1990s headed the union representing electricity managers, told me that when EDF took over Britain’s old nuclear power stations in 2008, ‘a lot of people were saying: “Christ, at last we’ve got someone who knows how to run these bloody things.” ’ But by lurching into the tax-gathering business overseas EDF has become a hybrid – a French CEGB crossed with a French version of Enron. One long-time observer of the French energy scene described accompanying a group of EDF executives to an Enron trading room at the hubristic height of that company’s success. She was taken aback by the gleam of fascination and envy in the eyes of the énarques as they watched their American counterparts trade gigawatts on the screens.

  Just because EDF is beset by Robin Hoods in France and has planted its standard at Cottam, hard by Sherwood Forest, doesn’t make it the Sheriff of Nottingham. And yet there is an echo, in the conduct of the electricity oligopoly, of the popular notion of medieval social injustice that has defined the background to the Robin Hood legend: a country where the symbol of the nation’s best interests, in the form of the king, is nowhere to be found, and in his absence, a rootless elite that has no concept of duty or service except to itself is busy taxing the poor. It is as if national boundaries are for the little people, the global peasantry who pay their taxes, not for great men and the great transnational corporations they run.

  Still, the lights haven’t gone out. At least that’s what an MP told Dieter Helm a few years ago when he was giving evidence in Parliament. People warned there would be blackouts the previous winter, the MP said, and there weren’t. With unusual passion, Helm put him straight. If you define the problem as the lights not going out, he said, you misunderstand everything about the way the new world of electricity markets works. The ideal situation for private electricity firms is one where there is only just enough electricity to go round; where the lights are always just about to go out, but never quite do. Then they can charge as much as they like, and people will have to pay. ‘People think insecurity of supply means will the lights go off or not – but that is not the issue,’ he said. ‘It is what happens just before the lights go off.’