How will ministers explain to consumers why we are paying renewables to switch off so we can buy expensive nuclear electricity?

The Department for Business, Energy and Industrial Strategy (BEIS) now expects renewable power deployment to be significantly higher than previously thought after 2020, primarily due to the plummeting cost and surging popularity of solar power and storage technologies. BEIS’ projections now expect cumulative new build renewables capacity from 2016 to 2035 to reach 45GW, marking a sharp increase in the 2015 projection for 33GW of new capacity. The energy supply gap expected from Hinkley Point C (HPC) delays is already narrower than feared just a few months ago. And later this autumn the results of the government’s latest clean power contract auction for offshore wind projects is expected to be extremely competitive, promising to deliver offshore wind at a price well below the guaranteed rates being offered to HPC. (1)

The falling cost of offshore wind power could mean that it turns out to be 25% cheaper than energy from HPC. Developers behind a series of proposed offshore wind farms are vying to secure government contracts that will guarantee a price for the electricity they generate for 15 years. Dermot Nolan, chief executive of Ofgem, said he hoped the winning projects would emerge at a price of “£70 or less” per megawatt-hour (MWh). That would compare with £92.50/MWh that was last year awarded to Hinkley Point for a 35-year contract. Just a few years ago offshore wind was one of the most expensive technologies in the market. In 2014 the government awarded some projects a price of £150/MWh. Technological advances, including bigger, more efficient turbines, economies of scale in manufacturing and the introduction of a competitive “reverse auction” process to award subsidies to the cheapest projects have helped to bring costs down rapidly. (2)

Solar power, once so costly it only made economic sense in spaceships, is becoming so cheap that it will push coal and even natural-gas plants out of business faster than previously forecast according to the Bloomberg New Energy Finance (BNEF) outlook. The research group estimated solar already rivals the cost of new coal power plants in Germany and the U.S. and by 2021 will do so in quick-growing markets such as China and India. Green energy is taking root more quickly than most experts anticipate which means fossil fuels may decline after 2026 – a contrast with the International Energy Agency’s central forecast, which sees consumption rising steadily for decades to come. Electricity from photovoltaics costs almost a quarter of what it did in 2009 and is likely to fall another 66% by 2040. Onshore wind, which has dropped 30% in price in the past eight years, will fall another 47% by 2040. (3)

Last autumn, Michael Grubb, Professor of International Energy and Climate Change Policy at University College London, told the House of Lords Selected Committee on Economic that, although he had supported new nuclear during his time on the Committee on Climate Change, he felt “times and conditions had substantially changed … renewables are now clearly cheaper. Committing to a 35-year contract at that level was economically inappropriate” (4)

He continued: “renewable energy costs … appear almost to have halved in the past few years … We now have more than 10 gigawatts of solar, when the cost projections were that we would get 1.5 gigawatts by about this time … It is now clear that in the electricity sector we will be delivering more renewables than the Government planned for or expected by 2020.” (5)

The electricity system has changed radically in the years since the project to build new third-generation nuclear in Britain was initiated, says Grubb. National Grid’s (NG) Future Energy Scenarios (2016) show a steadily declining need for ‘baseload’ generation. By 2030 there will be growing periods when wind and solar meet all projected demand. The capacity of ‘firm’ inputs (like gas, nuclear, biomass, interconnectors, storage etc) required to operate more than half the year is reduced to 20GW overall. (6) On June 17th Tom Burke of the E3G Consultancy told the CND “No Need for Nuclear” Conference that renewables could soon be producing enough electricity to power the grid from April to October. (7) The implication is that for most of its contracted operating life (which will run out to c.2060), HPC would increasingly be competing with other, lower cost low-carbon sources.

For efficient system operation either HPC would have increasingly to ‘load follow’, adjusting its output up and down to follow changes in demand, or alternately, baseload nuclear would displace other and cheaper sources, for example forcing wind and solar off the grid, if it cannot operate flexibly, or if the £92.50/MWh (indexed) contract is allowed to determine its operation (the plant with biggest payment has most incentive to run). By 2030, around 20GW of capacity is required for less than 10% of year, to cover peak net demand, for which nuclear power is manifestly unsuitable. The dominant need in the majority of National Grid scenarios post 2030 will be for adequate responsive capacity displacing coal and gas, and more efficient approaches to balancing demand and supply. (8)

Michael Grubb told the House of Lords: “If you are worried about how to provide power during winter periods when there is a cold dark windless night, you do not want to build a spanking new plant designed to run 100% of the time; you build something that is cheap to construct and expensive to run.” (9)

Andrew Warren, chairman of the British Energy Efficiency Federation argues that when the UK government first endorsed Hinkley Point C, (HPC) it was projecting an increase in electricity consumption of 15% by now, whereas in practice we are consuming 15% less than a decade ago. In other words it made a 30 % error. This is despite a 13% increase in GDP over the last decade and the increase in the number of gadgets we all own. HPC is only due to deliver 7% of consumption. So we don’t need to keep arguing for new power stations to replace the gap left by HPC – there isn’t one. (10)

Tom Burke points out that: “If there is even a feeble effort to improve energy efficiency electricity demand will fall further below the 30% Andrew Warren has pointed out. This means that a future energy minister will face the daunting task of explaining to consumers why he or she is having to pay renewable generators to switch off cheaper electricity in order to take the expensive electricity we have already bought from HPC. Imagine how much more difficult that task will be if we have by then bought the rest of the Government’s proposed programme.” (15)

For a longer version of this article see nuClear News No.97 July 2017

  1. Business Green 6th July 2017
  2. Times 30th June 2017 
  3. Bloomberg 15th June 2017
  4. The Price of Power: Reforming the Electricity Market, House of Lords Economic Affairs Select Committee. Feb 2017.
  5. House of Lords Select Committee on Economic Affairs, The Economics of UK Energy Policy 18th October 2016
  6. Hinkley Point C and other third-generation nuclear in the context of the UK’s future energy system, CEE Briefing Note 20160915 AZPS1; Andrew ZP Smith, Michael Grubb, September 2016
  7. See http://cnduk.org/component/k2/item/2712-no-need-for-nuclear
  8. Hinkley Point C and other third-generation nuclear in the context of the UK’s future energy system, CEE Briefing Note 20160915 AZPS1; Andrew ZP Smith, Michael Grubb, September 2016
  9. House of Lords Select Committee on Economic Affairs, The Economics of UK Energy Policy 18th October 2016
  10. Guardian 5th July 2017
  11. Pers Com

 

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Published: 11 July 2017