Tuesday, 26 March 2013

Government admits nuclear power is a dead loss

The Government has issued its policy document 'Long Term Nuclear Energy Strategy' today. Here I 'translate' some key passages to connect it up with reality and to emphasise how, reading between the lines, the Government more or less says that nuclear power is a dead loss. Please note that my translation is in italics.

page 5
'the future of nuclear power will depend on it being able to compete effectively against other forms of low carbon electricity generation'. Translation: ' At the moment nuclear new build seems very unlikely. EDF is demanding some jaw-droppingly expensive terms and conditions for building Hinkley C which are way over and above what any government could stomach, let alone one that is cash-strapped and containing Liberal Democrats.

page 6
'the size of the nuclear programme will depend on the effectiveness of developers initially being able to build to time and budget, and subsequently being able progressively to reduce costs through experience and economies of scale.' Translation: The nuclear power industry seems incapable of building in anything like the time or costs originally projected, and all the experience so far has proved that the industry is prone to monumental catastophes which have more than neutralised any scope for cost reduction.

'Government challenges the nuclear industry to reduce the levelised costs of new nuclear generation and will work with the Nuclear Industry council and the R&D community to do this'. Translation: The industry had better reduce its costs dramatically, because at the moment it has not got a snowball's chance in hell of doing any building. There's very little chance of doing this really, but to keep the nuclear industry happy and off our backs we will throw them a few nice juicy sops of taxpayers money for R&D and so on. George will let us spend this provided we don't rock the boat too much.

page 18
'Nuclear is cost competitive with other generation technologies and in the future it is expected to be the cheapest low-carbon source of electricity, so it can keep bills down and the lights on'. Translation: Nuclear might just about be cost-competitive at the moment with wave power, but very little else, and it is quite possible that even wave power will be more cost-effective that nuclear power in a few years time. But compared to sources like onshore and also offshore wind, and increasingly solar photovoltaics, nuclear is a dead loss. Lots of us at the Department of Energy and Climate Change have been saying that nuclear is the cheapest low-carbon source of energy in the past, but all of these statements are now 'inoperative'. However, we still want to be a bunch of wishful thinkers who firmly believe in the future of nuclear power because we learned this at school and clever people like David Mackay and David King keep telling us that this fairy story will one day come true.

The actual document can be read at:

Thursday, 21 March 2013

EU state aid challenge follows Treasury 'hint' at nuclear underwriting

A leading EU lawyer, backed by the Vice Chair of the European Group of Green MEPs, has declared the British plan to subsidise nuclear power as 'illegal'.


This challenge follows 'hints' in the Treasury's budget statement that nuclear power could receive underwriting of its costs under the Treasury Infrastructure Finance programme. This presages a battle over whether the European Commission will give state aid clearance to the British plans to subsidise nuclear power. Under existing EU law, while renewable energy has a state aid exemption on the basis that it is an environmental measure, nuclear power does not.

The UK Government has so far justified its 'contracts for difference' (CfD) proposals on the basis that these are open to all 'low carbon' generators and thus not a subsidy. However the grossly uneconomic nature of nuclear power (in reality) has meant that the Government is being pressed by EDF's well-resourced media machine and civil service supporters in DECC to grant much higher subsidies to nuclear power than will be offered to most renewable energy sources. Now, a new watershed has been breached with the suggestion, in the Treasury Budget statement, that nuclear schemes such as the proposed nuclear plants at Hinkley, Sizewell and Wylfa may have at least part of their costs 'underwritten'. These power stations have been included in a map of candidate 'infrastructure' projects. See
http://cdn.hm-treasury.gov.uk/budget2013_complete.pdf See map on page 37

The Daily Telegraph has been enthusing about this prospect. See

Yet, as late as last Tuesday, 19th March, in answer to a point made by Paul Flynn MP, Ed Davey said:

'The hon. Gentleman is right to say that my concerns on nuclear power for some time have related to the price, because the history of nuclear power in this country and elsewhere is that it has turned out to be expensive. That is why this coalition Government—and, indeed, the previous Labour Government—have gone about the third generation of nuclear power stations very differently from how Government’s went about things in the past to ensure that the consumer, business and the taxpayer are protected. That is why the coalition agreement says that there will be no public subsidy'

How much credence should we place on anything the Secretary of State says in view of the prospect of his agreeing to EDF's terms? We have seen, to use Tom Burke's words a process of 'salami slicing' demands, so that bit by bit EDF moves towards enjoying what would be (I suspect) ultimately a full blown blank cheque (full underwriting of construction risk) passed on by the Government with British taxpayers as the donors.

'Partial' underwriting', given the (apparent) application to the Treasury Infrastructure fund would involve the Treasury agreeing to accept an proportion of debt risk. So, the
Treasury would agree to guarantee the repayment of loans to the value of, say, £2 billion (out of a total £14 billion estimated cost of Hinkley C). Hence, whatever happened the lenders would get their £2bn repaid, as and when the loan and interest repayments fell due. The trouble with this, of course, is that EDF could conceivably go ahead and build £2bn worth of plant (which would have to be funded by the Treasury) and then say: Err, sorry, but we can't do any more without more underwriting.... Then the Government would be faced with a partially built nuclear plant with people saying 'why can't this be completed?', and, the Government may then be induced to underwrite the lot (whatever it will end up costing)  to ensure construction and avoid the embarrassment of having a
part completed white elephant on their hands.

This scenario actually is not totally dissimilar to what actually happened to Sizewell B which was half built when privatisation took place in 1990 and the electricity companies said thet they could not finance completion. So the 'non-fossil fuel obligation' and the 'fossil fuel levy' was invented, essentially to finish construction of Sizewell B. The 'blank cheque' was issued by the Government.

A much touted advantage of the Treasury programme of guarantees for infrastructure projects is that it will not cost the taxpayer anything - I am sure that will be the case in usual cases, but nuclear, my friends, is not usual. It is an industry that stealthily, over a period of years, draws the state into a series of increasing concessions when first it promised to be so cheap (in 2006). There will assuredly be no end to this process until the state has issued a blank cheque upon which will ultimately be written truly enormous sums of money that could be much more cost-effectively be spent on renewable energy and energy efficiency.........or indeed, schools, hospitals etc etc etc.

Even not counting underwriting, EDF's (desired) subsidies will look gargantuan compared to what premium subsidies will be offered to both onshore and ofshore wind under the CfD arrangements. Onshore wind will get no more than around £80 per MWh for a 15 year contract, so EDF's payment of, say, £95 per MWh for 35 years would mean that they would get well in excess of twice the subsidy paid to onshore wind. Offshore wind may get offered around £100 a year according to Government plans, but only for a 15 year contract. So EDF will be getting around twice the subsidy for Hinkley C compared even to offshore wind! And they would still need the taxpayer to 'underwrite' their construction costs! Who can seriously justify this? Well, according to what evidence we see at the moment, the Government may actually be heading in this direction.

But even if the British body politic remains supine before the blandishments of the nuclear-civil service complex  the nuclear industry may be assured of resistance at the level of the European Union. This resistance has already begun.


Wednesday, 20 March 2013

Write to your MP to demand a decent deal for community renewables!

Readers of this blog are urged to write to your MP urging that the Government ensures, as part of the Energy Bill, that community and independent renewable energy generators are given equivalent income streams for renewable energy projects as will be available to the major electricity companies. A letter, signed by over 30 academics and NGO leaders, appears today in the Guardian with this objective in mind. See:


The solution backed by this letter is a scheme that can ensure that independent renewable generators should get the same level of incentives as will be available to the Big Six electricity companies under 'contracts for differences' (CfD) arrangements. In effect, only very large companies will be able to access CfDs. There's no good logic for this - it is just the way our cock-eyed electricity system is regulated. Of course, even more cock-eyed is the spectacle that EDF is demanding, and will get at least up to a point, much better terms and levels of subsidies for nuclear power than will be given to community renewables schemes.

Although the Government slipped in a clause to their Energy Bill giving the Secrtetary of State power to make the electricity majors issue power purchase agreements (PPAs) to independent companies, unfortunately this on its own is unlikely to lead to good terms being offered to independents. The Big Six will have no incentive to offer good terms to people who they will see as competitors. The 'Big Six' are likely to cite uncertainties about 'balancing costs' as reasons why they offer PPAs worth considerably less than the CfD contracts to which the Big Six will have access (but not independents).

So, the idea behind the 'Green Power Auction Market' (GPAM) notion (originally designed by Nigel Cornwall and put forward by Alan Whitehead MP) is that independent companies could offer their schemes as PPAs (for, say, 15 years or whatever they need) for which there would be an auction and the independent companies would accept the best deal on offer. Experience suggests that this could get them a reasonable deal, within the limits of the economics of the CfD system of course. But I do not want to tire you with the arcane complexity of the whole thing here.

The GPAM scheme is the best option that is both available and currently being discussed. The Government is conducting a review on arrangements for independent generators at the moment, although it failed to accept a proposal for GPAM made by Alan Whitehead MP at the committee stage of the Energy Bill.

Sufficeth it to say that the optimum system, for a variety of reasons, is the 'Fixed Feed-in Tariff'  (Fixed FIT) concept. But the Government have firmly rejected this sensible idea. GPAM is not a Fixed FIT. However, the GPAM proposal is a workable alternative in the context of CfDs that will allow independent generators a reasonable deal compared to the Big Six. Hence GPAM is the proposal that needs promoting now.

In fact the independent sector builds a much larger proportion of renewable capacity than is generally realised. There are some community renewables projects, such as promoted by the company Energy4All, but there are also some independent renewable companies like RES and Fred Olsen who develop a lot of schemes. Without them, and without the competition that all of these companies provide to the Big Six, the renewables programme will be cut by as much as a half compared to whatever would otherwise take place. You can see some argumentation in support of GPAM on http://www.businessgreen.com/bg/opinion/2240941/the-green-power-auction-market-a-winwinwin-for-renewables-consumers-and-suppliers

You can see some arguments in favour of a 'Fixed' Feed-in Tariff on the FOE website, http://www.foe.co.uk/blog/energy_bill_will_give_more_38654.html, and a report I wrote for Friends of the Earth on http://www.foe.co.uk/resource/briefings/david_toke_fits.pdf. There are other arguments to suggest that sooner or later we will need a Fixed FIT, and that CfDs need to be replaced. In particular they give perverse incentives to renewable generators to stop producing precisely when we need renewable electricity. See my blog post: http://realfeed-intariffs.blogspot.co.uk/2013/03/how-electricity-balancing-mechanism-is.html

Tuesday, 19 March 2013

Hinkley C given consent for second time in 23 years

Today's 'second coming' for planning consent for a third nuclear power station at Hinkley Point probably means no more than the first consent for 'Hinkley C' given in 1990. The main difference is that there is a bit more hype about its prospects this time. But there are a lot of similarities between the two consents.

In 1990 the electricity industry was privatised and set up for liberalisation which meant that the newly privatised electricity companies could not pass on the investment risks and costs of building the power plant onto consumers. The planning consent for Hinkley C in September 1990 came shortly after the new electricity companies had said they could not afford to build more nuclear power stations under liberalised, competitive, conditions. The state directed blank cheque which had previously funded nuclear power and hid its immense costs had disappeared. The commercial basis for the power station disappeared with this. Despite planning consent being given Hinkley C was never built. History looks like being repeated.

Now, under Electricity Market Reform nuclear power is being allowed access to the same subsidy stream as renewable energy. Yet, the Government is now finding that this is not enough. You can see in earlier blog posts how high strike prices, incredibly long contracts to pay them and 'underwriting' guarantees (entrees to another blank cheque) are being demanded by EDF as the price for building the power station. The exact orchestration of how EDF and the Government will attempt to divert attention from the fact that Hinkley C will not be built in the forseeable future (at least) is still open to doubt, but not the outcome that the scheme is a dead duck.

The Treasury and DECC appear to be involved in an argument about who is to blame. In fact the interests that are most to blame are the nuclear industry who, despite 60 years of evidence, refuse to believe that their technology is uneconomic. Indeed, if you compare the inflation-adjusted costs of 'Sizewell B', the last nuclear power station to be built in the UK (to which the 1990 planning consented Hinkley C was supposed to be a successor), and the reported capital costs of EDF's Hinkley C, there is not much difference in terms of billions per GW. The main difference is that there was a lot of wishful thinking in between. You can read an announcement from 'Construction News' about the last time Hinkley C was given planning consent here:


Will there be another planning consent given to a Hinkley C in another 23 years? Hopefully not - even the UK will most likely be a lot wiser by then.

Friday, 15 March 2013

Pressure builds on government to deny EDF demands

Perhaps EDF's latest media offensive in favour of their 35 year contract for nearly £100 per MWh is a sign of desperation rather than strength. Certainly the Government is under great pressure not to give into EDF. As discussed in the Guardian, the Government faces a choice about whether it wants to face a long wait for approval from the EU Commission to be given 'state aid' approval for the nuclear subsidies or whether it will achieve a quick decision.


Of course it is easy to point out how the UK Government has got EU state aid approval in the past - eg to complete the construction of Sizewell B in 1990, and to bail out British Energy in 2001. However this latest instance is distinct because the UK's case for state aid approval is based on a claim that its 'low carbon subisdies' are equally available to other energy generators. Or at least, that is how it will be seen in Brussels. The Government might get away with things more easily if there were no objections from other actors in the generation business. But renewable energy generators, let alone anyone else, are not going to receive 35 year contracts (no more than 20 years), so the Government case looks very shaky if wants to obtain state aid under EDF's preferred terms.

The UK Government will have to wait until the Energy Bill becomes law before it can make its state aid request for permission. State aid requests are considered by the Competition Directorate and the rules give an exemption for environmental purposes, including renewable energy. However nuclear power is not recognised as 'environmental' by the EU rules. So the UK Government has a dilemma here, which is compounded by the fact that major competitors of the EDF do not see why it should be given such favourable treatment.See the statement from Npower in the 'Daily Mirror': http://www.mirror.co.uk/money/city-news/rwe-npower-boss-blasts-long-1764440

Of course EDF also wants its investment to be 'underwritten' by the British state, which, if granted, would make state aid consent even more problemmatic. But then the Government have said they will not underwrite investments in Hinkley C. Is there anything other than megaphone diplomacy from EDF that will persuade the Treasury to give into EDF? In fact, not very much. Carbon dioxide emissions will be more cheaply reduced by increasing spending on energy efficiency and renewables energy - for which there is not nearly enough funding available from Governemnt policies anyway. And the National Grid dismisses notions that there is a generation capacity crisis. Interestingly the National Grid also say that wind power is easier to manage than nuclear power.   You do not hear much about this in the press, which is eager to report EDF's version of the facts. See http://www.carbonbrief.org/blog/2013/03/interview-with-the-national-grid

Monday, 11 March 2013

Government set to pay EDF more than twice as much in subsidies as onshore wind?

Stories in the press would have us believe that EDF are about to clinch a deal under which they are paid about £96 per MWh for a 35 year contract for Hinkley C nuclear power station. If so they would be paid more than twice as much in subsidies as onshore windfarms even before EDF's demands for 'underwriting' their costs are taken into account. Onshore wind is set to be paid no more than around £80 over MWh for a 15 year contract under discussions on the 'strike price' to be paid for wind power under the 'contracts for differences' (CfD) arrangements. So, altogether, the nuclear power plant will receive a lot more than double the subsidy levels received by onshore wind power.

See: http://uk.reuters.com/article/2013/03/11/edf-britain-idUKL3N0C308520130311?rpc=401&feedType=RSS&feedName=mergersNews&rpc=401

And, fresh out on Wednesday 13th March, is a call from four previous Directors of Friends of the Earth for the National Audit Office to investigate the value for money of giving a contract to EDF for Hinkley C at the rumoured figure of close to £100 per MWh for a 30-40 year contract. See http://www.jonathonporritt.com/sites/default/files/users/PMNUKES2%20PRESS%20RELEASE%2013.3.13pdf_1.pdf and in more detail in a letter to the Prime Minister on http://www.jonathonporritt.com/sites/default/files/users/Letter%20to%20the%20Prime%20Minister%2013.3.13%20pdf_1.pdf

Meanwhile the Government is aiming to pay offshore wind schemes no more than £100 per MWh for just a 15 year contract. So even offshore wind will be getting no more than around half as much subsidies compared to nuclear power even before the subsidy of 'underwriting construction costs' is taken into account.

If EDF's terms are met this will blow a hole a mile wide in Ed Davey's repeated assertions that nuclear power will be paid no more subsidies than are available to other 'low carbon' energy sources. On March 7th Ed Davey said:

'The coalition agreement is clear – new nuclear will receive no levy, direct payment or market support for electricity supplied or capacity provided, unless similar support is also made available more widely to other types of generation. This is about creating a level playing field for all forms of generation, not subsidising nuclear' See

Where exactly is the level playing field or the parity in 'levy, direct payment or market support' if the Government meet EDF's demand?

In fact, though, whilst the media is full of propaganda from EDF, other reports suggest that Treasury is still holding the line at suggesting a strike price of £80 per MWh (for an unknown contract length), which would by coincidence or otherwise, happen to coincide to the headline strike price likely to be offered to onshore wind. So is this just a gesture before capitluation before EDF's demands or is this the Government position? A more nuanced interpretation is that in fact EDF has plenty of supporters within DECC but that the Treasury are the ones who hold the purse strings and will make any final decisions. Meanwhile the EU Transport and Energy Commissioner has been quoted in the Guardian diary as decribing EDF's demands for 35 or 40 year contracts as 'Soviet'.

Seenews reports on: http://www.itv.com/news/2013-03-11/will-they-or-wont-they-new-nuclear-hangs-in-the-balance/ and also the Guardian diary at www.guardian.co.uk/politics/2013/mar/11/hugh-muir-diary-francis-maude-dale

Of course the conclusion you can draw from the several years of experience of how the British media constantly soaks up nonsense propaganda from ther nuclear industry about how 'cheap' or 'essential'or 'green'  they are is that the nuclear industry is far, far, far better at public relations than they are at building cost effective and environmentally sustainable energy generation!

The people who should be getting a bit more lattitude in the subsidy game, and to whom extra resources should be diverted are the newer technologies such as tidal stream and wave power and ones that are fast reducing in cost like solar pv and offshore wind, not a bankrupt dirty dinosaur like nuclear power.

As a corrective to all this nonsense you can read a commentary on what is happening in Germany by Catherine Mitchell in http://projects.exeter.ac.uk/igov/new-thinking-blog-the-new-energy-system-is-winning-the-fight-for-the-future/. In Germany the universities are being enrolled to support this vision - as opposed to the UK where the universities have been encouraged to pursue a 'nuclear is cheap' fantasy.

Saturday, 9 March 2013

Why we should boycott stately homes to defend renewable energy

Green energy activists should now be considering boycotting stately homes now that the National Trust and English Heritage appear to have launched a campaign to defeat large numbers of windfarm applications near their assets by virtually any legal means possible. They have been successful in overturing a Government decision to grant planning consent to a windfarm in Northamptonshire.  This is significant because they persuaded the High Court to overturn a decision made by a Government Appeal Inspector. If this was about birds, ecosystems, or even serious threats to human wellbeing I would be less annoyed, but it seems to me that these so-called defenders of our environment are using their power and resources to defend not ecology or people's welfare but their own misconceived commercial interests coloured in many instances by a conservative antipathy to wind power.  See some detail in the the press releases:



Given that the fact that the National Trust is now Chaired by a longstanding opponent of windfarms, Sir Simon Jenkins, we can be sure that this is at least partly driven by ideological objections to windfarms, as well as misplaced commercial notions. Simon Jenkins is welcome to hold his views, but equally, if the National Trust and English Heritage are so determined to put their resources into mounting such legal challenges to windfarms then green energy supporters are equally welcome to boycott visits to stately homes and other ornamental ventures run by these organisations.

The new Director General of the National Trust, Dame Helen Ghosh, claims that she finds windfarms beautiful....so long as they are not close to National Trust assets! If that is not a blatant admission to Nimbyism I don't know what is!
See http://www.telegraph.co.uk/earth/energy/windpower/9890649/National-Trust-director-general-Wind-turbines-are-beautiful.html

She claims her views are different to Simon Jenkins. I think that actions speak much louder than words and that the actions her organisation is taking represent a serious blow to wind power since they can only but delay windfarms in general by encouraging more groups to take to the High Court to try to stop windfarms that they do not like. It is not as if this was an isolated case. The National Trust appear to be gearing up for a major legal campaign against windfarms. In doing so they form part of what is a concerted campaign against windfarms being waged by various largely conservative led councils and many Conservative MPs.

I for one will be steering well clear of visiting stately homes run by the National Trust. The National Trust are wrong to think that windfarms are a threat to their income. Indeed, we should give the National Trust reason to believe that their income stream will in fact be harmed by their anti-windfarm stance. I would urge other people who want renewable energy to prosper to boycott stately homes.

Wednesday, 6 March 2013

How the electricity balancing mechanism is undermining renewables future

Recent press coverage about allegedly high payments to windfarms to stop generating (to avoid electricity grid bottlelnecks) should be drawing attention to the cock-eyed way that electricity balancing mechanisms are organised. But instead the problems are being made even worse by the way that the Government is introducting the 'contracts for difference' (CfD).

Put simply, renewables are being fitted into a system that is designed to suit (and reward) conventional generators. There is no real effort to improve system flexibility by bringing in opportunties for 'demand response' so that shifting electricity demand can be incentivised at the same time as the wind is blowing or sun shining. Instead the renewable operators are just being given the same incentives as conventional generators to switch off to avoid the grid being overloaded. Most of the money paid to generators to switch off actually gets paid to coal and gas power station operators, not windfarms (although you would not get that impression from the press stories).

Green campaigners stress how 'smart meters' will bring in an age when dishwashers etc will be programmed to turn on and where electric cars will fill their batteries when renewable energy is flowing. But, unbeknown to them, nothing of the sort is happening. Indeed, developments are moving, at considerable speed, in promoting precisely the opposite. Renewable generators, essentially, are being pressed to be just more snouts in the troughs of excessive payments to generators. As discussed later this is being emphasised even further by the terms of the new 'contracts for difference'. But while the renewable generators gain in the short term (albeit at the cost of more sniping from the anti-windfarm lobby), the cost of providing renewable energy is increased and the amount of renewable energy that the system can absorb is constrained.

To put it in a nutshell, the smart meters being installed are totally incapable of helping 'demand response' and the rules governing the electricity market are actually making it even less likely that there will be much more demand response in the future than there is now (and there's not much happening now). I will explain, below, but first let me draw your attention to some recent coverage, first about how anti-windfarm campaigners are highlighting the payments made to windfarms to switch off sometimes


In this story there are hopeful (but currently very unlikely) comments that matters will be righted by 'demand response' measures. More balanced coverage is given by 'Carbon Brief', but unfortunately the report merely recycles the very naive rose tinted impression that people have got about the prospects for 'demand response'. See Carbon Brief's account at:


You can see a general description by the National Grid of their arrangements on this issue at:


In order to elaborate on earlier points, we first need to understand that essentially there are currently two routes at the moment to short term balancing of the electricity market between demand for and generation of electricity: the 'balancing mechanism' (BM) and the 'short term operating reserve' (STOR). It is possible for large and medium sized industrial units (typically refrigenration companies) to offer balancing services,  since they can contract directly with the National Grid, or, indirectly with the help of companies such as 'Flexitricity' (see http://www.flexitricity.com/core-services/frontline).

However, such services have to compete with the electricity suppliers, who in turn have strong incentives to get money for the power plant that they own rather than make sure renewable energy stays online for as much as possible. And remember, the electricity companies are likely to make much more money out of selling electricity generated by their power stations (or in receiving payments for their power plant NOT to produce energy) rather than making money out of saving supply costs by shifting demand.

Under the present regulations there is simply no agent around with clear enough interests in mobilising or organising ordinary consumers with their dishwashers, refrigerators, electric cars or whatever to engage in demand response. You would think that green energy suppliers would have good reason to do this, both from a marketing and cost reduction point of view (you can help us generate more green energy and save money at the same time!).  However, if the green electricity companies are being incentivised to shutdown the windfarms rather than keep them running (which is what is happening at the moment) then they are not going to be very keen on organising demand response campaigns. Yet as the amount of renewable energy increases the need to avoid shutting down renewable energy production will increase. Building interconnectors will help ease the porblem, but this is a slow process. Hence there is good reason why electricity trading regulators at an EU level are likely to stress the need to utilise demand response as the prime method of dealing with increased fluctuating renewable energy supplies. But the EU does not control the regulations to achieve this, although maybe the EU could try harder to influence national regulators to prioritise demand shifting.

You would hope that the UK electricity system would be regulated to take account of the increasing need to balance fluctuating renewable energy supplies, but of course it is not. A high proportion of the people who understand the system are likely to be associated with the Vertically Integrated Large Electricity Suppliers (VILES) who dominate the system. And they are not in a hurry to make themselves alter their ways.

But, in fact, other factors make the situation even worse than this (yes, really!). One is the fact that the wrong sort of smart meters are being installed. Although they will help people (and electricity suppliers) monitor energy consumption better, they are simply not configured to engage in the sort of interactive 'bottom-up' automatised trading that would permit demand response to occur. For that you need something that David Hirst has described as 'flowcost meters'. They can interact with with the short term and future electricity supply market (or, perhaps the electricity supplier's own generation cost structures) and automatically schedule operation of equipment according to consumer timing and cost preferences. However, nobody is installing such equipment, and, to my knowledge, there are not even any plans to do so.

The reason why nobody is installing the right sort of smart meters, is, as implied above, because electricity balancing markets are not regulated in the right way. The National Grid's license should be altered so that they have a duty to prioritise shifting demand to incorporate variable renewable energy before it is contrained. A part of this could be to 'cap' payments to renewable operators at the level of the 'strike price' of the feed-in tariff. The EU should bring in regulations to ensure that demand shifting is prioritised. But it is doubtful whether we can just wait for this to materialise.

This brings us around to the way the Government is implementing feed-in tariffs through the CfD. This does not help. The CfDs pay the difference between the 'strike price' set by the Government of the value of each unit of generated electricity and the wholesale electricity price - except in those (occasional) circumstances when the wholesale price is higher, when the generator will get nothing and actually pay money. Hence the CfDs have the perverse incentive of encouraging  renewable energy suppliers to want to stop generating electricity when supplies are most needed (when the wholesale price is high) and get paid to stop generating electricity precise at the time when it would be much better to shift demand. Of course, this perverse incentive would not exist if there was a 'Fixed' FiT used (see earlier blogs on this).

Now, it is possible to regulate the electricity market to give priority to demand shifting and to encourage, first, green electricity suppliers, and then hopefully others, to install the right meters and encourage demand shifting. But we need a review to make this happen - a specific review of balancing regulations with the objective of maximising demand response - and it should not be a review dominated by the VILES. The question is, what interests can pressure for a review to give priority to demand shifting? Well, green NGOs should have a go for a start, perhaps in alliance with consumer groups.

But for the sake of the planet please let us do something improve the present ludicrous situation!

Monday, 4 March 2013

MPs want to give priority to nuclear power over renewables and energy efficiency

In an especially brazen piece of pro-nuclear pleading the DECC Select Committee has effectively said that nuclear power should be given cost priority over all green energy options. They say that EDF and other nuclear companies should have their demands for  construction cost 'guarantees' met. They disingenuously suggest that this would have no consequences for consumers. See

and in particular where they say:
'54.  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.)'

In fact the Government has indicated that this will not happen and that nuclear will treated the same as renewables, but this evidently is not what the DECC Select Committee has in mind. They do say that nuclear should not be paid any more than offshore windfarms, but then efectively propose that the playing field be fixed to give nuclear power an advantage - underwriting plus, presumably, a 40 year contract thrown in (see previous blogs on this).  In the para above the MPs have implicitly 'decided' that the Government will give guarantees to nuclear as demanded by EDF - this is not what I have been hearing, but then I am a green energy realist whereas the Committee evidently is stuffed with nuclear fantasists.

There does seem to be a push for nuclear to enjoy an arrangement whereby, in effect, the Government pays for the costs of building the nuclear power stations and then 'sells' the plant back to the private sector. This is touted as being 'cheaper' than nuclear having to 'suffer' the same terms as renewable energy under the proposed CfD system.

Let us summarise some of the issues with this approach:

This would be a potentially very expensive way of doing it for the taxpayer for three reasons:

a) the taxpayer would lose all control over costs. In the case of a CfD system the electricity consumer is only committed to pay as much as is required to pay the difference between the wholesale electricity price and the strike price for the energy that is generated. This money should be used to pay capital and operating costs at the developer's own risk. But if the Government takes on construction risk as well as guaranteeing a premium price and pays whatever it costs (in other words write the developers a blank cheque) to build things, then developers will plough onwards to build plant with much less regard to costs or consequences compared to when the developer has to pay for cost overruns themselves.

b) This scheme has consequences for the public sector borrowing requirment (PSBR) in that until such time as the completed plant was sold back to the private sector the debt would appear on the government's debt record, either increasing public borrowing or leading to cuts in public spending (eg health, education, defence etc). People talk about the Government being able to borrow at lower rates than the private sector - true, but such borrowing comes at a high 'opportunity cost' for government spending - especially in current circumstances. Then, when the plant was sold back to the private sector, the private sector owners would still demand a steep premium to operate the plant. The taxpayer would suffer a double penalty - increased PSBR during what could be a long construction period followed by the electricity consumer having to pay a big premium on their bills. This hardly makes the situation better!

c) This idea privileges nuclear at the expense of what are much cheaper renewable alternatives. Why not do the same for windfarms and solar power arrays, external wall insulation, etc? Why should nuclear power get policy preference here?

In short, this idea only seems good if you regard nuclear power as being much more important than just about anything else in the British economy including renewable energy and energy efficiency - not my idea certainly, nor many other people's I would think.

It is also highly impractical for the Treasury to agree to this sort of thing, for much the same reasons as I have outlined. It would also clearly contravene EU state aid rules and would be unlikely to get EU state aid approval in the context of not at least giving the same benefits to renewable energy and energy efficiency.

In other words, for this to come about requires a rather heavy pressure on a political version of Douglas Adams'  'improbability drive' (for those that are familiar with the 'Hitchiker's Guide to the Galaxy').
So why does the pro-nuclear lobby plough on with such unlikely proposals? For much the same reason as Hitachi has bought its UK option nuclear option, desperation furnishes a belief that somehow a Government will come along that can see the beauty of the nuclear dream above all else in a world where many see it instead as an expensive nightmare.