Monday, 13 January 2020

Why EDF's argument that they cut costs with early start to Sizewell C is nonsense

As reported in 'The Times' EDF is now pressing the Government for an early decision to fund Sizewell C nuclear power plant through what is effectively a blank cheque financial model. EDF say they want to start building Sizewell C in 2022 because they will save money through transferring staff from building Hinkley C.

To me this sounds a very dubious argument for the simple reason that building another two units of their 'Euorpean Pessurised Reactor' (EPR) at the same time as Hinkley will put even greater pressure on staff resources - which  are very scarce in the highly specialised nuclear industry - and lead to increased problems and costs, not savings. The argument posed by EDF annoys me especially as I have been (for some time) researching a book for Routledge about the factors that have led to the nuclear power construction cost overruns, and  big factor appears to be precisely the fact that there is just not enough specialised nuclear staff in the West to build nuclear power plant. So this argument about 'transferring' staff seems to me to be especially tendentious.

EDF claims they are going to 'transfer staff'. Planning to transfer staff could produce even bigger delays as construction fell behind schedule, the staff couldn’t be released on time  and building at Sizewell has to be halted leading to  even greater costs as other staff sit around doing very little.

Really the whole argument seems to me to be a clever way of distracting from the obvious point that they cannot build more than two units at once (indeed, cannot even do that on time). To say that there is some sort of cost-saving in this seems bizarre. But then, in reality, we shall find that the real start of construction at Sizewell C will be pushed back and back.

But EDF have an big incentive to pre-commit the UK Government to an early start for Sizewell C (which may in practice be no more than some light work in advance of serious construction) because of three possibilities.

The first is that bad news continues to come about the longer and longer delays with building EPR reactors in France and Finland. The second is that bad news could soon be also coming concerning more delays with Hinkley C itself. The third is that EDF are in big financial trouble having to fund Hinkley C on their own balance sheet while suffering losses with their construction at Flamanville and would be given considerable succour with an open-ended committment to pour money into the company for another twin power plant. (See my earlier blog post on the massive losses EDF are suffering with Flamanville). The quicker they can get a decision from the UK Government then the less chance that the Government will be put off by continuing bad news from Flamanville and Hinkley C itself.

EDF have been consistently arguing for arrangements that they say reduce costs, while the outome is that costs increase. This is most likely to be the case with the arrangements that they have promoted to build Sizewell C. They have claimed that it will be cheaper because using Government money is chreaper. But the reality is that the Government will be committed to paying for any cost overruns of the project - so how is this project going to be built cheaper when the company doing it has no contractual incentive to keep costs down?

The reality is that every nuclear power project being built in the west over this century is costing at least double (probably even more than that eventually) than they were supposed to cost in the first place. The cost of building Sizewell C under the proposed 'Regulated Asset Base' is likel;y to be much higher for the energy consumer compared to even Hinkley C - even if it is cheaper for EDF! And EDF are rushing the public into accepting the inevitable high public costs before there is further mouning bad news from the construction of their power plant at Flamanville and Hinkley C.


Saturday, 4 January 2020

Why the UK Government may be encouraging greenwash in its announcement about 'hydrogen ready' boilers


The Government's announcement that from 2025 gas boilers will have to be 'hydrogen ready' could presage the start of one of the greatest pieces of greenwash that have been committed in the UK. It seems likely to result in carbon emissions being substantially increased compared to the present use of natural gas in boilers to heat homes.

The oil and gas industry is promoting so-called 'blue hydrogen', that is hydrogen produced by 'reforming' natural gas, and capturing the carbon dioxide that is produced. Yet currently most hydrogen is produced by reforming natural gas and not capturing carbon dioxide, a process that will dramatically increase carbon dioxide emissions if hydrogen is used to heat homes. The efficiency of the gas reformation process is only around 65 per cent meaning that much more carbon dioxide is generated to produce the hydrogen as fuel compared to simply burning the natural gas. Any claims that the process will be done using carbon capture and storage, beyond that is a few demonstration projects supported by public grants, should be taken with a wagon load of salt.

But the sad thing is that even if 'green' hydrogen for heating homes was to be generated by renewable energy (through electrolysis of water) it would still be a grossly inefficient way of using that renewable energy. Renewable energy is normally distributed through the electricity system where it can power heat pumps in homes (either individually or through district heating systems) to much much greater effect. The heat pumps use electricity much more efficiently compared to any hydrogen boilers, no matter how the hydrogen is produced. Indeed a heat pump may increase the efficiency of the use of renewable energy by approaching fourfold compared to using 'green hydrogen' in a boiler.

Not only does the heat pump multiply the heat from the electircity by around threefold (by using heat in the surrounding environemnt) but it avoids losing energy through electrolysis,

So, in terms of reducing carbon emissions we will need FOUR times the amout of renewable energy to produce the same heating effect in buildings if we turn it into hydrogen  - compared to using the renewable energy delivered through the electricity system and used in heat pumps.

So the Government should be looking at ways to ensure heat pumps are used as a rule in new buildings and giving incentives to have existing buildings retrofitted with heat pumps. This is as opposed to being hijacked by the oil and gas lobby to pass off business as usual under a greenwashed cover story.


 https://www.carboncommentary.com/blog/2017/7/5/hydrogen-made-by-the-electrolysis-of-water-is-now-cost-competitive-and-gives-us-another-building-block-for-the-low-carbon-economy




https://help.leonardo-energy.org/hc/en-us/articles/203047881-How-efficient-is-a-heat-pump-

Sunday, 22 December 2019

The secret massive losses EDF is suffering in building Hinkley C


EDF faces massive financial losses as they continue to fund the building of Hinkley C. This is because they are paying for the power station from their balance sheet rather than use much cheaper UK Treasury loans that were originally agreed with the UK Government. In short, paying for the construction costs out of shareholders' dividends is very costly, something that depresses share prices and in effect loses tremendous amounts of money for the main shareholder, the French Government.

Originally when the contract to build Hinkley C was signed off by the UK Government and then approved by the EU Commission (required under 'state aid' rules), the plan was that the bulk of Hinkley C construction costs would be paid for by loans from the Treasury, which would be lent at relatively low rates of interest. But the Government insisted on a proviso for this to happen.This condition said that the successful commercial operation of the same nuclear technology (the European Pressurised Reactor or EPR) being built in France at Flamanville had to be demonstrated by the end of 2020 (1).

However EDF has never taken up the offer of loans from the UK Treasury, and the obvious reason for this is simply that the completion date for the Flamanville EPR has been pushed back and back - so much so that the earliest it can even begin its test cycles will be 2022. EDF cannot possibly meet the conditions enabling it to take up the loan guarantees. EDF has made a 'virtue' out of this necessity and declared it will not take up the Treasury loans.

Hence, in order to complete Hinkley C EDF can only do so by issuing its own bonds, and thus accumulating debt that rests on its balance sheets. Such mounting debt reduces the possibility for issuing dividends to shareholders and thus depresses share prices.

EDF's notional profits from the Hinkley C deal (attacked at the time for being too high) have only recently been hit by the announcement that there will be up to around £3 billion costs overruns on the projects (I'm sure there will be more such announcements to come), but really these costs overruns are relatively small compared to the losses that EDF is taking by financing the project on its own balance sheet.

The rate of return on the project was estimated to be around 9 per cent in 2013 (less now given the announced cost overruns) and borrowing costs would be less than this if it was mainly financed by (relatively) cheap Treasury loans. Yet the borrowing costs of financing the project on its balance sheet are, according to accountancy conventions, more like 15 per cent. Hence EDF faces a big loss, in accountancy terms, even if the project is finished on time and even if it then sold the project onto someone else (probably unlikely).

In fact way back in 2016 EDF's Chief Finance Officer Thomas Piquemal resigned after the EDF CEO refused to postpone making a decision about whether to go ahead with building Hinkley C. There were increasing concerns about the length of delays in building the EPR at Flamanville  - and because of the loan conditions set by the UK Treasury for funding Hinkley C such delays had a direct financial implication for EDF's finances if it went ahead with Hinkley C. Piquemal thought that a hasty decision could jeopardise EDF's finances (2).

In fact 85 per cent of EDF's shares are owned by the French state. EDF share prices have been depressed in recent years- they are now worth less than  third of what they were ten years ago, for example, but the Macron Government has long signalled that it is prepared to put state money into defending the project (3). Some might see this as a bizarre outcome that the French taxpayer is in effect bailing out what would otherwise be a huge loss making project in order to build a power station in another country - the UK. Many said that the 35 year contract granted to EDF for the project for £92.50 per MWh (2012 prices) was too much. In fact this seems to be proving very cheap compared to what a fully private company could afford to take on.

Some with expert knowledge have wondered how on earth EDF can still go forward with a project that looks like financial insanity for its own accounts. But at the end of the day this seems to be all about the politics, and national identity, which the elite French administrators appear to see bound up in the EPR technology - no matter how much it costs.

Just how damaged this identity will be depends in part on just how disastrous a construction project Hinkley C proves to be. Given that it is scheduled to be built in no more than 6 years, and that no currently operating British nuclear reactor has been built in the less than 8 years, the cost overruns seem only likely to mount.

But, the French Government may have the last laugh (or t least the next laugh) in that the British Government is now poised to fund the next EPR (at Sizewell C) under an opaque mechanism called the 'Regulated Asset Base'. This is alleged to offer cheaper means of financing. It will be cheaper for EDF of course, but in fact it transfers the risk of the inevitable cost overruns onto the British Government and our taxpayers. A fake price will be used to cover what is a blank cheque to be offered to EDF to build the power plant.

EDF may be burning up French taxpayers money for the lossmaking Hinkley C, but it will be the British taxpayers who will be paying the massive price of the next EPR project at Sizewell C. There are, of course, much cheaper options to produce ow carbon power, but EDF and the British and French Governments are not rabidly keen to advertise such options.



(1) For further details of this, see my earlier blog at https://realfeed-intariffs.blogspot.com/2019/02/new-funding-crisis-looms-for-for.html

(2) See report in the Financial Times 'EDF chief quits over decision to push on with Hinkley Point'
by Michael Stothard, March 7th 2016 https://www.ft.com/content/ef9d4de8-e3e9-11e5-ac45-5c039e797d1c

(3) See report in Guardian, 'France agrees bailout to pay for Hinkley C' by Terry Macalister, March 17th 2016, Guardian, https://www.theguardian.com/uk-news/2016/mar/17/french-government-edf-united-front-hinkley-point-money-nuclear-plant-union

Sunday, 24 November 2019

How ammonia beats batteries to supply long term firm power from renewables



Not many people know this - yet - but ammonia is looking like being the best means by which wind and solar power can provide 'firm' power - that is ensure continuous supply of energy demand from renewable energy 100 per cent of the time. 

Ammonia, in this system, acts as an energy carrier for hydrogen produced from water which has been electrolysed - split into hydrogen and oxygen - by renewable electricity (mainly wind or solar). The hydrogen can be more or less simultaneously combined with nitrogen from the atmosphere to produce ammonia. The ammonia can be stored, and when needed, it can be burned in conventional-style turbines/engines or used in specially designed fuel cells to generate electricity when required. 

Currently much conventional wisdom has it that batteries are only the main means of storing renewable energy. Indeed batteries are very good for evening out balances in daily production and consumption of electricity - so peak demand can be reduced and the amount of firm power reduced. But we also need firm power for those days - under a 100 per cent renewable energy system - when there is little wind or sun. This is where ammonia comes in as a potentially better option for providing fim power. It is not a question of either batteries or ammonia, but simply that they can perform different functions providing short term and longer term storage respectively.

Ammonia (used as a hydrogen energy carrier) has a great advantage over hydrogen itself in that it can be stored much more easily than hydrogen. Ammonia is already stored for lengthy periods whereas long term storage of hydrogen requires development of the use of caverns or depleted gas fields.

In brief, there are various studies attesting to the likely practicality of this general type of system. A pilot project demonstrating the green ammonia to firm power concept was concluded last year at the UK's Rutherford Appleton Laboratories (1).

One student led project (at the University of Strathclyde), summed up the advantages of the system by pointing out 'The principle of having the storage tank connected to the National Grid would allow not only surplus wind energy to be stored as ammonia but all excess renewable resources from any power plant in the UK' (2). This project (2) concluded that ammonia would be a much better solution than batteries, owing partly to the fact that so much battery capacity would be required to do the same job, but also because of the value of the renewable energy that would also be wasted when there was excess production compared to electricity demand. 

Indeed supplying reserve power through ammonia (or some other storage vector, eg compressed air, biomethane etc) could be very cheap indeed since the storage solution would be generated using 'excess' renewable energy that was virtually, if not actually, zero cost.

One reason why ammonia is likely to emerge as a key part of progress to a 100 per cent renewable energy economy in countries like the UK is simply because ammonia is a very important industrial feedstock. The fertiliser industry, in particular, requires massive quantities of ammonia which are currently derived by a highly energy/carbon intensive process involving the 'reformation' of fossil fuels. The reformation (called the Haber process) releases hydrogen from the fossil fuel (usually natural gas or oil derived) which is then combined with nitrogen to produce the ammonia. 

A key point to remember is that the fertiliser industry is going to be under pressure to reduce its carbon footprint by deriving its ammonia from low carbon energy sources. Indeed there is increasing attention being given to the notion of 'green ammonia', and several research and demonstration projects into 'green ammonia' are being conducted around the world. Green ammonia will, in effect, be subsidised by the increasing quantities of otherwise zero cost renewable energy produced when renewabe energy is excess compared to demand (this phenomenon becoming more and more common as the proportion of renewable energy of total energy rises). As the fertiliser and other industries source their ammonia as green ammonia in larger quantitiesia then the availability of this will make the possibilities of it being used as a fuel increase.

It is certainly the case that the optimum processes involved in a green ammonia  system are yet to be determined. These include, if possible, improving the efficiency of the system. It also involving deciding which strategy is best to minimise nitrogen oxide production when burning the ammonia (this can be done by different techniques, or using the ammonia in adapted fuel cells). However, when compared with the complexities and problems of the rather-more-state-favoured nuclear or cabon capture and storage projects, the challenges facing using green ammonia as firm power seem simple to resolve. 

If it is the case that renewable energy can be effectively stored using ammonia to provide firm power (and I think it is the case) then not only can renewables provide firm power on days when there is little wind or sun but also ammonia could potentially be used to power aircraft. 



(2) Conclusion, Wind Energy Storage Project, University of Strathclyde, http://www.esru.strath.ac.uk/EandE/Web_sites/17-18/windies/index.html







Wednesday, 2 October 2019

How the Fixed Term Parliament Act has destroyed our constitution

The coalition between the Liberal Democrats and the Conservatives tore a gaping hole in the British constitution that was not understood at the time but through which we are now falling headlong. It has allowed a zombie Government to stagger about in the middle of the greatest British political crisis for several decades when in fact it should already have resigned.

The hole was created by the Fixed Term Parliament Act (FTPA) which was seen at the time as a clever expedient to ensure that the coalition led by David Cameron could not be easily dismantled. But it had the unintended consequence of destroying the carefully woven set of conventions that underpinned the notion of confidence in the Government.

The Government is apparently ignoring the pre-existing convention that it should resign if it loses a vote of confidence using the excuse that its wish to call an election has been thwarted under the rules of the FTPA. But the way our constitution has always worked is that whilst the outgoing PM had the power to call a General Election, this has been subservient to the fact that PMs have only stayed in office if they have the confidence of the House of Commons. You can see this in some examples quoted by Catherine Haddon, below. For example Baldwin resigned, in 1923, only after losing a vote on his Queen's Speech following the 1923 General Election to allow Ramsay Macdonald to form a Labour Government.

The way that the Government (aided implicitly by the Opposition in that they have so far not tabled a vote of confidence) have so far behaved is to make us look more unstable than Italian Government. In that case, as illustrated very recently, when it became apparent that he no longer had a Parliamentary majority (given Salvini's defection from the Govt), PM Conte tendered his resignation. He has only continued because a new Government coalition has been formed.

Yet Johnson, despite having no majority on the key issue of the day, has sat tight. The acid test of whether the British constitution has been totally blown is whether a) he will lose the vote on his Queen's Speech after October 14th and b) if he loses whether he resigns. If he does not resign, the UK will be an even bigger global laughing stock than it already is. Our constitution will be plainly totally shot, with conventions that no longer work in the light of the FTPA and the bankruptcy of British politicians.

It may not be the politicians' fault that there are deep divisions over Brexit, but it patently IS their fault that this zombie Government continues to stagger on. Either it should resign or the Opposition must no-confidence it under the terms of the FTPA if it won't go otherwise. Anything else is total lunacy.

http://theconversation.com/hung-parliaments-have-voted-down-the-queens-speech-before-heres-what-happened-79384

Wednesday, 25 September 2019

Is Hinkley C going the same way as the French and Finnish EPR disasters??

As EDF announces major cost overruns and delays after having only recently started major construction works for Hinkley C, it seems that this project is heading for the same sort of financial disasters suffered already by the other two European Pressurised Reactors (EPRs) being built in Finland and France. Yet the Government is going ahead with a financial model, the 'Regulated Asset Base' (RAB) to finance the next EPR at Sizewell C, that would mean electricity consumers would have to pay for cost overruns over and above EDF's own ridiculously low estimates of costs.

EDF has announced cost overruns of up to £2.9 billion pounds and delays for HPC that almost certainly mean it will not be generating in 2025. This is on top of the already high cost of building EPRs - at a cost to the electricity consumer of £92.10 in 2012 prices (now over £100 per MWh), and even that is only so 'low' because the contract involves paying this price (inflation uprated) over 35 years!

EDF, in its statement issued today talks about the project being 'first of a kind' (in the UK). But the project is not 'first of a kind' at all when we look at similar designs being implemented in Finland (Olkiluoto) and France (Flamanville), still uncompleted over many years and with costs in these cases having risen to more than three times their initial estomates. Who would put any money on this being the last cost overrun announcement for Hinkley C from EDF? Certainly not me!

In fact EDF only started 'pouring concrete' on the base of the plant in Spring this year, so if there are cost overruns and delays projected now, much much worse is likely to come.

The most outrageous aspect of this affair is that EDF expect us to believe that Sizewell C will be substantially cheaper to build than even the projections EDF made before the latest cost overrun announcement. The Government has in effect agreed it will swallow such a projection by EDF and then undertake to saddle electricity consumers with cost overruns over and above these absudly low estimates.

With offshore wind costs having fallen to well under a half of the cost of Hinkley C, it seems especially odd that the Government should be giving financial preference to new nuclear power. Yet new nuclear power will make integration of renewables more difficult since the nuclear power will, according to their contracts, always run meaning more times that there will be excess renewable electricity generation. Of course, as suggested in the my last post, any excess renewable energy generation (which would happen even without nuclear power beiung on the system) could  be used to generate hydrogen (via electrolysis). This could be used in fuel cells to produce electricity when there was a shortage of wind or sun. This beggars the question, though, of why we are not investing in this technology alongside renewables rather than pouting more and more money down a nuclear black hole and slowing down the decarbonisaion process as a result.

See https://www.ft.com/content/92102452-df62-11e9-9743-db5a370481bc

Sunday, 22 September 2019

How renewable energy can provide its own reserve power through hydrogen

A regular complaint about variable sources of renewable energy is that they need so-called 'back-up' when the sun doesn't shine and the wind doesn't blow, but this problem can disappear if fuel cells powered by hydrogen are brought into play. When the electricity system is producing excessive quantities of renewable energy (as will happen as renewable generation increases) this energy can be stored in various forms, one form being hydrogen which can be stored and then used in fuel cells to produce electricity when it is needed.

An increasing number of demonstration projects are focussed on generating hydrogen from renewable energy sources using electrolysis of water. One project involves making hydrogen directly from seawater https://www.rechargenews.com/wind/1850034/floating-wind-to-hydrogen-plan-to-heat-millions-of-uk-homes These systems (renewable energy-hydrogen-fuel cell) are coming down in cost as their constituent parts (wind and solar farms, electrolysis and fuel cells) all come down in price.

Fuel cell deployment is increasing at a rapid pace around the world as an option to provide back up power for buildings, displacing the role that has been performed by diesel generators. A fuel cell, if you like, is a sort of reverse battery in that it converts a fuel into an electric charge rather than the other way around. Fuel cells are considerably more energy efficient in creating motive power compared to internal combustion engines.

Of course we can use lithium or other types of batteries to reduce the need for 'firm' generating capacity to complement variable renewable energy (especially as the increasing amount of electric vehicles can use their battery power to, in effect, store power to be used in the grid). However the need for any fossil fuel or nuclear generating capacity can be completely abolished by building up the volume of fuel cells powered by renewable (so-called 'green') hydrogen.

As the amount of renewable energy generated increases, so the amount of renewable energy (RE) that is sometimes surplus to demand will increase. - The other side of the variable RE coin of course is that often too much energy is generated -  This surplus renewable energy (which will be available virtually free of charge) can be used for hydrogen production.

Of course this doesn't mean everything can be powered by hydrogen - many services are better provided by electricity. For example, electric rather than hydrogen cars seem to be taking hold in the market. In the provsion of ordinary space heating it is certainly much more energy efficient to use (electrically powered) heat pumps, either in district heating or individual houses, to provide heat to domestic and commercial buildings.  But we do have the resources to produce for some specialised hydrogen markets, and (besides fuel cells providing reserve power as discussed) this can include some specialised industrial heat markets and also aircraft travel.

Hydrogen powered aircraft seem, as a futuristic proposition, to have the edge on electrically powered aircraft since their weight might be a lot lower than that provided by batteries. This weight issue is not quite so crucial on the land, where the refuelling infrastructure that exists in the form of the electricity grid gives electric cars an advantage over hydrogen powered vehicles. However aircraft hydrogen powered flight might take off quicker (joke?) than battery powered planes.

After all, for example, there's enough offshore wind resource in parts of the North Sea to generate over thee times the energy consumption of the entire EU. See https://realfeed-intariffs.blogspot.com/2019/06/offshore-wind-power-source-that-could.html

But there is a note of warning to be sounded - we should make sure the increase in hydrogen use comes from electrolysis of water, not from traditional means of obtaining hydrogen from reformation of gas or coal - that is the opposite of decarbonisation.

Clearly what needs to be done is that rather than shovelling a lot of money down a nuclear black hole (eg the Government's plans for giving a huge handout to EDF via their proposed 'Regulated Asset Base' mechanism), they should be putting some money into encouraging deployment of fuel cells, electrolysis and hydrogen production from renewable energy.