UK Government to subsidise nuclear power and limit renewables

Government to shift resources from wind power to nuclear power…….by Dave Toke

Energy and Climate Change Secretary Chris Huhne is heralding  a move towards giving nuclear power  guaranteed subsidies from electricity consumers whilst going back to a

1990s-style  approach of awarding contracts to supply wind power through contract auctions.  In doing so the wind power construction programme, on the basis of past performance, will be cut by at least a half. The current Renewables Obligation, though expensive, offers good terms for wind power developers. The auction system signaled by the Government will reduce costs but it will also greatly reduce the number of windfarms that will be developed. A (real) system of feed-in tariffs that has become the dominant and highly successful means of implementing renewable energy programmes around the world is now likely to be ignored once again by British policymakers. 

The Government is worried that electricity prices will rise greatly if both the planned nuclear programme and existing targets for renewable energy are maintained. The Government’s solution to this is likely to be to limit renewable energy. If proof were needed about fears that nuclear power will crowd out renewables development, this new British policy will provide it. In effect the policy means a transfer of resources from renewable energy towards nuclear power.  This is directly in the face of public opinion which has been shown in all independent polls to prefer renewable energy to nuclear power by overwhelming majorities.

Chris Huhne unveiled his thinking at a press conference on Dec 16^th when he gave support to proposals, inspired by E.ON, for a ‘low carbon’ support mechanism. See report http://www.businessgreen.com/bg/news/1933215/energy-reforms-promise-guaranteed-returns-low-carbon-generators (see middle section mention of auctions in particular). Designs for auctioning supply contracts for various forms of low carbon sources are given great prominence in the Government’s consultation paper on Electricity Market Reform. See Chapter 6 in http://www.decc.gov.uk/assets/decc/consultations/emr/1041-electricity-market-reform-condoc.pdf.

Whether directly or indirectly, renewable energy will be in competition with nuclear power for subsidies from electricity consumers. A return to a Tory 1990s (NFFO) style contract auctioning system is likely to emasculate the onshore wind power  programme and deliver less a lot less than half the previous (Labour) Government’s target of 33 GW of offshore wind by 2020. In the 1990s the auctions for renewable energy contracts took years to  organize. Half of the projects that made successful contract bids proved to be uneconomic and half of  the rest did not get planning consent - so only around one in four proposed  projects could be implemented.

If the auction proposal is applied to Round 3 of the offshore wind power programme it will destroy the arrangements that The Crown  Estates have organised. Developers already given  leases in Round 3 would have to compete in this auction system in order to be given price support contracts. Obviously,  not all would get contracts. Moreover much of the contracted capacity will end up being uneconomic and thus undeveloped because the  auction system encourages developers to put in optimistically low bids. It is claimed that things  will be different this time, but the renewable auction system has been tried  several  times around the world for renewables (UK, Ireland, California, and Denmark under  the post 2001 right wing government) and low capacity out turns are always the result. Let us not lose ten years finding out it that it is the same yet again.
Some are claiming that Government targets for renewable energy (currently 30 per cent of electricity from renewables by 2020) can still be met with ‘auction’ systems, but such targets are meaningless if the incentive mechanisms can only deliver less than half those targets.  

The Renewables Obligation (RO) (although expensive) is much preferable to 
the auction system being proposed because it at least allows companies a much greater opportunity to set up schemes with a good price for their electricity. Of course, what we need most is a REAL feed-in tariff system like they have in the bulk of EU  countries (led by Germany) which also leaves the choice about whether to set up a project to developers, but gives a more cost effective outcome for the electricity consumer. The German feed-in tariff is a highly transparent system which give 20 year contracts guaranteeing good standard prices to be paid for renewable energy generators that are tailored for different technologies. If there is a consistent campaign supported by the green NGOs and others on this there is a have a good  chance of success, although the problem will still remain of getting good feed-in tariff  prices set by the Government for the different renewable technologies.

As Simon Hughes, acting as Lib Dem energy and climate change spokesperson said in April 2009:  "The best answer to Britain's needs is a massive expansion of renewable energy. If billions of pounds are wasted on new nuclear sites the money simply won't be available to do this." Could this issue turn out to be a radioactive equivalent of the Lib Dem u-turn on student tuition fees?

Dr David Toke is Senior Lecturer in Energy Policy at the Department of Political Science and International Studies, University of Birmingham

NOTE: A campaign for REAL feed-in tariffs (renewable, not nuclear) will be organized shortly. Write to your MP supporting this campaign. Watch this website for further news!

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