Support the campaign against EU tariffs on solar panels!

As the EU is about to join the US in its crazy decision to impose tariffs on solar pv panels imported from China now is the time to add our voices against what the EU Commission is doing. The Commission, acting upon the pressure from a small group of solar panel makers who are isolated from the rest of the EU solar industry, is about to impose punitive import tariffs on Chinese solar panels. This action runs directly counter to the EU supposed high priority of supplying 20 per cent of its energy from renewables by 2020.

You can support the campaign against the plans to impose tariffs. See http://afase.org/open-letter

If the EU imposes these tariffs it is quite clear what the priorities become - self-interested protectionism. Is the EU's interest in renewable energy nothing more than something that benefits solely EU manufacturing interests? Is all the talk about saving the planet, curbing climate change and conserving scarce fossil fuel reserves just a convenient piece of argument to advance EU interests so long as they have a trade advantage?

Unless the plans for import duties are reversed the already much-slowed growth in UK solar pv deployment will virtually cease as prices of solar panels increase. The UK Government is opposing the EU moves to impose solar import tariffs, although it is responsible for the slowdown in UK solar expansion because of its over-rapid reduction in the feed-in tariffs for solar panels. Between them the EU and the UK Government will destroy much of what is left of the UK solar industry.

The so-called 'neoliberalism' of the EU, like the USA, is really a form of ‘mercantilism’, that is expansion of trade only in so far as it benefits certain vested interests. The European Commission and the USA are all in favour of capitalism - until somebody else (like the Chinese) comes along and does it better! Then the talk is about 'subsidies'. I do not see much evidence of subsidies. What I do see is protectionism by the EU and the USA.

You can do something by signing the letter (see earlier link). More information about the campaign against the tariffs can be seen at: http://afase.org/en

Government set to please UKIP by cutting wind support

Onshore wind support is set to be cut back in what will be seen as part of an attempt to mollify the resurgent hard right forces of UKIP and right wing Tory backbenchers who oppose wind power. The Government is about to publish a review of support for onshore wind through the Renewables Obligation. They are expected to announce a further cut on the amount of Renewables Obligation Certificates (ROCs) available for onshore wind. Last year the Government cut support from 1 ROC to 0.9 of a ROC for new onshore windfarms, this having taken effect in April. Now the Government are about to announce a review which may cut support by a further 0.1 ROC (or more) to take effect in April 2014.

The last review was coloured by a battle between the Treasury and DECC over the level of support, with the battle being pictured in the media as a battle between the Liberal Democrats and the Conservatives over how much support should be given to onshore wind. But there is no doubt that further cuts in support for onshore wind will go a little way to pleasing the 101 Tory MPs who wrote in opposition to onshore wind power in February 2012. Now that UKIP is putting opposition to windfarms alongside gay marriage as its second tier of political dislikes (just behind the EU and immigration) and that many Tory MPs feel increasingly beholden to echoing a UKIP position, we can expect a further set piece political wrangle over onshore wind subsidies. The main loser in this will be the renewable energy targets and the prospects for clean energy in general. Inevitably we will be swapping wind power for either more gas burning or more imported biomass burned in Drax B (otherwise) coal fired power station.......or nuclear power later down the line if the Government were to give it good enough terms.

 But the government is heading for a big cumuppance in its efforts to cut wind power support as it will face outrage from clean energy supporters when it becomes clear later in the year that it is giving better terms to nuclear power to onshore and even offshore wind power. The Government is set to announce the 'strike prices' for different low carbon fuels which will indicate the amount of subsidies that each will receive in July. These are the prices for the 'contracts for difference' (CfDs). The Government will hope that little attention will be given to the length of time these subsidies will be available to generators, since nuclear power will be given them for far longer than renewable energy generators.

Currently new (post April 2013) wind power projects effectively receive around £90 a MWh for a mixture of the wholesale power price and the value of the 0.9 ROC. This is made up of wholesale electricity prices of about £50 per MWh and the value of the ROCs for onshore wind at about £40 per MWh. This (£90 per MWh) figure, however, cannot easily be compared to the price given under the 'contracts for difference' (CfDs) that will be issued by the Government following the adoption of the Electricity Market (EMR) reform package later this year. That is because the CfDs promise to give more reliability about future values of subsidies and will therefore give a lower level of support compared to what is available under the RO. Hence, when the Government announces its strike prices in July of this year onshore wind will not receive more than around £80 per MWh.

But that is not the end of the story. A key issue are the lengths of the contracts (for ‘low carbon’ fuels) for which the premium prices will be paid. Onshore wind and offshore wind will, I am told, be paid them for no more than 15 years. Yet nuclear power schemes will be offered them for at least 25 years (EDF demands 40 year contracts).

The Government has already prepared the way for this difference by talking about a need for a distinction between 'baseload' and 'intermittent' plant, implying that nuclear baseload is somehow more valuable. Of it is not since it cannot be increased to account for fluctuations in electricity demand or supply, and as has been revealed, a considerable proportion of its capacity has to be 'backed up' by gas turbines to protect the grid from the impacts of failure of a large nuclear power station. Meanwhile wind power plant already have the cost of balancing their variable output discounted through the traded wholesale prices of their electricity production. They already effectively pay for their ‘intermittency’ (variability).

Therefore, nuclear power is going to be receiving its subsidies for at least 25 years as opposed to wind power which will receive them for only 15 years. Nuclear supporters say that wind turbines only last 15 years - yet in fact the developers (especially offshore wind developers) would benefit greatly from longer contracts. In the case of offshore wind you could give a relatively high premium price for the first 15 years and then a much lower one for another 10-15 years to enable the existing foundations, tower and electrical connections to be retained and the wind turbines to be cheaply refurbished. Yet nuclear power will receive a high premium price for at least 25 years, maybe even 35-40 years if EDF gets its way.

Even that is before the 'underwriting' of construction costs demanded by EDF, which is likely to amount to a blank cheque.

It is difficult to see how the Government can seriously maintain that giving a much longer contract to nuclear power as opposed to renewables does not give nuclear a competitive advantage – the Treasury designed  'levy control framework' involving caps on spending on low carbon energy sources will ensure that more support for nuclear will mean less support for renewables.
 
When you start to think about how the subsidy level given to onshore wind will be cut back to around £80 per MWh compared to a much higher price for nuclear power for a much longer contract, the sheer pro-nuclear imbalance of the Government's policy becomes glaringly clear. Offshore wind is set to receive around £100 per MWh from 2020, with nuclear power to be given slightly less to give a facade of equality between the fuels. But how can the Government claim that the subsidies are being made equally available to all generators when so much better terms, including length of contract, will be given to nuclear power rather than renewables? I am sure that the European Commission will also be quizzical when they come to see the Government's application for permission for EMR under the EU state-aid rules.

But the bias in support of nuclear and against renewables will give some balm to the political right. The problem for Ed Davey is how he squares this concession to the anti-wind power pro-nuclear political right with his claims that the Liberal Democrats are defending green energy. What sort of green energy is this? Green radioactive waste perhaps?

MPs want to give preference to nuclear over renewables

In a report riddled with pro-nuclear fantasy hopes and statements, the Select Committee of MPs which scrutnises the Department of Energy and Climate Change has called upon the Government to give much better terms to nuclear power than will be offered to renewable energy. This mixture of pro-nuclear fantasy and preference for nuclear over renewables is highlighted when, on the one hand, the Committee calls for new nuclear build to be given no higher strike price than offshore wind, but then says that nuclear power should have its costs 'guaranteed' by the Treasury:

'The UK Guarantees scheme may help to bring forward investment in Hinkley Point

C, but it is not clear whether support will still be available for nuclear new build

projects that are further away from making a final investment decision (such as the

NuGen and Horizon projects).

Given the important role for nuclear generation in the

UK’s future energy mix, the Government should extend this support to all nuclear new

build projects, which may require increasing the amount of available assistance to more

than £50 billion. (We note that the UK Guarantees scheme does not involve expenditure,

as long as the guarantees are not called in.) - page 17 in the report 'Building nuclear - the challenges ahead' http://www.parliament.uk/business/committees/committees-a-z/commons-select/energy-and-climate-change-committee/news/building-new-nuclear-the-challenges-ahead/

The assumption that the Treasury has much money to guarantee anything, let alone nuclear power plant, is one part of the fantasy - another seems to be that it is okay to give an effective blank cheque to nuclear but not to renewable energy. Note the fantasy statement 'the UK Guarantee scheme does not involve expenditure as long as the guarantees are not called in'. Well, yes, but what nuclear power station has ever been built according to original cost estmates?

Earlier on the Select Committee report says that nuclear power should not be given more than the £100 per MWh that offshore wind is likely to receive in the future. However, this PR attempt at 'fairness' gratuitously misses the fact that EDF is demanding a 35-40 year contract while the offshore wind developers will only receive their premium prices for 15 years.  That fact, and the wish of the Committee to extend a blank cheque 'guarantee' to nuclear power, makes this into a blatant piece of policy preference for nuclear power over renewable energy. Renewable energy schemes, of course, will not be receiving Treasury guarantees.

The Committee entertains a host of fantasies including the apparent 'solution' of building 'small' nuclear power stations. They certainly will not be any cheaper in cost per KWh (probably a lot more expensive), but it seems the Committee hope that the smaller number of billions of pounds for each one might be easier to smuggle through the nations accounts!

The £100 per MWh 'strike price' claimed by EDF is itself a bit of public relations to hide the fact that, given the same terms, nuclear is much more expensive than all but the most experimental renewable energy sources. EDF say that £100 per MWh (over 40 years!) will give them a 10 per cent internal rate of return (IRR). What they do not say is that nobody, and I mean nobody, will offer them the cash on these terms. The banks will not lend the money because they know they are not likely to get it back, hence the diplomatically worded call for a blank cheque ('guarantee'). EDF would not spend the money on these terms (even if they had it, which they do not). But a state-backed blank cheque 'guarantee' scheme would allow the facade of a '10 per cent' IRR whilst in reality the whole project is guaranteed by the state. Without state guarantees the market rate for investing in Hinkley C would be at least 15 per cent IRR meaning that the 'cost' of Hinkley C is over £150 per MWh.

But the government are supposed to be running a competitive regime to produce the best value low carbon outcomes for the consumer. This is as opposed to returning to the days of the nationalised industry where the engineering establishment could choose their preferred power plant on the basis of a whim and pass on the cost of their mistakes to the consumer. Nuclear power has clearly lost the competition to supply non-fossil fuel power, but that is something the DECC Select Committee do not want to understand.

 

EDF boss set to quit as new nuclear talks falter

According to the Times EDF's boss in Britain, Chief Executive Vincent de Rivaz, is set to quit his job as talks with the Government about subsidies for new nuclear power stations falter. See the Times report at:

http://www.thetimes.co.uk/tto/business/industries/utilities/article3756956.ece?CMP=OTH-gnws-standard-2013_05_05]<br /><span style=

This will be a disappointing end for an energy company executive who has focussed much effort over the last decade on building a framework to give guaranteed minimum prices for new nuclear power. In fact he succeeeded in this - and in getting the Government to deny that the framework, through electricity market reform (EMR), was a 'subsidy' to nuclear power. The thing that let him down was the technology, nuclear power, that he sort to promote. The latest reactor design, touted as being cheaper than deisgns such as that for Sizewell B nuclear reactor (completed in 1995), has proved to be no cheaper after all. To many of us this was not an unexpected result. Civil nuclear power's 60 year history has been one long story of 'jam tomorrow', replete with myths about the 'cheapness' of the French programme (state funded, and it has got more expensive, not cheaper, as time has gone on). Nuclear advocates seem to have fallen in to the trap of believing their own propaganda. That, and a belief that the Government would eventually come around to doing what was really needed to get nuclear power stations built - give them a state backed blank cheque.

But blank cheques are not on offer. There are at least two reasons for this. First, it runs exactly counter to a basic premise of liberalised markets in that competition is supposed to obtain cost reductions, something that cannot happen if the costs are guaranteed like in a nationalised industry. The second is that nuclear power has technological competitors including renewable energy. How can the Government justify in a democratic polity giving a blank cheque to nuclear power when it does not do the same for more popular renewable energy and energy conservation technologies? Why should nuclear be preferred over renewables and energy efficiency?

One could list other institutional obstacles of course, for example the politics of obtaining consent under EU state aid rules. Indeed the new nuclear build programme looks more and more implausible the more one delves into the detail. In fact the headlines in the newspapers about EDF demands for £100 strike prices and 35-40 year contracts only tell part of the story. The irony is that nuclear is so uncompetitive that even these terms would be unlikely to lead to Hinkley C being built. The headline figures can be viewed as a public relations exercise that obscures an even deeper financial failure. That is because in addition to the £100 per MWh and ultra-long term contract EDF would also request loan gurarantees (which will amount, in the end, to a government awarded 'blank cheque'). Otherwise EDF will not raise the money needed to build the project. Offshore wind, as argued in previous posts on this blog, really is cheaper than new nuclear power if you compare it using private sector, market based, business criteria. Onshore wind, of course undercuts nuclear power by a very large stretch indeed. In fact the Treasury seem to be basing their preferred strike price for nuclear power (£80 per MWh) on a plausible rate for onshore wind for a 15 year contract.

Last year in one of its more prescient features, the Economist magazine heralded 'The End of the Nuclear Dream'. They are right, it is just that a lot of nuclear advocates are taking a long time to wake up.