Friday, 27 February 2015

Scotland gets half of renewable auction capacity as renewable prices tumble ever farther below nuclear

Almost half (1GW out of 2.1 GW) of the capacity of the Government's auction for renewable energy has been awarded to projects based in Scotland. Lots of schemes were unsuccessful in the 'contract for difference' (CfD) auction organised by the Department of Energy and Climate Change (DECC) - but at least the ones that are successful are projects that have been granted planning permission. Hopefully  these will be implemented - the onshore schemes are likely to be deployed, but there are question marks over whether the two offshore schemes given contracts will actually be installed. Solar pv farms were less successful, and some of those given contracts will not be implemented because they bid too low prices.

One thing is absolutely certain - the prices awarded to the contracts make even more clearer than it was already that renewable energy is generally a much cheaper option compared to nuclear power.

Onshore wind projects of 759 MW capacity and offshore wind projects of a total 1162 MW capacity won contracts. Altogether the capacity of the contracts in this auction will deliver around 1.5 per cent of UK electricity. But all bets are off for the moment about what will happen in the future until we know what the Government will be like after the next General Election. But another auction round will start in October 2015.

Onshore wind projects were given contracts for premium prices at around £81 per MWh, whilst offshore wind came in at just under £120 per MWh, prices varying according to the year in which they are set to be deployed (between 2016 and 2019). Several Scottish onshore wind schemes and one Scottish offshore wind scheme were among the winners.

Immediate comparisons are being made with the Hinkley C contract which was 'settled' at £92.50 per MWh in October 2013, although such comparisons grossly flatter the nuclear deal. This is because a) the renewable energy contracts last for a mere 15 years compared to the 35 years awarded to Hinkley C and b) the Hinkley C project has very valuable loan guarantees which the renewable energy projects do not possess c) the Hinkley C deal is valued in 2013 prices which are already out of date. We should also add a d) that faith in EDF in being able to deliver its project even under the current generous terms is on the low side and they are highly likely to receive further 'underwriting' commitments and, in the end, further payments for cost-overruns from one or more of the governments involved (French, British, Chinese) if the project is to be built (looking more unlikely, now - see previous blog posts). That's even before you count the cost of dealing with the waste which is always 'discounted' onto future generations.

The British are conducting a further experiment in the 'auction' method of allocating renewable energy projects. The last British experiment in the 1990s was disastrously unsuccessful under the so-called 'Non-Fossil Fuel Obligation' (NFFO). Few of the projects were actually implemented, partly because a lot did not receive planning permission and partly the developers bid in unrealistically low bids simply to get contracts.

This effort will fare better than the last (1990s) auctions for onshore wind - in that most of the onshore wind projects should get installed barring very negative shifts in currency values (the turbines are made abroad). £80 per MWh is a plausible price for onshore wind projects, even though the contracts last for only 15 years (£75 per MWh would be good for a 20 year contract). A couple of the solar farms will also be implemented at around £80 per MWh testifying to the increasing competitivity of solar pv technology. The outcome for the two offshore wind projects given contracts is less certain - the prices that have been bid have the unspoken aura that at least the developers involved expect to be awarded the loan guarantees that they have so far been denied.

But regardless of this renewable energy deployment is spurting ahead by leaps and bounds partly dues to the fact at the moment that developers have been straining at leash to get their projects in before the ending of the (relatively) generous (to the Big Six) Renewables Obligation. As has been said elsewhere, renewable energy output will very soon be more on an annual basis that nuclear power in the UK. And nuclear will have to wait an awful  long time for reinforcements.

As I've said before, I really do hope I live long enough to see another nuclear power station built (a real one, not a small experimental one, note). Because then I may be immortal.

But for now let's campaign for some loan guarantees to be offered for the two offshore wind projects just given contracts (East Anglia and Neart Na Gaolthe) . Which parties will sign up to that as an election promise?...................................

You can see the UK Government's announcement at

Tuesday, 17 February 2015

British minister claims there is 'no delay' in Hinkley C construction

UK energy minister Matthew Hancock has told a Parliamentary Committee that 'We do not expect a delay' in building Hinkley C as a result of the Austrian challenge to EU Commission's consent to state aid for the power station(s). He also declared that 'the cost of nuclear is not going up'. He was being interviewed before the Environmental Audit Committee on 10th February and quizzed about nuclear funding by green MP Caroline Lucas. 

Hancock's statements have some interesting implications. First, given that EDF have been announcing construction to start in early 2013, so in that sense there is already a delay, thus his answer is in formal terms, simply wrong. But one assumes that what he really means is that EDF are going to ignore the issue of the court challenge and go ahead building the power station, pronto (although, as stated in the last blog post in reality the project was falling apart anyway regardless of the Austrian challenge). 

This view once again highlights the gap between government policy and reality. EDF are certainly not going to go ahead without at least a guarantee of compensation from the UK Government in the event of an adverse judgement from the EU Court of Justice judgement (final judgement taking maybe 2 years).

But the UK Government could not, itself, give compensation without breaching the state aid rules which are the very subject of the dispute. The only way this could be done would be through the back door, through AREVA, the effectively already bankrupt (French) state owned nuclear constructor of the EPRs. But that idea doesn't seem even likely to be discussed. The French Government is distinctly unhappy already about increasing demands for the Chinese investors in Hinkley C to be insulated against cost overruns, so much so that we haven't heard much at all from the French Government complaining about the Austrian challenge. Again, see the last blog post for more comment

Hancock's statement about the cost of nuclear power not going up are also interesting, given the increases in occurred in government estimates for nuclear power since out nuclear programme was first announced in 2006. Then nuclear power was going to cost around £40 per MWh for a shorter contract length than 35 years. It is even more interesting given the fact that the costs of the EPRs being built in Finland and France (not to mention AP1000s being built in the USA) are spiralling out of control well beyond their original estimates. Of course the real central issue barring the way to building Hinkley C is which Government would provide guarantees for the cost overruns. If the answer is 'nobody', then nobody will build them!

You can see a transcript for the discussion at the Environmental Audit Committee at:

Monday, 16 February 2015

Why everybody is really pleased by Austrian challenge to Hinkley C

There's a lot of shaking of pantomine plastic swords by the British Government at the Austrian Government for launching a legal challenge to the Hinkley C 'state aid' consent made last November by the European Commission. In reality many people in British Government, the French Government and even quite a few in the nuclear industry will be quite pleased to have an excuse for the project's failure - and that they can perpetuate another myth about nuclear power - that it was the Austrian's fault that Britain's hopelessly irrational nuclear construction programme is not going ahead.

The reality is that the Hinkley C project was already falling apart at the seams. The British Government has only agreed - so far - to give partial underwriting of the construction costs. Given the near certainty of cost overruns arising in the light of the problems with the other EPRs being built in Finland, France and China, the Chinese investors have got worried that they will be exposed to a lot of cost overruns and have demanded that somebody carry the can rather than them. Ultimately it has either to be the British Government or the French Government who own EDF and AREVA who have to pay for what are likely to be very large losses. AREVA are the constructors and they are already effectively a bankrupt state company for whom the French Government is very averse to carry on supporting even more liabilities.

The result is a stand-off, a stand-off that is only being resolved by the Austrian challenge which gets everybody out of a hole. Other EU states are prevented (by the challenge) from thinking about other ruinous nuclear projects, and the British can blame the Austrians. The UK Government has made some token noises about the Austrian action, and the French Government has said very little about this.

I am also quite happy because on current form I am going to win my  £100 bet, placed two years ago, with Martin Alder at a Conference in Birmingham, that construction of Hinkley C would not happen. Meanwhile Martin is quite happy because he is pleased that the UK is avoiding such a terrible deal and some money might be available in the future to support renewable energy.

The curious case of different predictions by leading polling analysts

There are some quite stark contrasts between leading opinion analysts 'predictions' of the results of the May 7th General Election, the question being how this comes about. YouGov, at least in the person of its leader Peter Kellner, reckons that 'Ed Miliband's prospects of becoming prime minister are fading' (Sunday Times February 16th, 'Marauding Scots threaten to keep Ed out of No 10'). Despite the focus  Kellner puts on the number of seats that might be won by the SNP, my attention is drawn to the thinking behind his projection of quite a sharp swing to the Conservatives away from Labour sometime by May 7th.

According to the article in the Sunday Times YouGov  puts Labour ahead of the Conservatives by 35 to 32 per cent of votes but predicts that by the time of the election this will have reversed so that the Tories lead Labour by 35 to 30. This,  he projects,  would give the Conservatives 293 seats as opposed to Labour on 270. If (as he suggests) the Liberal Democrats receive 30 seats, this arithmetic might suggest that Nick Clegg in a pro-Tory mood would just about keep David Cameron in No 10, perhaps with the tacit support of the DUP. I don't know. I suppose it depends on what Vince Cable has had for dinner and whether he can keep it down in this scenario.

But what is interesting is the disparity between YouGov and other pollsters projections, and also his notion that the Tory-Labour balance of votes will shift quite significantly this close to the election (in contrast to the relative stability in 2010).

Paul Whiteley, the much-respected and longstanding University of Essex elections analyst projects rather less change in the Labour-Tory balance of votes, and projects that Labour will get 291 seats compared to Tories 281. Surprisingly ( to many) he suggests that the Liberal Democrats will get 48 seats and that the SNP will make few gains. See Government result: Labour minority Government?

Meanwhile Chris Hanretty, the new boy on the election forecasting block, is putting the Conservatives and Labour close in terms of seats, but in the context of the SNP winning over 30 seats and the Liberal Democrats not quite 30. Hanretty's analysis is altered daily, or rather his software alters the findings, as the polls shift. Today (Feb 17th) Labour were half a dozen seats ahead of the Conservatives and the SNP were projected a dizzy 38 seats, Lib Dems a sad 26. I must say I think the Lib Dems will pick up more than 26 and I would be gobsmacked if the SNP get as many as 38 - I know they will make some gains, but given that the pollsters tend not to use the actual candidates names, given the likelihood of a differential turnout (converts to SNP may be less likely to vote) I suspect that on May 8th Jim Murphy will get some plaudits for minimising the scale of Labour losses (whether deserved or not).  Under Hanretty's current arithmetic a Labour minority government would most likely result. See Certainly in any scenario where the Tories plus Lib Dems plus DUP add up to less than 323, Cameron would be likely to be heading to the Palace to hand in his resignation after the weekend.

I would like to ask Peter Kellner, writing in the Sunday Times, how he projects the polls to shift rather more dramatically between Labour and Conservatives more than happened in the run-up to the 2010 election. YouGov's own analysis shows that the polls hardly changed between Labour and Conservatives in the last 2-3 months before the election. You can see this by going to the webpage - you have to scroll down to see the chart.

Maybe Kellner thinks the UKIP tide will melt away leaving a lot of Tory votes on the beach ready to be scooped up? Not that the weakening of the UKIP vote in the last few weeks has led to Conservative gains, and Nigel Farage may now emerge from his trench in South Thanet to sally forth around the country tilting at windmills, solar panels and the EU.

It should be pointed out that all of these pundits (to a lesser or greater Kellner extent) seem to be assuming that come election day Labour will have lost their lead, and that the Tories will get most votes. Maybe. Turnouts in Labour areas are usually lower than in more well-heeled Tory shires. Certainly if Labour did maintain a 1 or 2 point lead then Red Ed wouldn't take long to move into No 10. But the difference with Kellner is that he seems to be assuming a relatively radical shift in votes towards the Tories. This will keep Tory spirits high, and they live in hope that the same syndrome that appeared to affect Neil Kinnock in 1992 will fell 'Red Ed' (he looks rather pinkish to me, though) in May. But this shift did not happen in 2010 - the relative Tory-Labour positions remained remarkably static and typical of the final result. Why should there be a big shift to the Tories now ?

But Kellner is a skilful analyst, so I wouldn't want to rule his predictions out entirely. But I am intrigued. It's all good fun of course. Although Kellner might be keeping Tory spirits up by suggesting that they are still likely to end up in government, his predictions won't actually help David Cameron. Indeed they might even encourage people to try that bit harder to get out to vote Labour (or Green or even Liberal Democrat).