News March 2013

31 March 2013

Carbon Floor Price

The government’s new carbon levy is effectively a “stealth poll tax” that will only work to put up household electricity bills and hand a windfall to old nuclear plants, the head of energy giant E.ON has warned. The Treasury’s “carbon price floor” comes into effect on Monday and official estimates say it will add £5 to household bills this year, rising to about £50 by 2020. The tax is intended to provide an incentive to invest in new wind farms and nuclear plants by making it more expensive to run coal and gas plants that emit carbon. Tony Cocker, chief executive of E.ON UK, attacked the policy on the eve of its implementation, arguing that it simply “pushes up the price for electricity” and should be scrapped. He told The Sunday Telegraph: “The carbon price floor is a tax and it’s pretty close to a stealth poll tax. It’s not based on ability to pay, it’s based on the requirement to keep warm and light your house. It was put in place with the stated objective of encouraging investment in low-carbon energy but it certainly doesn’t achieve that objective – it’s just a tax for the Exchequer.” The carbon tax would also provide an unintended “windfall” subsidy for existing old nuclear and hydro plants, which is “completely unnecessary because it’s already been paid for”, he said. The Daily Telegraph revealed that newly appointed energy minister Michael Fallon had called the tax “absurd”. Mr Fallon has taken on a new role, as joint energy and business minister, working across the departments of Business and Energy in the hope of creating a unified approach.

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Posted: 31 March 2013

30 March 2013

Nuclear Costs

As we continue to await news on negotiations between the government and EDF on the price of Nuclear now is as bad a time as any to look back at what the government thought it was getting into when it first embarked on the nuclear new build programme. In its 2006 document The Energy Challenge the (then) Department of Trade and Industry the government outlined its view of the future cost of nuclear (and gas). “The cost of new nuclear power generation is assumed to be around £38/MWh, as a central case. However, we have also considered a high case of (£44/MWh) and a low case of (£30/MWh).

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Posted: 30 March 2013

29 March 2013

Nuclear Subsidies

French electricity company Electricite de France SA (EDF.FR) and the British government are unlikely to meet a deadline at the end of March to agree on subsidies that would allow the construction of new nuclear power plants in the U.K., people familiar with the matter said. The people said in recent days that although discussions are still ongoing, they aren’t intensive and neither side appeared to be willing to make any compromises. “There’s no deal in sight, discussions are ongoing and if EDF doesn’t get the price that it believes is the right price then they won’t do it, they have no choice,” said one person familiar with the matter. A second person familiar with the matter said nothing had changed in recent weeks to suggest that an agreement between the two sides was imminent. “It wouldn’t surprise me if it ended up being the summer–that’s the most likely timing for an agreement. Everyone’s waiting to see who will blink first,” the second person said.

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Posted: 29 March 2013

28 March 2013

Energy Minister, John Hayes replaced by Michael Fallon

For those not on Twitter, Tim Probert, @TimProbert a freelance energy journalist specializing in the electric power industry says in honour of the WB Yeats-loving ex-energy minister John Hayes, he has written a commemorative limerick.

There once was a minister called Hayes
Who touched people’s hearts with his praise
For nukes, coal and gas
Not wind and biomass
And he left in six months in a daze

Posted: 28 March 2013

28 March 2013

Nuclear Subsidies

The row over subsidies for the UK’s new nuclear power stations has deepened after it emerged that the £160m-a-year cost of accommodating the giant reactors on the national electricity grid will be borne by all generators, including renewable energy providers. The new reactors planned by EDF for Hinkley Point are significantly larger than any existing power stations, meaning the national grid has to pay for extra standby electricity to stop the grid crashing if one of the reactors unexpectedly goes offline. National Grid said its decision to charge all generators for the cost was because “increasing costs on larger users could delay the commissioning of large nuclear plants by a number of years”. “There is no justification for nuclear being exempted from paying the additional costs to the system other than to make nuclear look cheaper than it is relative to other sources of electricity,” said Prof Catherine Mitchell, an energy policy expert at the University of Exeter. “It is clear to me that were there a genuine, transparent and comprehensive examination of the costs and benefits to society of nuclear versus renewables, the latter would be of far greater value both in the short and long term.”

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Posted: 28 March 2013

27 March 2013

New Nukes

A nuclear energy-free future for the UK is not something the coalition “is thinking seriously about”, the government’s chief science adviser said on Tuesday at the launch of the country’s long-term nuclear strategy. The government said its nuclear strategy would help seize the economic opportunities of a £1 trillion global market and provide 40,000 UK jobs. Prof Sir John Beddington, the government’s chief scientific adviser, said new nuclear power was essential: “We really can’t see a future for the UK energy sector, if we are to meet our climate change obligations and have resilience in the power sector, without a significant component of nuclear. A non-nuclear scenario is not one the government is thinking seriously about.” Beddington led a review of the nuclear research and development programme needed if the government’s high-nuclear scenario for future energy is to be feasible. Prof David Mackay, chief scientific adviser at the department of energy and climate change, said this scenario – one of four set out in the 2011 carbon plan – envisaged 75GW of nuclear capacity in 2050 providing 86% of the UK’s electricity, a situation he compared to France today. The industrial strategy, welcomed by the nuclear industry which worked with government to develop it, covers every part of the nuclear chain from new build, operations and maintenance and waste management. Craig Bennett, at Friends of the Earth, said: “The nuclear industry has always over-promised and under-delivered and it is extremely risky for this government to bet the UK’s energy future on new designs of nuclear reactors that we don’t know the cost of and we don’t know will ever be built. In contrast, there are huge opportunities for the government to throw its weight behind renewable and energy efficiency technologies that already exist and are proven to work.”

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Posted: 27 March 2013

26 March 2013

Energy Policy

The Department for Energy and Climate Change (DECC) is considering extending the life of coal-fired plants because of concerns surrounding the expected capacity squeeze in the UK. “We are looking at keeping existing plants alive,” Jonathan Brearley, director of energy strategy and futures at DECC, said at a World Energy Council (WEC) workshop for energy market reform strategy. Brearley’s statement came in response to a challenge from Ronan O’Regan, a PricewaterhouseCoopers utilities consultant, who suggested that contract for difference (CfDs) subsidy mechanisms will not be established in time for low-carbon generation to bridge the capacity deficit. “I have reservations over whether developers will be able to get the right capital into a project early enough [to fend off the expected capacity squeeze],” O’Regan told the workshop. “There needs to be a plan B. It will be highly challenging to have to CfDs in place by mid 2014.” Brearley did not dispute the concern. “We need to go to the European Commission to get state aid approval and we cannot put a firm deadline on that,” he said. “A [CfD] strategy for CHP [combined heat and power] plants still needs carving out.” O’Regan also expressed doubts that the 2020 decarbonisation target could be achieved under the current £7.6bn (€8.9bn) levy control framework a treasury-run model designed to keep the renewable subsidy pool in check. “Is £7.6bn enough to fund the roll out of the renewables needed to hit the 2020 target? Even in an optimistic scenario it is likely that there will be a shortfall,” he said. “The majority of developers will not be able to access CfDs.”

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Posted: 26 March 2013

25 March 2013

Energy Supplies

The Sunday Telegraph warned in this column of the problems of an energy policy that puts expensive, inefficient green power before coal-fired and nuclear power. There have been a few signs that the Coalition is at last turning its attentions to the issue but, still, not nearly enough has been done. Now we are reaping the consequences. Because of a misguided faith in green energy, we have left ourselves far too dependent on foreign gas supplies, largely provided by Russian and Middle Eastern producers. Only 45 per cent of our gas consumption comes from domestic sources. All it takes is a spell of bad weather, and the closure of a gas pipeline from Belgium, to leave us dangerously exposed, and to send gas prices soaring. Talk of rationing may be exaggerated, but our energy policy is failing to deal with Britain’s fundamental incapacity to produce our own power. Ed Davey, the Energy Secretary, may have granted planning permission this week to a new nuclear power station, Hinkley Point in Somerset. But one nuclear power station, with two new reactors, isn’t nearly enough. Moreover, it will take a decade to build and, even then, will only provide seven per cent of the country’s energy needs. It is time for the Coalition to tear up its energy policy before the lights really do go out. The first priority must be to repeal the Climate Change Act of 2008, with its brutal, punishing targets: reducing carbon emissions by 80 per cent by 2050, and 26 per cent by 2020. These targets have already had a disastrous effect, forcing the closure of coal-fired power stations, and increasing tax-funded subsidies on wind power. Next month, electricity bills will soar even higher, thanks to a new tax on carbon dioxide produced by coal-fired and gas-fired power stations.

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Posted: 25 March 2013

24 March 2013

Nuclear Subsidies

French energy giant EDF is this week set to clinch a £90 billion deal with the Government for providing the first new nuclear plant in Britain in 20 years. The contract is likely to prompt fury, as the figure will guarantee EDF a huge income at a price likely to be nearly twice the market cost of electricity. ‘EDF has the Government over a barrel because it’s the only horse in the race. Britain is effectively negotiating over how much to pay the French government over the next few decades,’ said a source. Any deal on the strike price is expected to last for 35 years, though EDF had been holding out for 40 years. This has led to accusations from MPs that, combined with a strike price at the top end of expectations of £97 per MWh, it would see EDF make £90 billion over the life of the contract. Davey said last week he did not recognise these figures from MPs. The Government may be able to reduce the strike price with a suggested deal to compensate EDF for any cost over-runs on building.

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Posted: 24 March 2013

23 March 2013

Energy Supplies

The chairman of ScottishPower’s owner has become the latest boss of a “big six” energy producer to warn that Britain faces looming power shortages. Ignacio Galan, chairman of Spanish firm Iberdrola, ratcheted up the pressure on the UK Government after Ian Marchant, chief executive of Perth-based SSE, said there was a “very real risk of the lights going out”. Mr Galan called on the ministers to provide more details about its proposed energy-market reforms if new power plants are to be built in time to avoid energy shortages in the next few years as older power stations are closed. “Although the Energy Bill currently going through Parliament is in the right direction, greater clarity of detail is needed if investment in new power stations is to be speeded up,” he said. He noted industry regulator Ofgem has warned that if no new plant construction begins now, there could be shortages in 2015. Centrica, owner of Scottish Gas, said it would not build any gas-fired power stations for at least four years due to uncertainties about pricing.

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Posted: 23 March 2013