17 May 2013

Energy Costs

At 2013 prices, solar PV in mid-latitude countries is now cheaper than new nuclear. Put in the UK context, the proposed EdF power station at Hinkley is now more expensive per unit of electricity generated than solar farms in the south of England. The implications of this need a great deal more consideration than they are getting. We do know what EdF, the owner of the Hinkley site, thinks it needs to pay its capital providers. Press reports, not denied by the company, suggest that it believes that it needs a minimum price of £97 per megawatt hour in order to achieve a required 10% return on the capital used to build the plant. Rough calculations suggest that a ‘strike price’ of £97 for solar electricity would yield a return of 11.3% on the funds committed. This is more than the 10% return achieved by EdF on its proposed investment at Hinkley. Electricity from solar PV is therefore cheaper – in good locations – than nuclear.

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Posted: 17 May 2013

16 May 2013

New Nuclear

The rhetoric of ‘new nuclear’ is specifically designed to distinguish Generation III (and 3+) reactors from previous generation reactors, or ‘old nuclear’ for the sake of argument. However, closer examination shows that the roots of nuclear rhetoric in the present day can be traced as far back as 1901. As an industry it is constructed in the collective public mind as inherently futuristic and progressive: the energy of the future- today. The problem with such rhetoric (or its strength, depending on your point of view) is that it can gloss over current controversies, for example, the cost of nuclear, to focus on the prospect of future benefit. Davey’s rhetoric sits awkwardly with the continuing wrangling over subsidies for Hinkley Point C.

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Posted: 16 May 2013

15 May 2013

Nuclear Subsidy

Britain’s hopes for new nuclear power may at last be cleared by ministers, with a deal set to be struck within two weeks. Crucial talks between EDF, which wants to build two new generators at its Hinkley Point site in Somerset, and Government ministers have dragged on for months, with both sides threatening to walk away. But now sources close to the talks say ‘the mood music has changed’. It is now understood that this is likely to be set between £93 and £96 per mega-watt hour. While ministers wanted a lower rate, in the £80s, EDF said it could not build the reactors for that amount. To compensate for the higher price, sources say tough terms and conditions in the contract will prevent EDF from making ‘massive windfall profits’ from the venture – a key political concern because ministers do not want to be seen to be over-paying to the French state-backed firm. A clause is likely to be inserted that will allow the Government to claw back money from the company to pass back to consumers if this happens, it is understood.

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Posted: 15 May 2013

14 May 2013

New Nukes

Centrica has ratcheted up fears over Britain’s energy security by warning that its rival EDF will take twice as long as originally planned to build the first of a new generation of nuclear power stations. Sir Roger Carr, Centrica chairman, told its AGM on Monday that since it first considered the project the price had “rocketed hugely”, adding: “Nuclear is not a cheap option.” Sam Laidlaw, chief executive, said: “Not only had the cost increased but also the schedule had lengthened very considerably. So instead of taking four to five years to build, EDF were telling us that it was going to take nine to 10 years to build. That is a long time to be writing out a cheque for this project.”

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Posted: 14 May 2013

13 May 2013

New Nukes

Mr Marchant who retires this summer after a decade at the helm of SSE, has renewed calls for the Government not to agree a deal with rival EDF to build the UK’s first new nuclear plant in a generation at Hinkley Point in Somerset. The £14bn project depends on subsidies paid for by levies on consumer energy bills. Mr Marchant said the EDF deal was “the wrong technology at the wrong price from the wrong company”. New nuclear technologies being developed elsewhere were “easier and quicker to build”.

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Posted: 13 May 2013

12 May 2013

Energy Policy

From 2015, Britain is due to start shutting down its dirty coal-fired power stations. The country has taken a huge punt on nuclear power to plug the gap that will be left by the demise of coal. It is a gamble that already looks like backfiring. David Cameron and George Osborne have turned to Fallon, often called the “chancellor’s enforcer”, to fix it. Fallon is now the government’s point man on some of the most controversial and thorny subjects. He is piloting the Royal Mail’s planned £3bn privatisation, and the sale of Urenco, the uranium enrichment business valued at $13bn (£8.6bn). Both deals could happen this year. Fallon is also throwing himself into make-or-break negotiations with EDF, the French state-controlled power group, about the future of new nuclear plants in Britain. “We are inching closer,” said Fallon, “but these are very difficult negotiations. We can’t be sure at this stage whether we are going to succeed.”

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Posted: 12 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


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