Case for abandoning nuclear energy has never been more powerful
Grim truth is that these huge projects are a financial dead end
We are in a strong position where electricity supplies are secure and costs are falling, says Greg Clark, in a letter to the Financial Times this week. He should know since he is the UK’s business secretary. Never mind that the contractors behind two nuclear power stations have pulled out because they dare not take the risk, while a third promises to be an epic financial disaster, and that the remaining two on the drawing board seem increasingly likely to stay there.
Mr Clark is relentlessly upbeat: “Britain’s electricity requirement for the 2030s is not a problem of shortages but the much better challenge of abundance.” This challenge has already translated into a rise of 8 per cent last year in the cost of domestic electricity, and a looming 11 per cent rise in the absurd “price cap”, as the cost of subsidies for “green” energy slides sneakily into household bills.
However, he is right about abundance. The fracking revolution has utterly changed the balance for both oil and gas supplies, and made a nonsense of the UK government’s decade-old assumptions about ever-increasing prices.
As Dieter Helm, Mr Clark’s go-to expert on energy costs, argues in a paper this week, the trouble dates back to when the Liberal Democrats were tossed the energy brief in the coalition government. Chris Huhne and Ed Davey were achingly green, but because they assumed oil was running out, the pair reluctantly supported new nukes, laying the foundations for today’s meltdown.
The grim truth is that these huge projects are a financial dead end, driven there by changing technology along with escalating safety requirements and the costs of decommissioning. As Mr Helm argues, there is a powerful case for abandoning nuclear altogether. Mr Pollyanna Clark, meanwhile, promises yet another energy white paper this summer. Oh dear.
How to do fund management
You have to hand it to Andrew Formica. Well, the shareholders in Janus Henderson had to, since they had no choice. In 2016 he concluded that Henderson, the fund management business he ran, was “sub-scale” with only $127bn to play with, and merged it with fellow fund manager Janus. The deal helpfully included a near trebling of his old salary to become joint chief executive of the new combine.
These double-headers never work, and last year he graciously accepted $12m to resign. Now he has popped up as CEO-designate at Jupiter, another fund management group. The £445,000 salary may look like a comparative bargain, but it just gets him out of bed. Bonuses could add 425 per cent, and his long-term incentive plan “opportunity” is a further 375 per cent.
If the shareholders do well enough, they will not begrudge him the money, although the signs are not encouraging. Janus Henderson shares have almost halved since their post-merger peak, as all those benefits of scale seem to have accrued to him and the executives who were not fired at the time.
On a Formica-topped table, Jupiter is definitely sub-scale, with just £42bn under management, spread between scores of different funds, all of which appear from the company’s website to have lost money last year.
Peak passive investment
The high-cost stockpicking fund managers like those at Jupiter and Janus Henderson were anathema to Jack Bogle, the father of the passive investing revolution who died last week . Passive funds now control $10tn of investments, half of it through his Vanguard group.
At first sight, this seems an odd way to invest, since exchange traded funds buy shares when the price has risen far enough to get into their chosen index, and sell if a share falls out of it. But as Warren Buffett and many others have observed, the ability to beat the benchmark is rare, hard to spot and may not last. The cost of those highly paid fund managers generally outweighs any consistent ability to outperform.
However, ETFs are now so big that they are almost the market themselves. At some point, an average fund manager might use the knowledge of an ETF’s mechanical trading to get an edge bigger than the cost of paying him. We are probably not there yet, but had Mr Bogle lived to a still riper old age, he might have seen the peak.