News May 2013

11 May 2013

New Nukes

The new Energy Minister Michael Fallon has told Channel 4 News that the push to build new nuclear reactors is on course.

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Posted: 11 May 2013

10 May 2013

Energy Bill

The problems facing the Government’s plan to reform the UK’s electricity market go well beyond the departure of two of the limited number of civil servants who actually understand the proposals. The reality is that the Government is losing its appetite for a scheme which is liable to disintegrate under the weight of its own complexity. The real problem is that the plans freeze the system in aspic at a time when the market and new technology are producing dramatic changes. The prices (we are not allowed to call them subsidies) represent corporate welfare on a very big scale – a transfer of wealth from consumers to suppliers which means that those who win the lobbying battle will be celebrating for decades to come. To reduce emissions the simplest and most effective device would be to incentivise energy saving. The green deal is too complex and the take up is low. It could be simplifed and relaunched along with new steps to stimulate investment in the technologies which can produce a step change reduction. The only remaining question is whether the Government has the confidence to step back and admit that the reform is too complex and that something simpler and short term is both necessary and appropriate. We will know within the next few weeks.

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Posted: 10 May 2013

9 May 2013

Utilities

Peter Atherton: Britain is playing Russian Roulette with its energy policy – and it is shareholders in the utility companies who are likely to get shot. Several events could bring an energy crisis to a head. Wholesale prices could rise if the market expects short-term supply problems, while longer-term shortages threaten actual power cuts. Meanwhile, rising energy bills for consumers or profits for the energy companies could become politically unacceptable, forcing the Government to renege on its policy commitments to the industry, such as minimum prices or investment returns. We think it’s highly probable that several of these catalysts could combine to create a “perfect storm” for energy within the next decade. If so, there will be three casualties – the Government, the consumer and investors in energy firms. While there is likely to be plenty of pain, recent experience in Europe has shown that governments will protect themselves and consumers by heaping the bulk of the financial pain on to investors.

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Posted: 9 May 2013

8 May 2013

Energy Supplies

Jonathan Stern: Why is it necessary for those writing about the future UK energy situation to refer to “the lights going out”? The outcome is likely to be far less dramatic. It’s quite correct that a great deal of old coal and nuclear capacity will be retired over the next few years. For the rest of this decade, that will be replaced by as much renewables as can be built (mostly wind) and gas. Most of the gas-fired power generation which is needed has already been built; around 4GW is currently not in operation because it is unprofitable and most of the rest is running at far lower load factors than in previous years. If “the lights threaten to go out”, existing gas-fired generation will run at higher load factors and more can quickly be built. This is unlikely to leave consumers “at the mercy of Russia and Kazakhstan” (neither of which supply the UK with any significant volumes of gas); but there will be increased dependence on Norway, Netherlands, Qatar and perhaps the US.

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Posted: 8 May 2013

7 May 2013

Hinkley

The chief executive of EDF Energy, a unit of Electricite de France (EDF.FR), will leave Britain if the French company’s 14 billion pound Hinkley Point reactor project collapses, U.K. daily The Times reported Monday without citing specific sources. Vincent de Rivaz, the longest-serving boss of Britain’s Big Six energy companies, has staked his credibility on getting the plan to build Britain’s first new reactors for decades off the ground, The Times wrote. However, the chances of the project going ahead are receding, with EDF Energy and the U.K. government in a stand-off over the level of subsidies–funded by levies on consumers’ bills–that the company will receive, The Times said.

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Posted: 7 May 2013

6 May 2013

Hinkley

The chief executive of EDF Energy will leave Britain if the French company’s £14 billion Hinkley Point reactor project collapses. Vincent de Rivaz, the longest-serving boss of Britain’s Big Six energy companies, has staked his credibility on getting the plan to build Britain’s first new reactors for decades off the ground. However, the chances of the project going ahead are receding, with EDF Energy and the Government in a stand-off over the level of subsidies — funded by levies on consumers’ bills — that the company will receive. One source said that the Government had made several minor concessions in recent days, but the two sides remained far apart. According to well-placed industry sources, Mr de Rivaz would seek a new role within the parent EDF Group, which is majority-owned by the French Government and is based in Paris, if the project were to collapse. With EDF Energy spending £1 million a day to keep the project going, it is thought that the group will walk away if no deal is struck by the summer.

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Posted: 6 May 2013

5 May 2013

Energy Costs

Apocalyptic predictions are circulating about the size of electricity bills in 2030 if the move to green power goes ahead. There is no need for them to come true. The UK’s energy policy is not “plausible” and a “crisis” is inevitable. That is the view of Peter Atherton, a respected utilities analyst who works for Liberum Capital, an investment bank in the City. Atherton is convinced that successive UK governments have grossly underestimated the engineering, financial and economic challenges posed by the planned move from a high-carbon electricity sector to a low-carbon one. Atherton is not the only one in the City asking difficult questions. Harold Hutchinson, a utilities analyst with Investec Securities, is also deeply sceptical about the UK’s nuclear strategy. The coalition has set much store on new nuclear but is balking at guaranteeing a price of over £100 per megawatt hour. Hutchinson points out that the last time nuclear was built in Britain there was the state-owned Central Electricity Generating Board to help. Similarly, the current list of newbuild projects in France, Finland and the Czech Republic all have the state as the major shareholder. This strategy is implausible. Any “crisis” stems from the government’s unwillingness to use the power of the state to ensure local companies build a network fit for tomorrow at a cost the consumer can bear. If David Cameron is looking for a patriotic mission to head off the Ukip surge, then instead of funding a futile war in Kabul, he could start ensuring domestic energy security through the proper funding of the new Green Investment Bank in Edinburgh.

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Posted: 5 May 2013

4 May 2013

Hinkley

Deal between EDF and government for £10bn nuclear power station could come as early as next week. A deal between the government and French utility firm EDF giving the go-ahead to the construction of the £10bn Hinkley Point C nuclear power station is expected as early as next week, according to separate sources close to the negotiations. This comes despite public comments this month by EDF chief executive Henri Proglio casting doubt on the timescale for a deal, and last week’s revelation that a redundancy consultation has been started with site workers. Sources say the parties aim to reach an agreement in “early May”, with a deal possible next week. The government and EDF have been at loggerheads since last year over the price the government will guarantee EDF receives for power generated by Hinkley, known as the “strike price”. However it is understood a strike price of between £95-£99/MWh has now been accepted by the government, guaranteed for 35 years, although one source said it was still to be resolved whether some or all of this price will be subject to inflation.

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Posted: 4 May 2013

3 May 2013

Hinkley

The National Trust of Ireland has begun a legal challenge against the UK government over its decision to approve a new nuclear plant in England. The plant at Hinkley Point in Somerset was granted planning permission by the Energy Secretary, Ed Davey, last month. However, the trust (known as An Taisce in Irish) has said the Irish people should have been consulted before the UK government granted approval. An Taisce wants a judicial review at the High Court in London. Its spokesman said the proposed plant is as close to the Irish coast as it is to London, and is closer to Dublin than it is to Leeds.

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Posted: 3 May 2013

2 May 2013

Low Carbon Investment

More of the funds held by institutional investors would be invested in energy projects if there was a clear EU policy about how to deliver secure, affordable and low carbon energy, says the House of Lords EU Sub-Committee for Agriculture, Fisheries, Environment and Energy in its report, published today. Following an eight-month long inquiry, during which the Committee heard from a number of individuals and organisations including the European Commission, the Secretary of State for Energy and Climate Change, Bloomberg New Energy Finance, the CBI, WWF and power companies, the Committee’s alarm at the degree of uncertainty and complacency about affordable, secure and low carbon energy supplies has grown.

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Posted: 2 May 2013