Friday, 21 December 2012

Energy Bill proposals could still freeze out independents, warn Friends of the Earth

Despite improvements to the Energy Bill, the proposals could still make it virtually impossible for community groups to set up renewable energy projects and could hand the ‘Big Six’ electricity suppliers even more control over electricity markets than they have at present. That is what Friends of the Earth are saying alongside a new report just published (written by myself). The Government has spurned pressures to establish a simple system, used in Germany, of ‘fixed’ feed-in tariffs that would give an even playing field to community based renewable projects  as well as multinational corporations.

The Government’s proposals mean that full access to incentives for renewable energy may be only available for very big power companies that can directly trade on electricity markets. ‘It would be very complex and difficult for companies like us and community renewable schemes in general  to sell power directly onto the market’, said Annette Heslop who is Director of the community wind company Energy4All.  The company has a dozen operational or planned projects based on community ownership. They have been working to establish projects under the current ‘Renewables Obligation’ (RO) programme. But the RO will be phased out after 2014 and replaced with a complex ‘contracts for difference’ (CfD) system that many critics argue has been chosen because this system makes it difficult to work out how much subsidies will be earned by nuclear power. Companies can only access the CfDs if they are able to trade directly on power markets, something which requires many millions of pounds start up capital, regular payment of large fees and a trading desk needing staff.

 Cooperatives UK  says that: ‘With the end of the Renewables Obligation, suppliers will have no incentive to purchase renewable electricity from independent generators’. There are fears that without an obligation, and without serious competition from independent generators, even the Government’s modest plans for renewable generation will not be met.

Following pressure from independent companies the Government have included a clause in the Energy Bill that would give the Government power to make electricity suppliers offer contracts to supply electricity, called ‘power purchase agreements’ (PPAs), to independents. However in practice, when long term PPAs are issued to independents,  the electricity suppliers often keep a large share  of the market value of the renewable generation. ‘The (long term) PPA is likely to generate a lot less income than would be gained on the short-term power markets’ says Annette Heslop of Energy4All. 

Critics argue that the proposed ‘contracts for difference’ (CfD) proposals will allow the Big Six to use the complexity to make extra profits from renewable energy compared to a ‘Fixed’ Feed in tariff system that would be fairer to independents. An independent report published by Cambridge University Professor David Newbery estimated that by 2020 the CfD system is likely to cost £70 million a year more for onshore windfarms alone compared to a ‘Fixed’ Feed in tariff system.
Friends of the Earth has just published my report giving the details of how a 'Fixed' Feed-in Tariff is a far better solution that the 'contracts for difference' proposals. It is called 'A Proven Solution - How to Grow Renewables with a Fixed Feed-in Tariff'. See

Come to the 'Feeding Renewables' Conference on January 18th!

I have been the prime mover in organising a Conference together with the support of the University of Birmingham (and also the collaboration of the Claverton Group of Energy Experts) to discuss what policies are necessary for an effective UK renewable energy programme. This is taking place at Lucas House at the University of Birmingham on Friday January 18th. As can be seen a number of leading speakers and experts on renewable energy are taking part. Although registration fees are payable for corporate delegates, free place are available for individuals upon application to me, at the email address See below for details of the Conference.

Feeding Renewable Policy
A Conference presented by The University of Birmingham and the Claverton Group of Energy Experts, Friday January 18th

This Conference will focus on policies needed to underpin a feed-in tariff system for funding renewable energy and also the sort of policy environment that is needed to ensure maximised expansion of renewable energy. The event coincides with the passage through Parliament of the Energy Bill implementing Electricity Market Reform (EMR) which is concerned with giving priority to a low-carbon electricity strategy. A mixture of expert speakers and participants from industry, government, environmental NGOs, and academia will discuss the details of the issues and options. Attendance fees will be £200 corporate, £50 individual and non-profit groups –free to speakers of course. Booking should be done through the online shop at;

The Conference will be held in the Edgbaston Room,

Lucas House, University of Birmingham, 48 Edgbaston Park Road, Birmingham, B15 2RA,

Note each individual speaker session (apart from the panel session) will comprise a talk for 20 minutes with 10 minutes for discussion
10.20 Tea and coffee
10.50 -11.00 Chair’s opening comments by
Dave Andrews from the Claverton Group. Dave has worked widely in the energy industry, including a recent stint at the European Commission, and he has been the biggest force behind the formation of the Claverton Group.
11.00 Holly Tomlinson, Regulation and Compliance Analyst for Ecotricity: ‘How the Energy Bill might affect green electricity suppliers and also renewable generators’. Ecotricity is a leading green electricity supplier and the only one that is principally concerned with installing renewable energy projects.
11.30 Dr David Toke: ‘What sort of Feed-in Tariff do we need for renewables?’ David Toke will discuss the different types of feed-in tariff and what might be an optimum solution for renewables. Dr Toke is the author of a report ‘Fixing Renewables’, a new report published by Friends of the Earth and Senior Lecturer in Energy Policy at the University of Birmingham
12.00 Rachel Cary, Policy Advisor, Green Alliance: ‘Implementing a feed-in tariff for energy efficiency’ Rachel has done a lot of the work on the Green Alliance’s proposal for an energy efficiency feed-in tariff. She leads the low carbon energy theme of the policy work of the Green Alliance. See
12.30 Nigel Cornwall, Managing Consultant and Director, Cornwall Energy: ‘How Electricity Market reform may affect independent renewable generators’. Nigel Cornwall is said to be one of the few people in the country who has a deep understanding of how the electricity system and, in particular, the Balancing and Settlement Code works.
1.10 Lunch
1.40- 2.10
Alan Whitehead M.P. Alan is Chair of the Parliamentary Renewable And Sustainable Energy Group (PRASEG) and is very much involved in debates around the Energy Bill. Amongst his Parliamentary activities he is a member of the Commons Select Committees on Energy and Climate Change and Environmental Audit
2.10-2.40 Martin Alder, ‘What policy do we need to maximise renewable energy deployment?’
Martin runs Optimum Energy Ltd. which specialises in renewable energy contracts, trading and renewable market economics. OEL is a partner with the Wind Prospect Group in the Wind Direct joint venture. He is Director of Energy UK, and Chairman of their Renewable Energy Committee. He represents Energy UK as the UK member of the Eurelectric workgroup for Renewables and Embedded Generation. He is a member of the DECC CfD expert group. ‘
David Hirst: What are smart grids? What sort of ‘smart grid’ and demand-responsive system do we need to have a proper functioning system based on renewables? David Hirst is and inventor who runs consultancy through his company RLTec and has been involved in patenting and promoting demand-side response and smart grid technology.
3.10-3.25 Tea and coffee
3.25- 3.55
Gaynor Hartnell, Chief Executive of the Renewable Energy Association (REA). Gaynor will talk about what renewables need in terms of policy support in order to achieve the EU target for renewable energy.
3.55-4.45 Panel Session. Each of the following panel members will give a 6 minute presentation followed by a question and answer session:
Graeme CooperGraeme is Policy Regulatory & Compliance Manager at Fred Olsen Renewables. Fred Olsen Renewables is an independent developer in Norway, UK, Ireland, and Canada
Doug ParrChief Scientist, Greenpeace UK. Doug has been involved in numerous publications, presentation, submissions, campaigns and media interventions promoting sustainable energy on behalf of Greenpeace
Dave TimmsEnergy and Climate Campaigner, Friends of the Earth. Dave Timms, previously Economics Campaigner for Friends of the Earth has led various FOE initiatives, including the 2007-2008 campaign for the small renewable energy feed-in tariff and campaigns for energy efficiency and anti-fuel poverty.
4.45 Chair’s closing comments
4.50 End of Conference

Wednesday, 5 December 2012

The Energy Bill is an Improvement

It has been a mildly pleasant surprise for me to read the details of the Energy Bill proposals that were finally published last week and to  realise that this effort represents, for the renewables lobby at least, a distinct improvement on the awfulness that preceded it. Three changes essentially contribute to this change. First, the income stream from the so-called Contract-for-Differences (CfD) 'feed-in tariff' will be guaranteed by the Government. Second, the Bill proposes reserve powers to be given to the Secretary of State to alter the licenses of electricity suppliers to make them give power purchase agreements (PPAs) to independent generators. Third, developers of renewable projects have the prospect of being able to take up CfDs or PPAs when they need them and can set up their projects.

Essentially what these changes will mean (if the details implementing them are sorted out properly) is that the programme going forward under the current Renewables Obligation (RO) will be continued under the CfD arrangements. The scheme will have Treasury-imposed caps on spending meaning, in effect, that with luck, just over 20 per cent of UK electricity will be supplied by electricity from renewable energy by 2020. That is not enough to meet the targets under the EU Renewable Directive of course, and certainly not the carbon reduction targets. So let us not get out the bunting. But it is working out not to be quite the nuclear-carve-up-fix that we suspected two years ago.

Ironically, because of the Treasury imposed cap (the so-called 'levy control framework'), this progress will be heavily reliant on implementing as much onshore wind as possible since this is cheaper than offshore wind. Alan Whitehead has indicated how the alleged largesse to be permitted by the Treasury does not translate into as much money for new schemes as might be imagined. See

Gremlins that lurk in previous versions of the Electricity Market Reform (EMR) proposals still threaten to burrow their way out of course. Will the 'Big Six' electricity suppliers be sufficiently well handled to ensure that they will be obliged to offer good PPAs for independent generators? One liklihood is that the Big Six will demand that large deductions from the CfD strike prices (to be announced by the Government next year) should be diverted to them to compensate them for 'balancing' renewable output from schemes developed by independent generators. In fact such payments are estimated by academic analysts to be of the order of £2-£4 per MWh depending on the time period studied (compared to a total likely strike price for onshore wind of around £80 per MWh). However, you can bet your life that the electricity suppliers will want a rather larger payment for being obliged to give PPAs to people they regard as competitors (!). Of course without being forced to give good PPAs to the independents the Big Six will propbably not strain themselves looking for projects since they will not have to compete with as many other companies. The independents should be paid the same as the Big Six for their renewable energy production. But will this happen in practice?

Expect a lot of arguments over this issue. Incidentally, the stories purveyed by anti-windfarm lobbyists that somehow variable renewable energy sources have hidden subsidies coming from somewhere else (where?) to pay for balancing (backing up) their production is nonsense. Wind operators have to pay for balancing costs out of their own income streams (which will come from the CfDs or the current RO income stream) - hence this discussion here.

Another particularly large gremlin is whether the 'strike prices' will actually be big enough to ensure that the money allocated (capped) in the Treasury's 'levy control framework' (LCF) will actually be spent. See my previous blog for some indicative figures on this.

Other gremlins are that despite the consultation about demand reduction, this (and demand side measures) may still get sidelined in favour of the rush to build gas fired power stations. Focus should be on making sure that  'capacity credits' earmarked for the gas fired power are equally available for those providing a) demand side measures (which shave peak demand) and b) upfront investments in energy efficiency (which saves energy). See some of Nick Eyre's work on investing 'upfront' costs in energy efficiency, being published soon in the journal 'Energy Policy'.

Oh yes, nuclear power........sinking fast.......See the following for example.....

The nuclear industry tend to blame lots of things for their cost malaise. Costs have increased more than expected. Who expected? Nuclear power has never been cheap. It is just that now the Government's 'competitive' framework shows that nuclear is too expensive to be funded under EMR. If you look at the costs of the last Sizewell B plant built in the UK the costs are much the same as are projected for French EPRs and also, incidentally, Hitachi's models. Sizewell B was funded by hidden consumer subsidies. The notion that the French PWR programme involved cost reduction through learning, and that the same would occur if only britain did the same is a myth. Cost increased during the French programme, not declined. See The whole thing of course, was based on the costs being underwritten by the consumer (as nuclear power always is when it gets built). In the absence of commercial competition (to which the renewable companies are exposed in France as elsewhere) the costs of nuclear power could be effectively hidden.

What has changed in recent time is not that nuclear costs have gone up a lot. It is that in the UK the terrible hype pushed out by the nuclear industry in recent years is just being exposed for what it is. Also, the expected blank cheque for nuclear that would help to hide the awkward truth about costs has not emerged.

So, I give a couple of cheers for Ed Davey on all of  this. The trouble is, since the expectations of people like me have been so low for such a long time, we should take this all in perspective!

Friday, 23 November 2012

More Government hot air on green energy spending

Today's announcement by the UK Government that it may allow several billion of pounds spending on green energy by 2020 is little more than hot air. There will be practically no new renewable energy projects unless the Government sets a good enough 'strike price', that is a high enough level of guranteed income per each unit of electricity generated. Independent renewable energy generators are likely to be frozen out of the market completely by the 'contract for difference' (CfD) arrangements they propose. The prospect of new nuclear power (which is not green anyway) seems increasingly unlikely.

First let us deal with the nuclear hot air that abounds. I must say it is puzzling that press releases issued by EDF agencies and John Hayes, the Minister of State for Energy, give the impression that a deal with EDF over Hinkley C is imminent. But this is only puzzling if you ignore the tendency of Government, for six years now, to announce the imminent arrival of nuclear power. It is becoming a bit like 'Waiting for Godot'. But on a rational level the propect looks exceedingly unlikely.

As discussed in earlier blogs, nuclear power would need a strike price of over £150 per MWh before Hinkley C even begins to look financeable (even ignoring the fact that the EPR is a design with no generating experience). At a 10 per cent internal rate of return (IRR) Hinkley C might just be financeable at a strike price of around £100 per MWh (the sort of level the Government is rumoured to set). But EDF are going to have to make the investment 'on' balance sheet - that is by holding the debts on their balance sheet- which means deferred dividends for shareholders. This is 'equity' financing from which shareholders will expect a much higher return - 15 per cent IRR being a minimum benchmark. Yet EDF could earn this level putting the money into lots of other projects. This also assumes that EDF has much money to invest, and even this is very doubtful. In fact EDF's share price has fallen considerably in recent months and continues to fall and its debt to earning ratio is rising to worrying levels. See

Indeed, just as EDF is reported to be seeking new business partners for its share in new nuclear investments, its partner in Hinkley C, Centrica, is now on the edge of formally ending its 20 per cent option in Hinkley C. Centrica says, in effect, it has much better things to do with its money. See

The only possibility for salvaging this position would seem to be some sort of Government underwriting or something to that effect. This appears to have been ruled out by the UK Government, and although, in theory, the French Government could do this, this raises the issue of why they would want to do it. AREVA the nuclear constructor (whose holding company is mostly owned by the French Government) underwrote an EPR being built in Finland. Yet AREVA's  financial position is, shall we say, challenged. See Given the difficult state of French public finances, effective handouts by the French state to foreign nuclear adventures by state companies look unlikely, and certainly very irrational. Francois Hollande has appeared to rule this out as well.

As if all of this was not bad enough news for nuclear prospects, the Government are also in trouble with in Brussels with its nuclear subsidy plans, with its request under state aid rules for the CfD nuclear arrangements being seriously questioned. See my earlier blog on this. See also Alan Whitehead's blog at

The prospects for renewable energy are a little better than this, although the prospects are hamstrung by the Government proposals, which as discussed in earlier blogs, will as they stand, effectively prevent independent generators from establishing projects. Given that one half of the Government does not want many more onshore windfarms anyway, one must question the Government's will to do much about this. Of course onshore windfarms can be funded with relatively modest subsidies from the consumer. They will need a 'strike price' of about £80 per MWh for a reasonably sized programme if this was funded by a proper feed-in tariff - a so-called 'Fixed' Feed-in tariff that allowed independents to take up power purchase contracts.

But the Government will have to offer more than £100 per MWh if much of the 'Round 3' offshore windfarm programme is to be built. Something in the range £120- £130 per MWh is likely to be required, depending on the success of the cost reduction programme. Solar pv also needs at least this sort of level for the large schemes, and at least £160 per MWh for smaller ones. The costs have come down a lot, but the orders need to keep coming in to maintain this progress. The only surviving Conservative minister with significant green credentials, Greg Barker, appeared to have won a concession for an energy efficiency feed-in tariff, but how much of a real option this will be also remains to be seen. Judging by Ed Davey's answers to Alan Whitehead at the DECC Select Committee on November 20th, that might not amount to very much. Thanks to David Lowry for pointing this out. See
The point about today's announcement about the Energy Bill is that it says absolutely nothing about these details of strike prices and contractual terms. These are not set to be announced until at least February next year, and there are even doubts about the level of transparency about such issues. Quoting large sums for the 'Levy Control framework' (LCF), is pretty meaningless. The LCF is, in any case, merely an artificial Treasury invention designed to give it formal power to control DECC spending commitments.

Unless the right strike prices are set, and unless the right contract terms are given, very little of this sum will actually get spent. Indeed, the advantage (to the Treasury) of announcing a reasonably large figure LCF figure for 2020 (although nothing for beyond that) is that discussion is focussed on the cost to the consumer, whereas in fact under the real Government plans, spending on renewables is likely to be quite thin by comparison - with consumer costs, in reality, being very small indeed. So we should brand this announcement for what it is - a lot of hot air. We still await news of some substance. Indeed we should demand some substance in the way of real feed-in tariffs for real green energy sources: renewable energy, energy efficiency and most certainly not nuclear power.

Wednesday, 14 November 2012

How gas manipulation scandal could spread to electricity with Electricity Market Reform

Media reports about price opacity in gas trading markets sets a context in which price manipulation can occur. The Government is about to introduce an Energy Bill implementing Electricity Market Reform which will make the precise amount of subsidies paid to nuclear and renewable energy sources very difficult to calculate and handover more control of the the renewables market to the major electricity players. In the process this reform will effectively prevent independent developers from setting up renewable energy projects.

Independent analysts have already warned that the complex and highly opaque system of 'contracts for differences feed-in tariffs' (CfD- FiTs), that is proposed by the Government, will create favourable conditions for major electricity companies to make money out of the complexity. Currently we have a relatively transparent method of calculating how much extra is paid for renewable energy, but this will disappear as the funding for 'low carbon' energy sources is pooled together. What a coincidence it is that we will find it difficult to calculate exactly how much extra (on top of market rates) is paid for nuclear power! Proposals for a much simpler and cheaper 'Fixed FiT' system (used in Germany) have been sidelined. This system would be much more transparent and would also give independent developers good chances of establishing projects.

Under the Government's EMR proposals, there will be no publicly accountable monitoring of subsidies paid to low carbon generators (the government insists they are not subsidies anyway) because the system of paying 'top-ups' will be administered through ELEXON, a private subsidiary of the national Grid. There is no arrangement, at least so far as I can see in the currently constituted Bill, for there to be any publicly available information on subsidy levels or 'top ups'. Payments to individual companies for particular projects will be labelled as 'commercially confidential'. The Government may establish a body to provide backing to the contracts (to provide guarantees of payments) but this does not mean that there would be any monitoring of payments actually made.

Currently, under the Renewables Obligation, OFGEM administers issues of renewable obligation certificates (ROCs), and it is possible to get hold of details of ROCs issued to particular generators from OFGEM. This information is relatively easy to understand and turn into estimates of subsidies paid. However OFGEM is being kept out of direct monitoring of payments made under the CfD arrangements, so this avenue will not be open.

It may be possible to make generalised informed guesses about what levels of support particular technologies are receiving through CfDs by subtracting estimates of power prices from 'strike prices' for the technologies (inasmuch as even these are made public - not certain in the case of EDF and Hinkley C yet), but these will be only informed guesses. Future pressure may require the National Grid to publish details of their own estimates of the power price fluctuations (necessary to make decisions about top-up payments), but even if this happens a) this information will require the help of experts to generate estimates of 'top-ups' paid, and b) even then there will be a level of uncertainty because the power prices estimated by the national Grid will not necessarily be the same as the money that is actually received by the generators. Fears have been expressed that the major electricity companies can manage the complexity to generate extra profits for themselves out of the system.

Because CfDs are only available to companies that trade on electricity markets (which is a very expensive, capital intensive operation usually only open to electricity suppliers and very large companies) this effectively excludes even quite large independent companies from developing renewable projects. It is ironic that at a time of criticism of the 'Big Six' the EMR firmly entrenches control of the renewables market in their favour. A report I have written about this is being published by Friends of the Earth.

Learn more about this controversy. Hear and discuss how propects for renewable energy and independent developers could be improved with the right amendments made under the forthcoming Government Energy Bill. Do all of this at a Conference on January 18th at the University of Birmingham. Details can of the Conference can be found at:

Monday, 5 November 2012

Superstorm Sandy deals another blow to nuclear power 'reliability'

US news wires are humming with stories about the biggest nuclear shutdown since Fukushima as over 32 GWe of nuclear power was shut down during 'Superstorm Sandy'. This is another blow to what is the myth of nuclear power as a reliable energy source. As reported in an earlier blog last year, when storms were reported as leading to a wind turbine catching fire, little attention was paid to the much more serious storm-related shutdown of Hunterston B in Scotland. Indeed, British nuclear power stations are prone to unplanned outages which plunge thousands of people into darkness (for example Sizewell B in May 2008). It is ironic that wind power is cast as intermittent when in fact its output is predictable on the basis of increasingly sophisticated advance weather forecasts. But nuclear shutdowns occur instantaeneously with no warning causing massive problems for the electricity system. As posted on the earlier blog about the as-yet-far from completed Hitachi 'deal', Hitachis' preferred reactor type (Advanced Boiling Water Rectors) have a poor record for reliability, with half of them effectively being on line for less than half the time. We do not know about EDF's planned EPR power stations of course since none have actualy started operating yet.

So why are the Government planning to pay nuclear power a lot more subsidies than onshore wind under Electricity Market Reform? It certainly has nothing to do with reliability! It does not have anything to do with the Coalition agreement, either. Did the Lib Dems really agree to give nuclear power around £100 per MWh over 25 year contracts in an electricity market reform strike whilst onshore wind gets only £80 per MWh for 15 years? Isn't it strange that the nuclear industry, the Government and the engineering establishment have been telling us for so long how much cheaper that nuclear power is compared to renewables - all they need is the right 'framework' and it will be 'cheaper' for the consumer! Well it won't, and we should ring-fence the money for renewables, not nuclear!

Learn about policy options for implementing renewable energy by making amendments under the forthcoming Government Energy Bill at a Conference on January 18th at the University of Birmingham:

See the Superstorm Sandy report below:

Superstorm Sandy behind largest nuclear power outage since Fukushima

November 2, 2012
Superstorm Sandy, which tore through the Northeast United States causing property damage and even numerous deaths, led to three nuclear reactors shutting down and several other plants to reduce operations. Reuters reported the storm caused 32,045 megawatts in nuclear power outages on October 30 - the highest amount since May 2011 when the Fukushima disaster occurred in Japan.
Three reactors experienced shutdowns during the storm. They were Indian Point 3, in Buchanan, N.Y.; Salem Unit 1, in Hancocks Bridge, N.J.; and Nine Mile Point 1, in Scriba, N.Y. Operators reported all safety systems responded as designed.
Three additional nuclear plants in Connecticut, Vermont and Pennsylvania also chose to reduce power due to the storm, Reuters reported. They resumed full power by October 31.
Although Nuclear power plants are built to withstand hurricanes and other natural disasters, safety protocol requires plants to shut down operations when faced with potentially extreme conditions. In the case of Sandy, operators took precautions against hurricane-force winds, power loss and nearby water levels exceeding flood limits.
Thursday, the U.S. Nuclear Regulatory Commission said it was beginning to return to normal inspection coverage for nuclear power plants in the Northeast.  Heightened coverage will continue at Oyster Creek, a plant in Lacey Township, N.J., still in an “Alert” status due to high water levels in its water intake structure.

Friday, 2 November 2012

Are Tories anti 'bourgeois left' or just anti-green?

John Hayes comment that he does not take any notice of 'bourgeois left wing academics' (surely not referring to people like me!) may be a superficial, amusing quip, but it obscures a deeper truth - that the Conservative Party has effectively abandoned the green agenda. Although David Cameron appeared to contain Hayes' anti windfarm comments Cameron in fact said that the issue of capping windfarm development would be reviewed when the windfarm deployment targets are met. In other words a windfarm deployment cap is still very firmly on the Tory agenda. Despite Greg Barker's attempts at greenwash pr, he has presided over a massive cut in support for energy efficiency compared to the programme established by Labour.

When you put that together with the fact that the Conservatives want to pay nuclear power developers a lot more than onshore wind developers (indeed give them a blank cheque if John Hayes could get away with it) you can see that there is very clear blue water now between the Conservatives and the other main parties on green energy. With the exception, of course, of the very anti-windfarm UKIP to which the Conservatives feel they are now heavily beholden!

Yes, Labour led the charge on a supposed nuclear rennaisance from 2006 onwards, but the point is that they never actually did anything that would be crucial to bringing it about. Now I don't want to excuse their weakness in pandering to the nuclear lobby for one minute, but their policy of not offering significant extra payments to new nuclear power did ensure that the superfically pro-nuclear policy remained as just hot air. Yet now the Conservatives, having bullied the Liberal Democrats into accepting a plan to subsidise nuclear power (in all but name), threaten to hand the nuclear industry large quantities of consumers' energy bills to fund nuclear power stations instead of renewables.

The Treasury (led by George Osborne who wants to keep the anti-windfarm lobby from snapping at his heels) are insisting on a strict cap on spending on 'low carbon' sources - called the 'levy control framework'. So any money that nuclear gets will be deducted from the amount available for renewable energy. As argued in the last blog paying nuclear around £100 per MWh is uncompetitive on economic grounds compared to not only onshore wind but also offshore wind and solar pv. Remember even if the headline 'strike prices' are much the same for solar, offshore wind and nuclear, the renewables end up being much cheaper since the nuclear constructors will be given much longer contracts, 25-30 years, compared to renewables which are slated to be given 15 year contracts. So nuclear, at a 30 year contract will cost the electricity consumer TWICE as much as for a renewable source at the same strike price on a 15 year contract. And then there are the decommissioning and nuclear waste charges being funded by the Treasury to be taken into account......

Of course onshore wind, under a feed-in tariff regime (as opposed to the more uncertain Renewables Obligation) will lead to windfarm being given only around £80 per MWh for 15 year contracts under plans being considered. What sort of competition is that when nuclear power gets around £100 a MWh for 25-30 year contracts? In fact the public would much more prefer to pay onshore wind £100 per MWh (and we'd get a lot more windfarms at the higher price) than pay near that level to nuclear power!

But then the Tories are out of step with public opinion. If they listened to public opinion then nuclear would get less of a subsidy than onshore wind power, not more! (preferably none of course). As I have said, the Tories have lost possession of any significant part of the green agenda to Labour, Lib Dems, and of course the Green Party. Note that the Green Party is the only one that is unambiguously pro-wind and solar and anti-nuclear.

And yet the Lib Dems have to get Ed Davey to work harder to retrieve their claim to have a handle on the green agenda themselves. An important start in that process would be to make sure that nuclear do not get offered a higher 'strike price' than onshore wind!

And, a last comment on this post, nuclear power is hardly a 'working class' fuel compared to onshore wind power since the poor people are going to have to pay rather higher bills to support nuclear than onshore wind - according to government plans! So who has 'bourgeois' interests in mind? John Hayes, I am sure.

Thursday, 1 November 2012

Government nuclear subsidy plan will breach EU state aid rules

The Government, with their proposals for a 'levy control framework' cap on spending on 'low carbon' electricity sources, are heading for a breach of EU state aid rules. This is because the Treasury are likely to reserve a specific fund to pay subsidies to nuclear power rather than make it available to 'low carbon' sources in general. Otherwise they cannot possibly justify paying more money to nuclear power developers than will be paid to onshore wind developers.

The Treasury appear to be claiming that it is handing out subsidies, through the 'contract for difference' (CfD) framework being set up by the forthcoming Energy Bill, on a 'competitive' basis that is available to all low carbon sources. But if that is the case, then why are the Government proposing to give a higher strike price to nuclear power than onshore wind? Onshore wind is tipped to get no more than around £80 per MWh. The strike price being mooted in Government circles for nuclear power (close to £100 per MWh) is the same sort of level as the government is proposing to pay for large scale solar pv and offshore wind. Moreover nuclear power developers will get this stream of money for a much longer period (25 or 30 years) than renewable developers that, it seems, will be limited to 15 year contracts. So there will be no consumer savings if nuclear power is substituted for renewables. Quite the contrary. In fact the consumer will be out of pocket if nuclear is funded rather than renewables.

The nuclear subsidy scheme has been sold to consumers on the basis that it is a cheaper way of achieving low  carbon objectives compared to renewable energy. Yet that is palpably not the case,  if, as seems now very likely, nuclear power is given more subsidies than onshore wind. In addition, public opinion surveys report renewable energy as being much more popular than nuclear power. So, with the proposed nuclear subsidy scheme, the consumer will simultaneously get both short-changed and given an energy source it least prefers.

The only way that the Government can, and it seems will, avoid this logic (of giving nuclear no more subsidies than are given to onshore wind) is by 'ring fencing' a pot of money under the 'levy control framework' to spend on nuclear. Then it will be privileging spending on nuclear rather than renewables. Yet, if it does this then it is also going to be in breach of its own pitch to the European Union, and also what it has told the British public, that the 'low carbon subsidies' are equally available to all energy sources. They clearly are not going to be available to all low carbon sources. A specific chunk is being reserved to pay nuclear power. A bundle of money has, in effect, been labelled 'to be given to EDF'. EU rules allow an exemption to its 'no state aid' rules when it comes to renewable energy. There is certainly no exemption that allows giving state handouts that are, in effect specifically labelled for EDF!

Tuesday, 30 October 2012

Nuclear strike price to be higher than wind? - While wind development is 'capped'.

The Government seems poised to announce a policy that will see nuclear power paid more than onshore wind. In the process onshore wind development will be capped. Consumers will be big time losers as the Government prepars to give nuclear power a higher 'strike price' per MWh for electricity generated compared to the strike price to be paid to onshore wind. They will end up paying around double the subsidy for a given amount of onshore wind compared to nuclear power. It looks like a pretty clear way of signalling that nuclear power is to be given a big advantage over wind power.

There is a lot of speculation about what the Government will set as the 'strike price' for nuclear power, not to mention whether it will be high enough to bring forward nuclear projects without a government 'blank cheque' (underwriting). However, one paradox seems to be going unnoticed. All the bets on the figure for nuclear seem to be higher than anything onshore wind is likely to receive.

Various people have mentioned £100 per MWh as the likely strike price for nuclear power. It is being described as a cap!(?) So what sort of a 'cap' is this if nuclear gets paid 25 per cent more than wind for the same output? Under a feed-in-tariff regime the figure paid to onshore wind is likely to be no higher than around £80 per MWh. Is the Government really going to make it so plain that onshore wind is cheaper than nuclear power? Even £100 per MWh is unlikely to be enough to lead to nuclear power plant being built - although we will see quite a few windfarms at £80 per MWh.

The Government seem poised to make the contrast even starker by 'capping' onshore wind development in some sort of deal with George Osborne - to placate anti-windfarm Tories. So suggests Business Green

Consumers will, with nuclear compared to onshore wind, have to pay an excess of £50 per MWh (over and above a wholesale electricity price of £50 per MWh) compared to only £30 with onshore wind - and to cap that as well nuclear power will have a much longer contract period - 25-30 years compared to maybe only 15 years for onshore wind. Altogether consumers will end up paying around 100 per cent extra to subsidise nuclear power compared to getting the same amount of energy from wind power.

Besides making consumers pay bigtime to satisfy Tory anti-windfarm MPs, this smacks of giant political bias in favour of nuclear rather than wind power. All overseen by a Liberal Democrat Energy Secretary! If onshore wind was paid £100 per MWh we could have a lot more onshore windfarms - but the Government clearly prefers to have nuclear if it can. How can the Government justify such a policy? Certainly not according to public opinion which sees wind as being preferable to nuclear power. But Government policy will have this exactly the other way around - with a twist of the wind 'capping' knife thrown in.

And we have claims that Hitachi's reactors are 'reliable' - even though half of the Advanced Boiling Water reactors in operation work for less than half the time! At least you can predict windspeeds in advance with some accuracy, which is more than you can say for nuclear power stations which suddenly go offline.

Learn about policy options for implementing renewable energy by making amendments under the forthcoming Government Energy Bill at a Conference on January 18th at the University of Birmingham:

See my letter in the Guardian which also puts forward these sentiments at:

Also, see letter published in the Daily Telegraph signed by me and a number of leading academics (and Jonathan Porritt):

Hitachi bid - more fantasy nuclear power?

The latest supposed breakthrough for the UK nuclear new build programme came with the announcement  that the Japanese nuclear constructors Hitachi had won a contest (with one other Japanese company, Toshiba, according to the FT) to build reactors abandoned by the former 'Horizon' consortium. But, as usual in the nuclear garden, all may very well be not quite what it seems from the press releases.

A new nuclear myth is busily being constructed by commentators that the only reason we have a blip in the nuclear power programme is that the German Government got the wobblies about nuclear power forcing E.ON and RWE out of the picture (nothing to do with nuclear power being far too expensive for the incentives likely to be offered, of course). But now others have rushed in to fill the gap. This new reactor programme, based on the Advanced Boiling Water Reactor (ABWR) is going to be cheap, quick to build and is all but a done deal.

Now pause for a moment, since, over the years, we have been subject to so much fantasy from the nuclear industry about their plans, costs etc, why should we suddenly believe everything stated in their press releases now?

The Advanced Boiling Water design has, let us say, a chequered history in terms of reliability. None of the four operational plants can so far, according to the World Nuclear Association (WNA) database (accessed 30/10/2012), boast a capacity factor of more than 73 per cent, and two of them have capacity factors less than 45 per cent (see WNA links below) - some wind power plant have capacity factors around this level, and they are supposed to be that way! A capacity factor is the amount a plant generates compared to the amount that would be generated if it was operating at full power all of the time. Nuclear power plans are costed on the basis that they will achieve capacity factors of 80-90 per cent. With a capacity factor of 45 per cent (plausible outcome based on experience) any nuclear power project comes out needing twice the power price to be an economic proposition!

 These ABWRs do not seem to be very cheap to build either. Currently three are under construction (according to 'wikipedia'); two in Japan, and one in China. The plant being built in China has been under construction since 1997, admittedly delayed by political controversy at times, but still an eye-wateringly long period. The reactor cost seems high even though interest charges will not, I guess, have been factored in, which will be a real killer for any nuclear project that has to be financed through the UK's proposed low carbon mechanism. So far no ABWR projects are being built in the west, with the reactor for one project initially planned in South Texas being cancelled last year. The costs had spiralled to a reported $14 billion for 1358 MW (wikipedia), a cost that compares broadly speaking, MW for MW, with the costs quoted for building Hinkley C.

It is strange. I have not seen any of this reality about high reported construction costs, experience of delay, and uninspiring capacity factors appear in the press coverage so far. But these facts, as opposed to the press release fantasy, mean that discussions of what 'strike' price the UK Government might offer to achieve standard commercial rates of return seem irrelevant. The figures just go off the chart. Only government underwriting with a very blank cheque seems likely to ensure that these projects go ahead........and somehow getting the project passed EU state-aid rules, which is another perhaps not-so-minor issue.

Again the question arises, why not instead invest in renewables and energy efficviency which have much more certain outcomes and cheaper costs? See previous blogs on this one.

 Hitachi/GE are busy announcing deals with engineering companies for various things to do with the project and one receives the impression from the press handouts that the potential 6.6 GW worth of developments at Wylfa and Oldbury are almost built subject to a bit of paper chasing about approval of reactor designs.

But one teensy weensy little detail remains to be settled about the promised nuclear power stations. Who will pay for them? Hitachi? Well, Hitachi are nuclear constructors - they contract to build plant for  other people. They did agree to take out a 20 per cent equity investment in a nuclear power plant in Lithuania (which the Lithuanians have just rejected in a referendum), but it seems unlikely they would take on 100 per cent of the equity never mind 100 per cent of the financing in total. Indeed, because the bulk of the Lithuanian proposal was financed by a state-guaranteed loan, Hitachi's contribution to the projected cost in fact comes out as rather less than 10 per cent. And according to the UK Government there will be no underwriting of construction costs, unless you catch energy ministers in a wavering moment (see previous blog). So the banks would not lend any money. Hitachi would have exactly the same problem as is faced by EDF or, for that matter, any other large company. They would have to finance the lot off their balance sheets.Their shareholders would face big risks and expect big returns, which pushes the required price to be paid for the nuclear electricity higher still.

Hitachi themselves are not in a position to derive income from the electricity generation - they need contracts with big electricity suppliers. This implies investment from electricity suppliers. So who are these other people who will invest in the power plant? - by 'people' I mean electricity companies with a big stake in UK electricity markets. In China and Japan, of course, the power plant are built for electricity utilities who are are monopoly retailers. This means that they can pass on any costs to their consumers. This cannot, as explained earlier, be done under the UK's liberalised electricity market arrangements -even if Hitachi did interest electricity majors to invest in their project. And the UK Government are unlikely, short of the blank cheque option, to offer a high enough strike price to make nuclear power stations commercially viable under the 'low carbon mechanism' projected as part of the Government's Electricity Market Reform package (coming soon to Parliament, on November 19th I am told).

One might ask why Hitachi/GE are buying up the option. The Financial Times suggests that the loss of business in Japan is impelling the company to take up 'risky' options.

It does sound like desperation. The FT quotes an international lawyer specialising in nuclear power as commenting that 'What they're really buying here is an option to build reactors, without all the fundamentals in place'. The fundamentals seem unlikely to be in place to deliver Hitachi or anybody else the sort of returns that can give a commercial justification for nuclear power in the UK. So the project looks unlikely.

Nevertheless the UK Government and nuclear proponents are keen to collaborate in all of this to keep up the myth that nuclear-is-cheap-reliable-and-coming-soon, so the fantasy continues........Everyone is a winner, except perhaps the Lithuanians who could be left with a misleading impression about what is really happening in the UK.

Learn about policy options for implementing renewable energy by making amendments under the forthcoming Government Energy Bill at a Conference on January 18th at the University of Birmingham:

You can study some links here for details about the performance and background of Advanced Boiling Water reactors: 44.6 72.8  68.2      44

world nuclear database

For details of the Lithuanian deal involving Hitachi, see

Sunday, 7 October 2012

Secrecy and lies likely as Government considers 'blank cheque' for nuclear

The Government, via Energy Minister John Hayes, is considering a major u-turn in nuclear power policy as it considers giving a blank cheque to nuclear constructors. This is what is involved in 'underwriting' the risks faced by nuclear constructors, and it will almost inevitably lead to secrecy and lies about what consumers will pay for building Hinkley C. It means that the Government will guarantee to pay for overruns in construction costs incurred by EDF in building Hinkley C.  Such options were specifically ruled out, not only by the Conservative Party immediately prior to the 2010 General Election, but also by Ed Davey (Secretary of State at DECC) himself in May. 

A commitment to 'underwrite' nuclear power costs would almost inevitably mean either the Government keeping secret the details of how much it might cost the consumer to pay for pay for Hinkley C, or providing misleading statements that would amount to a lie. In the process nuclear power would be given immensely better incentives than renewable energy projects, who would receive no underwriting of costs and whose (transparent) payments would be wrongly held up as costing more than 'cheap' nuclear.  I will explain all of this. First the details of the u-turn. 

The Daily Telegraph reports, on October 6th, that:  'The Government is considering ways of underwriting risk in the construction of new UK nuclear plants, the energy minister John Hayes has said.' See 

Underwriting nuclear risks would be in direct contradiction to what the Conservative Party said in their pre-election energy policy statement in March 2010, called 'Rebuilding Security – Conservative Energy Policy in an Uncertain World'. The Conservatives said:  we agree with the nuclear industry that taxpayer and consumer subsidies should not and will not be provided – in particular there must be no public underwriting of construction cost overruns’. Note the statement: 'in particular there must be no public underwriting of construction cost overruns'. Whatever the interpretation off the term 'subsidy', there is not much wriggle-room there! Mr Hayes,  which part of the phrase 'there will be no public underwriting of construction cost overruns' don't you understand? See the page 18 of the pdf document at: - if this (now) embarrassing document is still on the web by the time you get to it!

But it gets worse for the Government's record. Ed Davey, in a moment of clarity, declared on May 22nd this year, just as the Energy Bill was published, that: "There will be no blank cheque for nuclear - unless they are price competitive, nuclear projects will not go ahead." See I was on BBC Radio 4 that morning and  commented that there would be no new nuclear built unless there was a blank cheque issued for them, and then Ed says, 'no blank cheque' - I thought well, 'no nuclear then'. But what a silly fool I am for believing what the Secretary of State says - or at least not understanding that at the end of the day he would have to do as he is told by Sir William McAlpine, Berhard Ingham and their 'Sir Humphrey' civil service friends in Whitehall.

Of course if nuclear costs are underwritten they are hardly 'competitive' since there is no competition! Jeremy Leggett's Solar Century will not be be told by the Government that however much their projects will cost, the electricity consumers will foot the bill. It is as if the nuclear developers are acting like a nationalised industry, except that they (EDF and whoever else they attract into this honeypot) get to take home the profits at the end of it. If you thought the way railway franchises are issued is bad, take a look at the concept of 'underwriting' nuclear costs. At least the Government do not guarantee to pay the costs of building the trains! Of course the droves of solar power companies who are going bust are not getting their costs underwritten. As things stand at the moment, independent wind power developers will not even be able to get decent power purchase contracts, and they definitely will not get their costs underwritten! Hard luck Fred Olsen Renewables, Ecotricity, Renewable Energy Systems, and so on. 

So how would a policy of 'underwriting' nuclear construction costs fit in with with the Energy Bill? Well, it would go something like this. The Government would announce that a special 'investment' instrument would be issued to EDF for Hinkley C, the terms of which are 'commercially confidential'. After some searching questions the Government would most likely come out with some statement that the (commercially confidential) estimates suggest a nuclear 'strike price' of £70 per MWh, conveniently, just under what the Government will pay to onshore windfarms organised by the major electricity suppliers. In fact though it will turn out, years later that, well shucks, you would never have guessed, the estimates were underestimates and that the consumer will just have to shell out over £100 per MWh. 

Of course the consumers should count themselves lucky here because if EDF did not have their costs underwritten, and had a level financial playing field with renewables, then the cost would be more like the £165 per MWh, of which we have heard previous mention. That is because they would have to raise money off the markets, just like renewable energy developers. Except that the renewable projects would cost the consumer a lot less than the nuclear projects in £s per MWh. It is called competition, but this means that nuclear will lose out to renewables, and that cannot possibly be allowed. Instead we will have that euphemism 'underwriting' which stands for 'blank cheque'.

But, to get back to the point, when the Government 'underwrites' the cost of nuclear power plant,  the Government would end up implying a price to be paid by electricity consumers  that would be much lower than the electricity consumers ultimately ended up paying.  It is called lying. You think I'm the one fibbing? Well, just look at what has happened in the past....Magnox, Advanced Gas Cooled reactors, Sizewell B.........Lies, lies, lies...........The beauty of it is, by the time the power stations actually get built, the ministers involved are long gone.

But do not worry, the Renewable Energy Foundation (the ones who do not like windfarms) will still be able to criticise the financing of windfarms because the information about this is transparent and truthful, and this is their democratic right. This is a stark contrast with nuclear power of course. Because if the Government told the truth about nuclear power, consumers would never, ever, allow it to be built in the first place.

Monday, 17 September 2012

British nuclear supporters issue surrender notice

Supporters of British nuclear power have effectively surrendered in their efforts to secure a new programme of building nuclear power stations. Sir William McAlpine, a member of the McAlpine family which founded the major construction company of that name, has written to the British Chancellor, George Osborne, to ask that Government proposals to subsidise nuclear power should, in effect, be abandoned. He has written as the Chair of the 'Supporters of Nuclear Energy' (SONE) group, which provides much of the lobbying inspiration for nuclear power in the UK. This is also a very significant move since the McAlpine group are among the companies who are most likely to benefit from contracts given to build new nuclear power stations.

The Daily Telegraph says that:
'Sir Williams tells the Chancellor that neither the consumer nor businesses “should have to pay through the nose” for a subsidy system “which seems to have very little justification.” '

This is in reference to what is reported to be EDF's demands for a high 'strike price' that would be well above £100 per MWh (as reported previously in this blog). It seems SONE are advocating direct financing the construction of the nuclear power stations by Government. Direct financial support from Government, involving also, as this logically means, the 'underwriting of construction costs' is not going to happen outside of re-nationalisation of at least a part of the electricity industry. This is very, very, unlikely. Hence nuclear industry supporters are, in effect, running up the white flag in the struggle to get a new fleet of nuclear power stations built. This looks like an attempt to organise a dignified withdrawal in the face of overwhelming odds. However, really, the effect is surrender under cover of an attempt to save face.

The fact is that the Government set up a price competition between nuclear, various forms of renewable energy, and carbon capture and storage,  for who could offer the lower strike price at which each unit of 'low carbon' electricity production would be sold. Nuclear power has lost this battle, as discussed in earlier blogs. Its supporters have reverted to advocating the only historical precedent for building nuclear power stations - namely that somebody (other than private investors) has to guarantee to pay the construction costs. That is why SONE wants their power stations to be directly funded by the Government. But this is politically, and in very practical business terms, impossible in the UK and the EU's increasingly liberalised energy markets.

It would certainly look bizarre if the Government's plans to reduce subsidies for wind and solar pv were implemented at the same time as a much higher strike price for nuclear power - very bizarre in view of the fact that nuclear power is much, much, less popular as reported in opinion polls compared to the renewable fuels. Government plans to reduce subsidies for both onshore wind and solar pv farms by 2013-2015 to around £95 per MWh  have already been announced, with the likelihood that under the Government's plans for its own version of feed-in tariffs onshore wind will not be given more than around £80 per MWh from 2017. Even offshore wind's costs for 15-20 year contracts have, according to Government aspirations, to be brought down to £100 per MWh by 2020. So what political hope is there for EDF to be given a lot more than £100 per MWh for a contract of 25 or 30 or even 50 years in length? None whatsoever!

It is not surprising that SONE have now recognised political reality.

However, the effective demise of the British nuclear construction programme will probably not be recognised by the Government itself in its public relations output. This is partly because it wants to help keep a few consultants in their jobs for a bit longer. However, this refusal to admit the collapse of the nuclear programme  is also because the Government would have to admit that either it has to massively increase investment in renewable energy and energy efficiency or abandon any remaining chance of getting at all close to the UK's carbon reduction plan.

For its part, EDF has something of an interest in continuing to maintain that its nuclear plans are still viable. One interest is that if there is little chance of new nuclear power stations, then this questions the Government's commitments to a floor price for carbon. In fact this floor price does very little to encourage new low carbon capacity (because there is no guarantee that the price will continue for long enough) but it does give a lot of money to EDF's subsidiary, British Energy, who own Britain's old nuclear power stations - and the Government has announced that these power stations are likely to have their operational lives extended. The other gainer from the carbon floor price is the Government itself. Perversely, the more gas is used to generate electricity, and the less renewable energy is generated, then the more the Treasury receives in tax revenue under the Government's carbon floor price scheme. The Treasury, of course, is these days enthusiastically promoting natural gas power stations to the extent that it is giving large tax breaks to oil and gas companies to encourage more rapid depletion of British gasfields and is backing proposals to give 'capacity credit' subsidies to gas power station operators in the Government's Energy Bill.

Oh yes, the Government's Energy Bill.....this is coming to Parliament soon. Watch this space.

See the press report on :

Monday, 13 August 2012

EDF implies cost of Hinkley C could be higher than £100 per MWh

It was good news for offshore wind as EDF, in an article in the Daily Telegraph, 'suggested that....costs for Hinkley Point..... could be higher' than £100 per MWh. This was in an article in which the CEO of EDF said that they would be asking for less than £140 per MWh for the power plant at Hinkley C.

See the paragraph : 'Mr de Rivaz suggested the "most credible" cost estimates were those by the Committee on Climate Change (CCC), which last year estimated new nuclear costs at up to £100/MWh. But an EDF Energy spokesman stressed that things had "moved on" since the CCC's report, and suggested costs for Hinkley Point, as the first plant of its kind in the UK, could be higher.':

The reason that this is good news for offshore wind is that whatever the Government did decide to offer as a strike price for nuclear power plants would also have to be offered to offshore wind, if the policy was to stand up politically. The Government has set an aspiration of bringing offshore wind down to a cost of £100 per MWh, so if Hinkley C were to get the over £100 MWh that EDF wants, then offshore wind would have to get at least the same - and remember that EDF is likely to wants a longer contract length than offshore wind developers are likely to get. So £100 per MWh for a 15 year contract for offshore wind is really worth a fair bit less than £100 per MWh for a nuclear contract of 25-30 years. And of course onshore wind is likely to get around £80 per MWh for 15 years, or less if the anti-windfarm Tories get their way.

Can the Government really offer nuclear power more than £100 per MWh?....I doubt would certainly be highly interesting (for offshore wind in particular) if they did! Of course if I was EDF I might also, for public relations reasons, deny that the company could ask for more than £140 per MWh, because the Government cannot really offer them that much anyway.

Tuesday, 24 July 2012

Will Chinese companies invest in British nuclear power?

The papers are now almost swimming with stories that leading Chinese nuclear companies are about to step in and buy up concessions for building nuclear power plant abandoned by the German companies RWE and E.ON in Anglesey and Gloucestershire. See for example
This makes interesting coverage of course, something bound to distract attention from the near-impossibility of funding new nuclear power under British liberalised electricity markets - without, that is, somebody agreeing to write a blank cheque to the nuclear developers. Attention thus shifts from the incredible stories of nuclear needing over £160 per MWh for 25-30 years to debates about the ethics and security issues surrounding Chinese control of our forthcoming nuclear power stations.

Chinese companies (Russian, or whoever) may or may not buy up concessions for nuclear sites, but they are no more likely than E.ON, RWE, GDF Suez or EDF to actually build on them. As has been pointed out elsewhere financial markets are global (they have been for a long time actually) and the rate of return required by Chinese investors will be no less than anybody else. Chinese citizens and electricity consumers have even less of an incentive to give very very large subsidies to build nuclear power stations in Britain than, well, British people. The Chinese are busy trying to raise money for their own nuclear power programme, see

However, in China they do not have liberalised electricity markets. There the state, the electricity consumer, or a mixture of the two, will be guaranteed to pick up the tab for power station construction. Not so in the UK.
In the UK any company is going to have to take a lot of debts onto its balance sheets to pay for new nuclear power stations, with no guarantee of paying back these debts. Banks, including Chinese ones are only going to risk their money on nuclear power in a conventional 'project financing'  operation where the debts are kept of company balance sheets. But the banks will not touch such an arrangements. Developers will have to raise the money to do this, and it will linger mightily on their balance sheets traising the alram of the credit rating agencies. Of course the Chinese can riase money through bond issues - so can EDF, relatively cheaply. That is not the problem. The problem is that the resulting debts will be borne by the equity investors, the shareholders.

So any developing company is going to have to invest equity and that means deferring profits and dividends in order to repay the debts with interest. In the case of nuclear power stations this means building up very large debts to build the plant without any prospects of getting any money back for several years. The costs and build-times for the plants are highly uncertain. Rates of return to equity have to be high to avoid profits, dividends and share prices from tumbling.

So if you mix togather the spiralling construction costs of nuclear power plant and the high rates of return to equity, you get the incredibly high prices that British electricity consumers would have to pay for new nuclear power. Offshore wind is a breeze by comparison.

Will the Chinese actually build any nuclear power plant in the UK? No, they won't. Essentially this is another of a contimuing (and for the forseeable future) never-ending stream of hopeful stories pushed out by a nuclear industry and struggling nuclear-dominated Department of Energy and Climate Change designed to persuade us all that nuclear power is till a going concern. It is not. Not without givernment agreeing to underwrite the construction costs. But this is also very unlikely.

Some rumours suggest that Treasury guaranteed money will come from the 'infrastructure funds'. But the design of the scheme, to put it briefly, will not help nuclear power. But the nuclear industry are ever hopeful. 'Nuclear before homes' is what they cry. But the most anybody is likely to get is around 10 per cent of the funds guaranteed. Nuclear needs more like 100 per cent! Ed Davey has said that nuclear will not get a blank cheque. and the Tories have specifically promised not to underwrite nuclear construction costs in an energy policy document issued just before the 2010 General Election. In an answer to a Parliamentary Question ministers have said they have not discussed loan guarantees with EDF. See

The latest news from unidentified spokespersons (probably within DECC), according to the Financial Times of July 23rd, is that the Government will set a 'strike price' of £100 per MWh for nuclear power.It could hardly set it any higher considering that this is the figure the Treasury wants offshore wind power to come down to, and it is a lot more than offshore windfarms are going to be paid.

Yet even this is a soft landing for a policy retreat. The Government may say that £100 per MWh is profitable for nuclear power, but it is unlikely to lead to any being built. Lots of rumours, hopeful stories, yes, because the British Government (and the nuclear industry) does not want to admit that nuclear power is a dead duck - this would threaten lots of nuclear interests who want money from the Government and hopeful punts from Chinese and other interests to keep them in some sort of buisness. Indeed, without the appearance of the possibility of nuclear power the Government might be pushed into investing more in wind power and solar power! Just at a time when the Treasury prefers to subsidise gas fired power stations.

Monday, 16 July 2012

It's official - nuclear power IS more expensive than offshore wind

See the story in the Times that EDF wants to be paid £165 per MWh (198  euros per MWh) for its proposed 3.2 GWe reactor and Hinkley C in Somerset, UK. In the story below they (EDF) claim this is still cheaper than offshore wind. In fact currently, under the UK Renewables Obligation offshore windfarms that have been recently and are now being installed are being paid around £135 per MWh (2xs £42.00 per MWh renewable obligation certificate value plus wholesale electricity price at £50 per MWh).  EDF has been forced to come clean on nuclear costs, so now it is making dubious claims about offshore wind.

In the UK solar pv is now being paid £160 per MWh and onshore wind £92 per MWh – and wind power prices are inflated by the inefficiencies of the Renewables Obligation (compared to the ‘feed-in tariff’ system price that is quoted as the basis for EDF nuclear power). In addition, of course, the consumer will be locked into paying for nuclear for 25 years under the EDF plan, whereas the renewable energy support only lasts for 15 years.

Will the British Treasury sign off on this plan to increase average British electricity prices by 8 per cent for 25 years to produce 6 per cent of UK electricity from nuclear power? I don’t think so. See earlier blog 'Why it is impossible for the Government to fund Hinkley C' for more details and comment.

French demand high price for ‘rescuing’ nuclear industry with two new reactors
Last updated at 9:00PM, July 15 2012
Families and businesses are being asked to find an extra £2.8 billion a year for the next 25 years by EDF Energy as the price of rescuing Britain’s faltering nuclear power programme.
The Times has learnt that the French state-backed energy giant will not build two new reactors in Somerset without huge subsidies, paid for through fixed levies on the electricity bills of consumers and businesses for decades to come.
The company has begun talks with the Department of Energy and Climate Change about its planned £14 billion Hinkley Point nuclear plant and intends to decide at the end of the year whether to go ahead.
Under the Government’s electricity market reforms, low-carbon generators will earn more than the market rate for electricity to make it economic to build nuclear plants and offshore wind farms.
According to well-placed industry sources, EDF Energy has told officials that it needs about £165 per megawatt hour, almost four times the existing wholesale price of electricity, if it is to go ahead with Hinkley Point.
City analysts said that the additional cost of building these two reactors at such a heavily subsidised rate, rather than, for example, cheaper gas-fired plants, would be £68 billion over 25 years, or an average of about £50 extra a year on every household bill. Businesses would be face an even bigger charge.
John Sauven, the executive director of Greenpeace UK, said: “Anyone who is able to turn on a calculator can now see that the nuclear industry has been misleading us for years. The Government’s energy policy is based on the fiction that nuclear power would be cheap. At these prices, it would be a very costly mistake that would see consumers paying billions of pounds in subsidy for decades to come.”
The Government has warned EDF Energy, and its junior partner Centrica, that nuclear power subsidies must be lower than offshore wind power to ensure public acceptance. The company argues that the total costs of the giant new offshore wind projects planned for the North Sea will be £180 per mw/h, making nuclear slightly cheaper.
Spiralling nuclear costs could force the Government to abandon or reduce its nuclear new-build programme. The Times revealed in June that the cost of the Hinkley Point project had soared by 40 per cent to a mid-range estimate of £14 billion. EDF Energy wants to build at least four reactors in the UK.
A spokesman for EDF Energy denied that it would negotiate with the Government for a £165 per mw/h subsidy, claiming that it was “too early to talk about specifics”. A source close to the company did say, however, that it had begun modelling different scenarios for the level of subsidy required.
One senior City analyst said: “I wouldn’t be surprised they want to keep that number out of the public domain.”
The Government will offer special subsidies to EDF Energy because its package of electricity market reforms will not be ready for several years. Last week, the coalition appointed the accountant KPMG to represent it when formal negotiations begin.
EDF Energy said that the subsidy for nuclear “will represent a fair and balanced deal for customers. It will show the cost competitiveness of nuclear new build. The process will be transparent — and the details published in due course.”

Learn about policy options for implementing renewable energy by making amendments under the forthcoming Government Energy Bill at a Conference on January 18th at the University of Birmingham: