Sunday, 15 December 2013

Further shift of renewable incentives towards nuclear power planned by Government

In what will be a further cut in incentives for renewable energy and shift towards funding of much more expensive nuclear power stations, the Government is preparing to 'auction' contracts for onshore wind and solar power. The auctions work by giving contracts to those bids that will involve the lowest premium prices to be paid for electricity generated.

The 'auctions' for onshore wind are a back-door method of cutting windfarm deployment by at least a half since at least half of windfarms which receive contracts will never be built because they will not be given planning consent. The system is notorious in the wind industry in the UK because it was used in the UK in the 1990s and resulted in no more than 30 per cent of projects that won contracts in the 'auctions' actually being built. Reasons for this low-take up included planning failure but also the tendency for bidders to put in optimistically low bids to obtain contracts which could not be implemented when the project economics became better known.

Far from increasing the number of windfarms (as the anti-windfarm Telegraph coverage implies) history, and logic, suggests that the number of windfarms and solar power projects will be dramatically cut. Unlike the present system of fixed tariffs for each particular technology, the quantity of capacity auctioned is strictly controlled, and no account is made for projects which fail to be built.

This move can also be seen as part of a more general trend towards shifting funding of 'low carbon' energy sources away from renewables and towards nuclear power. Nuclear power, through Hinkley C, is also poised to receive much more generous terms than renewable energy, and this move will exacerbate this trend still further.

Hinkley C is set to receive £92.50 per MWh for a 35 year contract with 65 per cent loan guarantees. Onshore windfarms will receive (from 2018) £90 per MWh but only for a 15 year contract and with no loan guarantees. If windfarms were given just 20 year contracts to receive premium prices (as applies under the Renewables Obligation which is being replaced by Electricity Market Reform) and also 65 per cent loan guarantees then the 'equivalent' price (to £90 per MWh on existing terms) would fall to around £70 per MWh - around a quarter cheaper than Hinkley C.

It is often claimed that windfarms require 'back-up' services. In fact such services are relatively cheap, and a lesser known fact is that considerable reserve capacity also needs to be built (and will be paid for by the system not the developers) to safeguard against system effects of sudden breakdowns of nuclear power stations, not to mention other in-kind incentives for nuclear power (including insurance liability).

You can see a report on this latest Government shift towards nuclear power and away from green energy at:
and issues with offshore wind....

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