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The nuclear option

Written by Tom Gillingham, associate partner
Edited by David Gaffney, partner
29 September 2020

Good morning,

Beyond Brexit, Covid-19 and the climate emergency, there is an important issue seemingly buried under a pile of ministerial paper, and it’s a fairly fundamental one. How, exactly, do we keep the lights on?
 
Until recently, nuclear power was positioned as the most carbon-efficient way of meeting the UK’s ‘baseload’ (always-on) electricity generation needs. With this in mind, Hitachi’s reversal of its plans to build a new nuclear power plant on Anglesey did not perhaps attract the attention it deserved.
 
As our ageing nuclear power stations – which currently provide around one-fifth of the UK’s electricity – enter the creaking and crumbling twilight of their lives, the issue of what takes their place becomes more pressing each day. On the current trajectory, they will all be gone by 2030.
 
Building new nuclear reactors to replace them is both complex and expensive. Only one is currently under construction in the UK, at the delayed and over-budget Hinkley Point C in Somerset. The next plant on the to-do list, at Sizewell C in Suffolk, has a key planning milestone next week, but is nowhere near construction stage.
 
This challenge is compounded by the expertise required. A repeat of the deal that secured the Chinese investment and involvement required to make Hinkley Point C viable seems much less palatable to this government than to its predecessors.
 
And that is before you factor in the clean-up operations at those existing nuclear plants. Brexit means we will likely leave Euratom – a treaty governing the trade of nuclear materials – and then there’s the troublesome question of who exactly funds decommissioning if the UK breaks up.
 
So, if not nuclear, then what?
 
There is no doubt solar and wind energy have improved hugely in terms of efficiency and lower costs, but what happens when the sun doesn’t shine or the wind doesn’t blow?
 
National Grid provides a colourful and mesmerising live breakdown of our energy consumption and production which shows we are still too reliant on fossil fuels to deliver that baseload of power. If we are to meet our climate change objectives, this has to change.
 
This is where we get into Dominic Cummings’ ‘moonshoot’ territory. You can go deep into tidal generation (Swansea Bay’s termination doesn’t bode well), ponder whether the obsession of nuclearising everything in the 1950s was actually onto something with small modular reactors or, instead, keep on burning and hope that carbon capture and storage will dig us out of this hole.
 
The ultimate answer is likely to involve contributions from all of the above, combined with more efficient usage to reduce demand. On this front, there is some room for positivity. In 2017, UK energy consumption was down by 19% on the levels used in 2000, with consumer efficiency improving by 25%despite a growing population.
 
We may well be past peak demand, but the looming electricity crunch is still a fundamental and pressing issue, and one that appears to be lying relatively low down an already turbulent political agenda.

News

The global Covid-19 death toll has now passed one million, according to figures compiled by John Hopkins University. Deaths in the US, Brazil and India account for almost half of that total, although experts caution that the real number could be far higher.
 
The UN security council will hold emergency talks tonight on the ethnic Armenian region of Nagorno-Karabakh, where fighting continued yesterday. Armenian and Azerbaijani forces clashed in the separatist region for a second day, reportedly resulting in the deaths and wounding of dozens as the decades-old conflict reignites.
 
US president Donald Trump did not take reporters’ questions as he concluded an event on coronavirus testing yesterday. This in-person silence follows his online counter-claims against the explosive report that revealed he paid little or no federal taxes.

Business and economy

Prime minister Boris Johnson will today announce new training options for adults to learn novel vocational skills, in an effort to boost productivity and help the country recover from the coronavirus crisis as the furlough scheme ends.

Investors are growing more nervous about the risk of a disputed US presidential election. The Vix volatility index, a measure of the expected volatility of the US stock market based on derivatives prices, suggests that investors are stepping up preparations for a potential period of market turbulence as the costs of insuring against unpredictability rise. (£)
 
The chief executives of councils in Liverpool, Leeds and Manchester have said the cities face mass redundancies and boarded-up high streets unless Covid-19 restrictions are reviewed. They claim the current regional rules are having a “huge, disproportionate” impact. Meanwhile, a spike in the number of cases in the north east of England have led to new laws further restricting any social mixing between households indoors being applied from tomorrow.

Columns of note

Writing in The Times, Rachel Sylvester suggests that Rishi Sunak’s rising star is a threat to Boris Johnson, not least because of his ability to apparently think ahead, in contrast to Johnson’s more reactionary style. She points out that the Treasury recently released a picture of Sunak walking up the stairs outside 10 Downing Street. A sign of things to come, perhaps? (£)
 
New Statesman political editor Stephen Bush uses his column to explain why he believes the new Lib Dem leader Sir Ed Davey chose to use his conference speech to introduce himself to party members and political journalists, rather than the wider public. He believes this initial move was effective, but that the real test – establishing “brand Davey” – is a far bigger challenge in the months and years ahead.

Cartoon source: The Times

Markets

What happened yesterday?

London stocks ended Monday higher, after being boosted by encouraging Chinese data and strong performances from the likes of HSBC and Diageo, while the pound was lifted by Brexit hopes.
 
HSBC surged 8.89% after its biggest shareholder, China’s Ping An Asset Management, lifted its stake in the bank. Other banks followed the trend, with Lloyds up 7.58%, Standard Chartered rising 7.48% and Barclays adding 7.06%. Elsewhere, Diageo gained 6.09% after saying it made a good start to the current financial year, with the drinks company’s US business beating expectations.
 
The FTSE 100 ended the session up 1.46% at 5,927.93, and the FTSE 250 was up by 1.91% at 17,370.27. In currency moves, sterling finished positively too, gaining 0.86% on the dollar to $1.29, and advancing 0.69% against the euro to €1.10.
 
In the US, uncertainty around the upcoming elections seemed to be offset by hopes of a fourth round of fiscal stimulus. At the end of trading, the Dow Jones Industrial Average was up by 1.51% to 27,584.06, while the S&P 500 was up by 1.61% to 3,351.6 and the Nasdaq Composite finished the day up 1.87% to reach 11,117.53.

What’s happening today?

Finals
Blan Tech Grp
Ferguson
Gateley Hldgs
Hotel Chocolate
Scs Group

Interims
Adm Energy
Alfa Fin
Animalcare Grp
Card Factory
Escape Hunt
Fireangel
Invinity Energy
Menzies
Mereo Biopharma
Mortgage Ad
Osirium Tech
Trans-Siberian Gold
Xlmedia

Trading announcements 
Greggs   

AGMs
Afritin Mining
Amigo
Arcontech Group
Augmentum Fint.
Brickability
Carclo
Dcd Media
Dods Group
Gama Aviation
Imimobile
Ince Group
Jaywing
Novacyt

UK economic announcements
(09:30) Mortgage Approvals
(09:30) M4 Money Supply
(09:30) Consumer Credit

Int. economic announcements
(10:00) Business Climate Indicator (EU)
(10:00) Consumer Confidence (EU)
(10:00) Economic Sentiment Indicator (EU)
(10:00) Industrial Confidence (EU)
(10:00) Services Confidence (EU)
(15:00) Consumer Confidence (US)

Source: Financial Times

did you know

Calder Hall in Cumbria was the world’s first power station to generate electricity from nuclear energy on an industrial scale.

Parliamentary highlights

House of Commons

Oral questions
Business, Energy and Industrial Strategy (including Topical Questions)
           
Ministerial statement
Return of Students to Universities – Gavin Williamson
                       
Legislation
United Kingdom Internal Market Bill: Remaining Stages

House of Lords 

Oral questions
Current political situation in Hong Kong – Baroness Northover
 
Oral questions
Amending the Licensing Act 2003 to allow local authorities to take action against premises that are not enforcing the 10.00pm closing time – Baroness Thornhill
 
Legislation
Trade Bill – committee stage (day one) – Lord Grimstone of Boscobel

Scottish Parliament 

First Minister Statement: Covid-19
 
Scottish Government Debate: Promoting Equality and Human Rights for Minority Ethnic People and Communities

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