Sunday, 23 March 2014

How Hinkley C deal will cut consumption of solar pv not fossil fuels

The Hinkley C nuclear power plant deal that gives the nuclear developers a £92.50 per MWh premium price for 35 years will give nuclear power a clear competitive advantage over solar pv in what will be a growing electricity for motor vehicles market.  The combination of declining costs of solar pv and the growth of effectiveness and use of electric vehicles (EVs) will mean that within 15-20 years (maybe even sooner) solar pv, operating by then without any guaranteed premium prices at all, will be attracting large portions of the electricity market.

However, the premium prices paid to Hinkley C under the deal agreed by the UK Government will mean that the prices that can be offered under the 'night time' tariff that will be used to charge EVs will be relatively lower compared to what prices would be without the deal. This means that whatever electricity is generated during the night (nuclear plus other non-solar) will have a relative competitive advantage over solar pv used to charge EVs during the daytime.

Today this sounds like an esoteric argument, but in the future, whilst the Hinkley C contract is still in its earlier stage (it will last until 2058 assuming a 2023 start), this will be a very real issue. What we are doing now is  ensuring that in an important part of the future electricity market that nuclear, and whatever else is in the night time mix (including fossil fuel based power), is given a state-backed commercial preference in the energy markets over (day time) solar power. To those who argue that the system is built to favour the major energy utilities this sort of outcome would not be a surprise. To those who give the benefit of the doubt today to the Government's argument as to why Hinkley C needs such a long term contract, this may cause dismay.

In the US companies like Tesla are already promoting the use of solar pv to power EVs. See Also see

100,000 'plug-in' EVs were sold in the USA last year. The UK's skies may be a little less sunny than California or Pakistan, but in fact the difference in annual output is not actually as great as one might think, and solar prices are hurtling down..... See (scroll down the page on this one to see the chart from Bloomberg).

This trend will only grow and grow as a) solar pv prices continue to fall b) cost of EVs falls and range of the vehicles increases and c) increasingly commercial operators will offer daytime charging facilities (and later nightime stored) fuelled directly from solar pv.

The economics of this are already close to being attractive. Commercially sized solar schemes can already be put together for little more than £100 per MWh (10 p/kWh) even in the UK, and this is already close to commercial grid rates for commercial sized supply of electricity. So in fact the development of the solar-EV market is held up more by the rate of development of EVs than the price of solar pv itself.

So, flash forward to 2030 when a lot of EVs are humming around and Hinkley C, which, if all goes as projected (with a 2023 generation start-up), will be in its 7th year of its premium price contract. It will have another 28 years of unfair competition with solar pv, and of course, whatever other renewables (produced at day or night) are being generated. It is even plausible to argue that by sometime in the 2030s homeowners in energy efficient households with a developing generation of cheap efficient battery systems will not need the grid at all. A major hurdle in achieving this of course will be the 35 year premium price contracts (with loan guarantees assuring low interest bank loans) handed out for Hinkley C and whatever other similar contracts our governments decide to grant the nuclear developers.

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