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Clarity on nuclear power subsidies

The Government should be “upfront” about the subsidies it is planning to give new nuclear power, MPs have warned.

The Energy and Climate Change Committee said ministers risked distorting planned reform of the electricity market by hiding subsidies in a one-size-fits-all design of long-term contracts for delivering low-carbon power.

The coalition Government has pledged its support for a new generation of nuclear power plants but has insisted they would not be subsidised by the taxpayer.

But the MPs said the contracts proposed by the Government, which would pay a fixed price for electricity from low carbon sources, amount to a subsidy for new reactors.

They warned that the system would work for nuclear but may not be suitable for other forms of low carbon energy such as offshore wind.

As a result, a failure to own up to the subsidies for nuclear could risk designing a system that does not deliver the needed investment in clean energy.

The committee’s report into electricity market reform also warned that the proposals were overly complex and could fail to attract the £110 billion needed in the electricity sector by 2020 to replace ageing power stations and cut carbon.

The MPs called on the Government to simplify the reforms and to break up the dominance of the “big six” power suppliers to allow new entrants to invest in the market.

They said a carbon floor price, which sets a minimum charge for the pollution energy companies create, was a necessary short-term solution for problems in the European emissions trading scheme but would increase costs for consumers and could provide a windfall for nuclear and renewables.

Tim Yeo, the committee’s chairman, said: “Ministers believe that new nuclear could play a key role in keeping the lights on and meeting our climate change targets - but they don’t want to own up to supporting it.

“This is understandable given the promise they made not to subsidise nuclear, but it would be deeply irresponsible to skew the whole process of electricity market reform simply to save face.

“The Government must be upfront about the support it is giving to nuclear and not hide subsidies in a one-size-fits-all design for long-term energy contracts.”