Tuesday, 29 November 2016

Why leaving the EU is a bit like building nuclear power stations

Britain's efforts to leave the EU are a bit like trying to build nuclear power stations, that is it takes a lot longer than you expect, you're not quite sure it will actually happen and it is very expensive.

Of course we have to decide what Brexit actually means. Whatever the status of the 'have our cake and eat it' notes may be as reported in The Times this morning, this will be viewed as fantasy by many except if you take the Daily Mail very seriously. Leaving the EU could actually be much like Norway or Switzerland's position in that we take all of the rules, including rules on free movement of people. We just won't have any say on them. That'll mean we can whinge all we like with the absolute assurance that we can't do anything except shout at the foreigners rather than speak their language. A perfect English sereotype!

However the notion that we can leave and have some sort of Canadian-plus style of free trade agreement with the EU any time soon (as implied in the Times story) is stretching things too far. Like Hinkley C, such a thing might be possible in theory in many years to come, but in the near-term it is not going to happen. In terms of the EU a Swiss-type agreement is much more likely.
That's because trade deals take an awful long time to negotiate, and as we have seen with the EU-Canada agreement, are fraught with the difficulties of getting every EU nation to agree with it. It's taken 7 years to negotiate this agreement, and it is not finished yet.

Sure, the UK could agree a quickie-ish exit from the EU, within or around 2 years as stipulated in the much-mentioned article 50. That would be covered by the Article 50 injunction that a leaving deal would be agreed by a qualified majority in the EU. But the subsequent agreeement detailing trading relationships would have to wait, leaving the UK having to face trade tariffs in the (could be very lengthy) meantime.  The Government has already given assurances to British industry that this will not happen of course (Nissan, CBI etc). So what's to give?
Well, not the EU, since it is sticking very hard to the principle of free movement in its negotiations with Switerland who seem to be accepting a face-saving compromise in order to stay in the Single Market. So, logic has it that the UK might get a more speedy deal if it simply accepts a Swiss type deal, since that appears to be much more a la carte than much else on offer. The Government would trumpet that it has got a concession that British employers could, if they wanted, give British people first peiority in job appointments, but that would be all they could do apart from reinstate the social security chnages that were agreed by David Cameron.

Even that of course maybe looking on the hopeful side because that will enable an optimistic reading of what is possible within two years.

Of course you might say, and UKIP et al seem to be saying this, why not just leave and take the tariffs. Well, we're back to the assurances given to Nissan etc, which rules that out, and anyway business will riot (not a pretty picture). So using the chess analogy, the Government is in check, and can't get out of check within several years unless it concedes staying in the Single Market. The effective choices of the UK Government become reduced either to staying in the EU as we are at the moment under some temporary basis, or doing a Swiss or Norweigian style deal. Given that the Government does not want to go into a General Election in 2020 without any imminent prospect of leaving, the UK Government is in a very weak negotiating position. It will have to accept what is offered. A Swiss deal is almost certainly the best it will get (although there's plenty of Remainers who will still say that full membership is still best!).

Those are the rules of the game, and the only plausible way out of it is if the game, that is the EU, collapses in the meantime. Much as Nigel Farage seems to want this, the collapse of the euro at least is not something that anyone who has money in a bank would wish for.

Below (underneath the link to the Times article) is a link to a UK Government discussion of leaving the EU. see page 14 in particular



Monday, 14 November 2016

Why Trump might not make much of a difference to action on climate change

The election of Donald Trump probably means that, one way or another, the USA will pull out of the Paris Agreement on climate change, but this may make less difference to how much carbon the world would have emitted than what you might think.

For a start the Paris Agreement already has enough national states as signatures representing a high enough proportion of global greenhouse gas emissions to remain valid with a US withdrawal. The Agreement  requires there to be signatories representing at least 55 per cent of global emissions, and there's more than that left in the agreement without the USA.

Second, internally, such downwards pressure on carbon emissions as there is is mainly bound up with technological changes or policies that are likely to continue anyway. Coal consumption in the US has fallen by around a quarter since 2008, but. according to a recent paper published in The Electricity Journal this has very little to do with Obama, and almost all to do with the increased availability of cheap natural gas. The growth in production of shale gas has been the factor that has reduced the demand for coal and led to the closure of increasing numbers of ageing coal fired power plant. Another factor reducing coal use is the growth of renewable energy - mainly wind and solar. These technologies are promoted by a bi-partisan Congressional agreement on a policy of production tax credits (wind) and investment tax credit (solar). These will  decline in force and run out in 2020. However, many Republican Congressmen are relatively sympathetic towards renewable energy, and there are possibilities that some form of tax credit support could be renewed. The Republicans may not care much for the climate issue, but they are interested in helping people, including often the renewable energy industry, make money.

Certainly Trump is likely to want to short-circuit Obama's 'Clean Power Plan' which was being pursued through the aegis of the Environmental Protection Agency, although even here, many states will continue with their own clean power plans. Trump may order the reversal of the regulations restricting mercury and toxic emissions, compliance with which makes coal plant more expensive. However, as stated already, coal power plant are being retired without this measure anyway. In addition it is unlikely that the revision of standards to allow more mercury and toxic emissions will please many people given that the EPA estimates that otherwise between 4000 and 11000 people will die each year from poisoning by these toxics. Resistance to Republican initiatives to pare down environmental regulations may prove to be rather sturdier and more effective than the anti-environmentalists bargain for.

Third, there is the global impact of Trumps' protectionist trade strategies to consider. Trade restrictions on China, and quite possibly even the EU, may help relieve competitive pressure on some US industries, but they will, overall, make the world poorer. China's economy is less robust than it appears, with rising levels of bank debts and it is vulnerable to US pressures to increase the value of its currency. Indeed, my outlook is that there will be anything from a global slowdown in economic growth to a full-blown world economic meltdown. This of course, to a greater or lesser extent, will have a downward pressure on carbon emissions and probably more than offset the impact of Trumps's reversal of Obama's internal energy measures. On top of that of course, there are suggestions that the EU could impose a carbon tax on US imports to offset reductions in environmental performance by UK goods and services. This idea actually comes from Nicolas Sarkozy.

Some references:





Sunday, 9 October 2016

Why I was right to predict that UKIP would become the largest party

Some time before the EU referendum I predicted that a 'leave' vote would make UKIP the largest party. Well, I am very sad to admit that I was absolutely right. It's just that the Conservative Party has morphed into UKIP-lite.

My argument ran that as it became obvious that the UK could not simultaneously remain in the EU's Single Market for economic purposes and have solely British control over immigration rules then support would shift to UKIP and the Tories would split. What has happened is that the Government has stolen UKIP's clothes and is heading for chauvinism and economic isolation. There's a joke being made to Americans now. Why not come over and buy some property here? You'll get a nice house and change from $100!

The proposed rules about companies saying how many 'foreigners' are employed is a measure bound to inflame prejudice and threaten the livelihoods of people who have settled here in good faith. It is being reviled around the world as a sign of how the last country in Europe to embrace xenophobia in the 20 the century has taken the lead in this ignoble pursuit in the 21st century.

But perhaps the most ludicrous action of all in this package of petty chauvinism announced at the Tory Conference are the proposals to limit 'foreign' students. Apparently Amber Rudd is considering proposals so that overseas students will only be able to obtain work visas if they study at some universities, rather than 'lower quality' courses. According to one of her advisers quality will be measured by whether the universities are one of the two dozen members of the Russell Group of universities.

This proposal would do little, if anything to reduce overseas student numbers as the Russell Group universities would simply expand the intake to recruit the students who would have gone to non-Russell Group universities before. Meanwhile it would do severe financial damage to the rest. It would be an incredible piece of policy nonsense given that recently the Government proposed to ruin the top universities by linking home student fee rises to how well the universities scored in the National Student Survey (NSS) (see previous blog on why this is nonsense). That would mainly favour the non-research intensive universities who tend to do better in NSS scores.

I struggle to understand how it is that a Programme we run at Aberdeen University (or at places like the Science Policy Research Unit at Sussex, Robert Gordon University also in Aberdeen etc) is 'lower quality' to one organised at a university in the Russell Group. But it is now. Because Amber Rudd says so. They'll be no NSS on that one I'm sure!

Of course if Amber Rudd fails to divide and rule the universities she may use the option of simply stopping overseas students getting work visas at all. But if this leads to large cuts in income from overseas students then then that would even more surely ruin the universities more thoroughly than will happen anyway with the loss of EU research income and the decline in numbers of EU students studying in the UK.

There's no good argument for doing this, bar the notion that this may nominally cut the numbers of so-called immigrants (students are counted in this list). It is ludicrous to claim that the students I teach at my and other universities are low skilled people, presumably who will put out British people out of jobs picking fruit or cleaning toilets. No they might compete with university lecturers for their jobs of course - but I can assure you that very, very, few of us mind about that!

But facts and expert opinion have departed from being regarded as having any relevance in UKIP Britain. Experts are weak liberal internationalists who have no country.  The Prime Minister has sacrificed her country in the race to save her Party by transforming it into UKIP.

Saturday, 8 October 2016

Social Science research boosted by right-wing Tory ex-Minister

Peter Lilley, the ex-Tory cabinet minister, gave an unexpected boost to social science research when he implied that social science research was needed to estimate the impact of an administrative change he brought in when he was a minister in the 1990s. But what this (surprising?) boost does illustrate is that there is some hope to defend social science research from what I hear as the increasing howls of 'what's the point of all this' that I hear these days. This is especially strong after the EU referendum and the Brexiteer sneering at 'experts'.

Peter Lilley, in a Radio 4 Programme (broadcast earlier today) was actually discussing whether civil servants, in preparing lists of policy options, should include an option 'of doing nothing'. When asked whether this had led to long term changes in how policies are assessed he responded 'that's something for social science research to determine'! So get your ESRC applications in now, folks (although jolly good luck, because these days only about one in ten or so of proposals get funded!).

This boost was a little unexpected partly because the intensity of dismissal of social science research has strengthened in the wake of the EU referendum, with social scientists being attacked as being 'shamen' in one memorable attack from a right wing opinion leader that I can remember. It's nice to have somebody on the political right who thinks it is sometimes useful.
Of course lots of people say that we social scientists should just focus on teaching.  Now we have to do this of course, as well as research, but what all those wailing at us for spending so much time on research fail to answer is that when we do put a lot of effort into teaching:

Where exactly do we get the material to teach from?

I ask this question when people tackle me on the way that (so they say) academics 'waste' time on doing research when they could be helping students. and I must say that the responses seem pretty thin. People seem to simply ignore the point I make, or refer to some 'body of knowledge' out there which we can use. But where on earth do people think this 'body of knowledge' comes from? The Guardian, or Times perhaps? Well, they in fact tend to either recycle un-evidenced opinion or, wait for it, research published by academics. Or perhaps the Daily Mail? I won't comment in that one. Besides providing students with material to discuss and learn, social science research can answer a lot of questions that the people want to know about (including Peter Lilley it seems).

The Government have got very confused about all of this in their proposals for a 'Teaching Excellence Framework'. Initially at least, they seemed to be moving towards a proposal whereby the universities that did best in the national student satisfaction surveys league tables were allowed to increase their fees. Which seems ok at first sight until you understand that, as a very general rule, the universities that students most want to get into (ie research intensive universities) happen to be the ones that tend to come often towards the bottom of the 'teaching satisfaction' league tables. So would they be starved of funds and forced to sack the boffins?

So what does the Government want to do? Destroy places like Imperial College, and the LSE that don't do well enough in student satisfaction surveys but who generate very high quality research as represented by international league tables? Despite the fact that students want to get into these sorts of places most of all!  Of course, as we can see in Scotland, which boasts lots of top-rated universities (eg Edinburgh and Aberdeen, and others), a fees system is not necessary for UK students.

But maybe the universities should not expect too much help from the Government. After all they are tainted with the liberal internationalism that is so hated now by Brexit Britain.

There is an irony that, unintentionally, the Brexiteers, by bringing down the value of the pound, have made studying in Britain a lot more attractive for overseas students. This might go some way to replacing the loss of EU funds for research if it leads to increased numbers of students coming in from abroad. But I suspect Theresa May will order her ministers come up with some 'options' to put a stop to that sort of comeback!
Of course doing nothing to limit overseas students numbers would be one option that the universities would favour! But will a 'doing nothing' option be on the cabinet committee agenda?
By the way, if you want to join in (or just look at) the 'Energy Politics' facebook group at the University of Aberdeen go to https://www.facebook.com/groups/1110798358955201/

Monday, 26 September 2016

Ofgem action against small generators threatens to destabilise capacity market

In pursuit of a complete failure to understand the problems with its own 'capacity market' Ofgem seems about to make things a whole lot worse by reducing capacity margins - by taking away the incentives to a lot of small scale generators whose existence helps to keep the electricity sector running.

Ofgem runs on a piece of fantasy theory that the capacity market will work better if the 'distorting' benefits to so-called 'embedded;' generators are taken away. In fact the opposite it the case. Ofgem's concern that proposed big gas power stations cannot win bids at sufficiently low prices to put them into business partly because of the small generators is total nonsense. Without the small generators the price at which the required capacity will be supplied by the big power stations will increase not fall. The problem has to do with the principles and practice of the capacity market, and has nothing to do with the small generators who currently provide a valuable service. Ofgem's actions  are akin to destroying a table leg in order to save the table.

The central problem is that future prices for electricity that the power stations could sell on the wholesale power markets are very uncertain, and quite likely to fall. Given this it will require very high capacity market prices (which will put consumer energy bills up by large amounts) to evince the capacity that Ofgem wants from gas fired power stations.

A big part of the problem of course is that increasing parts of electricity supply are being paid for outside of the wholesale power markets, through the Renewables Obligation or contracts for difference. This will only increase in the future, especially if Hinkley C comes on line (whenever that may be). Note: this has nothing to do with so-called renewables 'intermittency' , it is to do with 'liquidity' being siphoned away from the wholeslae power markets to pay for low carbon energy sources - which has to be done of course, otherwise they will not come on line.

The answer to all of this is to offer new generators firm long term contracts so that they can have income guarantees in the future - this may involve some sort of 'take or pay' scheme for all generators at least, in the form of a contracts for difference arrangement as applied to the generators.   - But this approach is bound to end up being a lot cheaper than the Government's current approach which consists on the one hand of giving the capacity payments to every generator and on the other hand (in these proposals) of driving the small generators out of business by taking away the income they need to provide capacity to the whole of the system.

The problem has a lot to do with ideology. Ofgem and civil servants seriously believe that somehow in a world of decarbonisation you can run wholesale power markets according to some imaginary free market trading arrangement. People must learn to be more pragmatic and tear themselves away from economic models that have little bearing on the real world.
For the story on Ofgem's proposals see http://www.telegraph.co.uk/business/2016/09/24/industry-faces-160m-energy-hit-under-overhaul-of-power-plant-rul/

Tuesday, 20 September 2016

All green energy supporters should shun the Tories and join a Progressive Alliance

The Green Party and Jonathon Porritt have been organising campaigns to unite people to form a 'Progressive Alliance' that would co-ordinate efforts to defeat the Conservatives. There is hardly an area for which this is not more necessary than green energy. That means renewable energy and energy conservation.

Tories who oppose support for renewable energy are getting their way despite the fact that green energy is much more popular than nuclear power or fracking which is their preferred means of deriving energy. This is despite the fact that both of these options are much more difficult to deliver compared to renewables or energy efficiency.

Behind the spectacle of Hinkley C Point being, in reality, postponed again (until at least 2026) because of the inability of the nuclear industry to deliver, the Government refuses to offer contracts to several thousand MW of onshore wind that are in the planning system, or solar farms that could be quickly put together. It has postponed the issuing of contracts for new offshore windfarms. Targets for zero net energy housing have been abandoned. Local authorities have been stripped of their powers to make developers build buildings to a higher energy efficiency standard than the minimum requirements. As the UK leaves the EU the right wing will be straining at the leash to cut down the environmental protection rules, including EU inspired energy efficiency standards for machines and buildings. I could go on.......

All the Government seems likely to do now is to oversee the ramping up of incentives for fossil fuel power plant under the capacity mechanism and think of crazy schemes to fund nuclear power through back-door blank cheques.

Of course the predominantly anti-green Brexiteers hold green energy to ransom. Despite the fact that green energy is very popular the anti-green faction hides behind a front of xenophobia to push through policies that the public really does not want. It's classic right wing politics of course.

So it seems nothing will change until we get rid of the Tories. Divided the centre and left will fall. Together we can win.

See Jonathan Porrit's blog for some general further thoughts: http://www.jonathonporritt.com/blog/progressive-alliance-laying-foundations

Wednesday, 7 September 2016

‘The newest windfarm in Aberdeenshire – a good omen for renewable energy?’

‘The newest windfarm in Aberdeenshire – a good omen for renewable energy?’
Roger McMichael from the company ENGIE who are building the Cairnborrow windfarm in north west Aberdeenshire will be coming along to talk on Friday September 16th at noon in room New Kings (NK) 3 at the Kings College, University of Aberdeen. He will talk about renewable energy policy as well as the windfarm that is currently under construction. You can see some details of the windfarm at http://www.westcoastenergy.co.uk/…/work-begins-on-10mw-cai…/
You can see the position of New Kings Building at:http://www.abdn.ac.uk/about/campus/maps/view/36/
All are invited to this meeting.

Saturday, 3 September 2016

EDF leaders get desperate over Hinkley C

EDF leaders are now in such a state of panic over their Hinkley C proposals that desperate messages were being sent out to tell the British Government that they need to take a £6 billion equity share in the proposal. Signals are coming from Downing Street that the Government wants to decouple Hinkley C from the 'deal' with China allowing them to build their own nuclear power plant at Bradwell. The Chinese have responded that they would no longer be interested in funding their (approx one third) share of Hinkley C.

A Chinese response of withdrawing from the Hinkley C deal would be entirely logical from their point of view since the only point of taking a huge risk of funding Hinkley C would be the possibility (in their imagination at least) of opening up a western market for their own nuclear power stations. The 'deal' with China was always a bizarre arrangement compared to the normalities of building power plant and really reflects earlier desperate attempts by EDF and some pro-nuclear allies in the UK to prop up what had become, by 2012, a project of increasingly dubious commercial realities.

I know that some people still occasionally produce projections that on the basis of the now notorious 35 year contract to pay EDF £92.5 per MWh in 2012 prices (now worth about £97 per MWh) EDF can still make a profit on a rate of return of around 7 per cent. But, and this is a VERY important 'But' without a) the ability to finance the bulk of this from bank loans as opposed to equity capital which needs to be serviced by much higher returns and b) any reasonable certainty that the project would be delivered relatively close to projected cost and timescale, then the scheme is something that no sane boardroom in the private sector could possibly ever contemplate taking on.

The Treasury has quietly edged away from offering the sort of guarantees that would have allowed EDF to take out bank loans to finance the deal - fearing quite rightly that the guarantees would most likely be transformed in the fullness of time to a state funded blank cheque. Meanwhile the construction disasters for the Hinkley-style EPR models in Finland and France have  made the achievement of cost and timescale delivery projections look like, as they say these days, a 'heroic' ambition.

So it is no surprise that there would be no private sector takers for the Hinkley C investment. Centrica withdrew their plans to invest in Hinkley C in 2012, and remember that the previous year the other privately owned big electricity companies had walked away from the British nuclear programme. But a foreign Government with their own techno-political agenda, China, then decided, in effect that Hinkley C might act as a 'loss leader' for their ambitions to be major nuclear exporters. I think this hope is much misplaced and that China should stick to exporting the solar panels, but I shall reserve that story for another time.

Of course if one country has a political agenda in investing in another, then it is hardly a surprise if the host country (in this case the UK) considers its own political agenda, as we read in the papers. But the point here is that this issue (China's involvement) only arises simply because the Hinkley deal is commercially inferior to the various other clean energy options that the UK has at its disposal, none of which will have any major problems in delivery or financing. The only problem here is that the Government does not want to offer any long term contracts for them - and is even (now) delaying offering contracts for some more offshore windfarms.

People can often be heard to say that nuclear power is needed to provide energy security. Yet what is remotely secure about the technology which you don't know whether or when it will be delivered? Indeed, this produces the opposite - insecurity!

EDF's desperate plea that the British Government take over the Chinese share in Hinkley C is unlikely to be welcomed by Treasury officials who would (or at least should) see that as tantamout to locking in the British state to shovelling money down a black hole, with a lot more inevitably following the first £6 billion equity.

See FT report: https://www.ft.com/content/0b80e672-70ea-11e6-a0c9-1365ce54b926#axzz4Io1bYUFm

Thursday, 1 September 2016

Labour 's 'choose a policy' approach to nuclear power looks like chaos

With Labour trying to face several ways at once it looks more like chaos as the front bench tries to please everybody and fails to satisfy anybody at the same time.

Jeremy Corbyn is quoted (quite rightly in my view) as saying that 'Tories have just put up the cost of your electricity by giving a blank cheque to EDF for a power station that doesn’t work' See: https://dwpexamination.wordpress.com/2016/07/31/jeremy-corbyn-facing-backlash-from-unions-momentum-activist-and-shadow-business-minister-over-hinkley-c-nuclear-opposition-huffington-post/

On the other hand, Labour's energy spokesperson Barry Gardiner is said to be in favour of the Hinkley C power station but at a lower cost to the consumer. See Ian Fairlie's piece at:

How to reconcile these two views? Well, you could say that Labour wants to pay a slightly lower price for a power station 'that doesn't work'. Alternatively, you can just choose the particular policy that comes closest to your particular taste. That's one way of running a political party I suppose, though even (nay, I say, ESPECIALLY) the Green Party has somewhat more coherent policy responses than Labour!

As for the trade unions, well that depends on whether you are a French union or a British one. The British trade union position is that it's ok if somebody else pays for Hinkley C, and of course the French unions are opposing the deal because they know that they will end up paying a lot of money (and jobs) for it!

Of course, as Ian Fairlie argues, there's plenty of jobs in alternative clean energy sources to Hinkley. One estwhile Momentum supporter has attacked Corbyn as being an 'anarchist' for his position on Hinkley. Well, I'd more see the Labour position as being much closer to chaos! There's a big difference!

Monday, 1 August 2016

How British research academics will be encouraged to emigrate by new research rules

The just published 'Stern Review' on how research outputs of UK academics are going to be valued is likely to seriously blight the careers of British academics and lead to a 'brain drain' as they seek to advance their careers abroad.  A change in the arcane rules of the 'Research Excellence Framework' (REF) will mean that the work of British academics is now likely to be of much higher value to foreign universities than British ones.

Under the practices of academia every 6 years British university departments are assessed for the quality of their research output, and this exercise, now known as the 'Research Excellence Framework' (REF). The original purpose of this exercise was to have some rational basis for distributing monies for research time and resources between university institutions, although the amount of money at stake has diminished as austerity measures have taken their toll.

One of the criticisms of the process has been, as the Stern Review, says, that 'smaller institutions with strong teams in particular areas which have previously been potential targets for ‘poaching’(para 99 point iv). Under the existing system if somebody if doing well then they would have good prospects in applying for a job with another university since the academic would carry with them their research output. Either the host university would have to give an offer of promotion to the academic to keep them, or the academic would most likely leave to take up the new post at a different university. However this had the side-effect that people could be poached by departments who either had greater prestige in a particular area or at least had resources to offer people more money.

But now under the Stern review recommendations if British academics switch from one department in one university to a different university then they will no longer take the value of their research outputs. This could lead to some odd effects. One effect could be that towards the end of each cycle there would be a sort of vague 'transfer window' during which academics who had amassed good records and who could blag themselves about their future could get jobs in other universities. However, another, rather more perverse effect is that in between such times staff would most likely find themselves like beached whales who could not get promotion in other British universities since their research output could no longer be transferred.

Note that I say, promotion to 'British' universities, because the same rules would not apply abroad. British academics would be welcome in other countries since these foreign universities would in no way be bound by the UK REF rules and would be able to use the value of their research in the international league tables of universities without suffering any financial penalty. Indeed in some ways the British university who has 'lost' the staff would actually benefit. Why? well they would retain any research output made by that academic while they were working there whilst the university would no longer have to pay for it! More bizarrely of course, universities could actually dismiss people, make them redundant, and still report their work to the REF!

Of course there are lots of gremlins waiting to crawl out of this piece of do-goodery by Lord Stern, but I would emphasise the particularly irksome gremlin that it is highly likely that lots of British academics will move abroad to further their careers. Really, all Lord Stern's attempt to stop 'poaching' is doing is creating a different, arguably much greater problem. At least with the current problem of poaching it was British universities who were getting the benefit. Now it will be the foreign universities who will be doing the poaching and getting the benefit. And, post Brexit, many academics are just looking for good excuses to emigate anyway!

Building on Success and Learning from Experience

Sunday, 31 July 2016

Why UK Government will be signing a blank cheque for Hinkley and Bradwell in one go

Theresa May may have gained short term kudos for 'stamping' her authority on the Hinkley decision by delaying it until the Autumn. But in reality all she may have done in the long term is emphasised the fact that she sanctioned a decision that resulted in the biggest industrial disaster to have affected the country in modern times. Once the Government signs the project it will be committed to footing the bill for a long running engineering construction foul-up, whatever the terms of the Government's contract may actually say.

It should be obvious from the problem that EDF has had with its attempts to build the two reactors at Okiluoto in Finland and Flamanville in Normandy that there is a very high chance that the project will end in disaster, organised by a company whose leaders ignore commercial logics in pursuit of a discredited piece of technology - the hallmark of a nationalised industry that controls the state. But now EDF say they will go ahead, in 2019, with 'pouring concrete' (ie starting building proper) once Flamanville has 'proved' itself. Yet even this timetable may not happen, pushing EDF further into its financial crisis and producing even more handouts from the french state to EDF.

The UK Government, for its part claims that it will be under no legal obligation to pay for any cost overruns. True, we understand that the contract that awaits signature says that the Hinkley C power plant must start generating by 2033 if the premium price  payments of £92.50 in 2012 prices (£97 per MWh in today's prices) are to be paid. But that is a legal nicety that obscures the political blank cheque that the UK Government will be signing this Autumn.

Imagine the situation in ten years time. It is 2026, and EDF, is beset by generally unfavourable market conditions, having in any case to pay increasing amounts of money to refurbish its own French nuclear fleet. It is facing mounting construction cost overruns on the still far from completed Hinkley C construction and EDF tells the French and UK Governments that it cannot complete the project without further financial injections. We then have the spectacle (as we did in the case of Sizewell B in 1990) of a half-built nuclear power project with no money to finish it. There will then be a political demand that it must be completed. The terms of the contract between EDF and the UK Government will then become irrelevant, and the UK Government will have to pay untold extra billions to finish the project, and fund it thereafter, the only limits being what cost-sharing it can achieve with the French Government itself.

Of course Theresa May, who is said to be reluctant to agree to the Chinese demand on behalf of CGN to be given the right to build a 'Huang' Chinese power plant at Bradwell in Essex, may seek to alter the terms of this agreement. The Chinese have agreed to invest in Hinkley C on the basis that the Bradwell project will be allowed. Indeed the Chinese are responsible for a third of the equity in the project. But the controversies and issues around this Chinese project are likely to considerable.

Apart from controversies over 'security' issues (about which I do not know enough to comment) there are going to be arguments about validation of the safety protocols for the plant. In China there have been complaints that the safety criteria have not been rigorous enough for nuclear power stations. The problem from the point of view of the British Government is that if the Chinese have put money into the Hinkley project, then the British Government will be under great pressure not be seen to be too choosey with the approval of the power plant. Will Bradwell be built according to British or Chinese safety standards? Then there is the issue with the financing and power price for the Bradwell project. Again, the Government will be under great pressure to give the project good terms, or be accused by the Chinese of having reneged by other means on the Hinkley agreement.

If Theresa May says that she will agree to Hinkley C but will not agree to the Bradwell project, then it is likely that the Chinese will walk away from Hinkley, thus ending the project - unless the French Government came up with even more money and risk-taking.  But of course if Theresa May now does give approval for the present scheme, give or take some public relations concessions, then it is May that will go down in history as having personally approved not just a Hinkley disaster but a political and industrial crisis over the Chinese nuclear power project at Bradwell.

Of course by 2030 under this scenario we will still probably have no power from the new nuclear power plant, but otherwise we would have been able, by then, to have put on line maybe another 20 per cent of our power from renewable energy from the money. That is, just using the money that we would be committing to non-existent nuclear power stations, and not including any other renewables we would have put on line anyway.

Friday, 22 July 2016

EDF to postpone Hinkley Construction start to at least mid 2019

The media is full of stories that EDF is about to announce a 'final investment decision' on Hinkley C nuclear power station, whereas the logic of its own press statements suggest that the project is in fact in deep freeze. Once again, EDF's superb public relations is convincing people that its disastrous Hinkley C power plant project is moving ahead, whilst the reality is that it is announcing that the project will not be started until at least 2019. And even this date seems to be associated with the commissioning of the terribly delayed sister project at Flamanville.

I have lost count of the number of times that EDF has sparked speculation that it is about to announce a final investment decision for the project. These 'announcements', given through press briefings about which EDF bristles with annoyance if people question their connection with reality, have occurred several times since 2012.

And yet EDF's own press release in effect says the opposite of the 'final investment decision' press stories that EDF have inspired.The document, released by EDF on July 21st, actually says: 'The first concrete of reactor 1 of HPC, scheduled for mid-2019, would coincide with perfect continuity with the start-up of the EPR at Flamanville, scheduled for the end of 2018'

So, what is actually happening is that, as experts familiar with the saga know only too well, EDF is confirming that Hinkley's construction could not possibly begin until the safety issues surrounding the reactor design have been cleared and the working of the Flamanville project has been demonstrated. This is not going to happen for a minimum of THREE YEARS.
Of course even this possibility defies commercial logic given that the project would bankrupt EDF without massive subsidy from the French state.The UK has agreed in principle to pay EDF (in June 2016 money) 97 per MWh for 35 years of operation for the project, but even this price would not go close to covering the risk that EDF would take with the project. Hence the need for a massive state handout. The French unions and many financiers and managers inside and outside the company regard the whole thing as a politically motivated piece of industrial suicide.

Even the UK Treasury has long since sidled away from the project, effectively cancelling its offer for guaranteeing the bulk of the loans that EDF would hope to take out for the project. Indeed, contrary to what seems to be widely assumed, the UK Government has not even offered EDF a legally binding contract. It beggars belief how seriously one can take a project that has not even got an offer of a contract from the people who are supposed to be paying for it!
But then the project has long since departed from being based on any sense of commercial reality, and linkages with commercial reality have always been tenuous, as they will be with any nuclear power project that has to meet the sort of safety standards demanded in developed countries these days.

Whatever 'decision' will be reached at next week's EDF Board meeting, it will, as EDF clearly state, not lead to the construction of the Hinkley project being started. But it will be just a continuation of the public relations pantomime that we have been witnessing for several years now.

See EDF's press release at:

Thursday, 14 July 2016

Government abandons the economy to try to ward off UKIP

Early pronouncements from Philip Hammond and David Davis indicate that the Government is set to abandon hopes of remaining within the Single Market as the price the UK will have to pay for imposing immigration controls on EU citizens. This strategy is clearly aimed at pacifying those who prioritise reduction of immigration within the Tories and also reducing the attacks from the xenophobic right, whose 'respectable' wing resides in UKIP.

Politically this might take the shine off the electoral threat to Conservatives posed by UKIP in the short term, but this threatens to unravel in the longer term and it will be at great cost to the British economy.

It seems that Hammond is fighting a rearguard action to preserve internal market market access for British financial services, but how successful and costly that will be to the British exchequer remains to be seen. But the British economy now faces having nearly half its trade facing not only tariffs in the EU but also falling prey to non-tariff trade barriers as the EU changes its rules to which the UK will not be subject.

In terms of energy our influence in regulations governing energy markets will decline and the automatic upgrading of energy efficiency standards and labels that comes with the EU will cease. Directives on renewable energy and energy efficiency will cease to apply.

There will be a lot of talk about trade agreements with the USA and maybe others, but in reality nothing can be effected until after the UK formally leaves the EU, which, according to David Davis, is likely to be in December 2018. That implies the issue of an article 50 notice in December of this year (2016).

In the longer term (which may not be very long at all!) this attempt to feed the monster of xenophobia is likely to fail as the hard right demand more and more stricter immigration controls. The targets of abuse have already been widened from just perceived EU migrants to muslims, and soon no doubt others.

'The hopes of self-styled 'civilised' Brexiteers such as Daniel Hannan are being dashed. His 'libertarian' eurosceptical views favouring continued free movement and internal market membership outside of the EU have merely ended as being ballast to pave the way for the objectives of the anti-immigration English nationalist lobby.

Monday, 11 July 2016

Ways in which Brexit will help the environment

‘Always look on the bright side of life’. That was a theme associated with the ‘Life of Brian’ (as is strife within the popular fronts of the Labour Party these days of course, but I won’t go into that now). So what’s good about Brexit? Well, it might be a crushing blow to our British economy and environmental laws, but in other ways it might actually help..... 
One way Brexit will definitely help is that the green interest groups will find it easier to get their way on various environmental issues in EU institutions. The UK won’t be around to perform their usual watering-down role! Take the issue of air pollution. The UK has been an opponent of tightening up EU air pollution regulations. As the Guardian reported on June 3rd this year; ‘EU states have agreed to water down a proposed law aimed at halving the number of deaths from air pollution within 15 years, after intense lobbying from the UK that cross-party MEPs have condemned as “appalling”......Some 14,000 people will die prematurely every year across Europe from 2030 as a result, if the weakened proposal is implemented, according to figures cited by the environment commissioner, Karmenu Vella.’
Then there is the issue of chemicals which scientists say are killing bees. The EU banned farmers using neocontinoids in 2014, and bees are said now to be recovering, but the UK dragged its feet at first allowing the NFU to use the chemicals in 2015. In the USA the chemicals are still used widely and bee numbers are declining. In the UK the number of bees declined by 15 per cent in 2015 according to the Beekeepers Association, continuing a trend that has set in for many years.
Under pressure from the NFU the Government has allowed farmers to carry on using these chemicals. Of course, once more over the cliff, our British lemming friends must go!
Then there is the issue of renewable energy targets. The UK, under great pressure, accepted the 2009 EU Renewable target which was set as a mandatory commitment for 2020. We’re now set to get 30 per cent of our electricity from renewable energy by 2020, even if we haven’t met our target from energy as a whole. However the UK Government has strongly resisted a further rigorous target for 2030. Clearly, without the UK, the EU could set a stronger renewable energy and energy efficiency ambition!
Moreover, anti-nuclear greens may be cheered by news that Chinese investors in Hinkley C are spooked by financial instability in the UK and the declining value of the £ making it even less likely that the Hinkley C nuclear power development will go ahead ahead.
Now, think about it, under Brexit, the UK will have a bad environment. But at least it will be better in the rest of the EU! Progress in implementing a range of environmental initiatives in the EU will be a lot smoother and more effective! Indeed, if by some miracle the UK does remain inside the internal market, the UK will have to obey the EU environmental laws anyway, but won’t be able to have any say in making them! Ideal, you could say!
But there is one pretty sure way in which the environment is likely to benefit from Brexit, and that is reducing UK energy consumption and thus reducing carbon emissions.  That’s because the Brexit-inspired reduction in economic growth will reduce energy consumption. Indeed, the Government will now find that the need to build new conventional power stations is much reduced or even abolished with Brexit. The UK’s power demand has, in any case, been going down since around 2005. Now it is set to continue to decline with slower economic growth, or even plummet with a recession. Not only will we need less power plant and coal and gas burning but people will not be able to afford to heat their own homes as much. Less energy consumption means lower carbon dioxide emissions! Another environmental winner from Brexit. See a previous post for more details http://realfeed-intariffs.blogspot.co.uk/2016/06/with-brexit-uk-may-not-need-any-more.html

But of course there is the ‘piece de resistance’, they say, in a language now increasingly banished from English schools. That is Brexit as a means to deter any other country from thinking about quitting the EU! With so much economic and political chaos in the UK, populist politicians who where thinking about asking for referendums about EU or euro membership are now forgetting the idea or having serious second thoughts.

So as the UK descends into political and economic chaos, think about the gains, the supreme sacrifice we are making in saving the EU from the English anti-green menace....not to mention reducing carbon emissions!......

Thursday, 7 July 2016

Dutch tender award for offshore wind plant is 25% cheaper than Hinkley C contract

The Dutch Government has awarded a contract to build two 350 MW Borssele offshore windfarms for 87 euros per MWh (£74 per MWh), some 25 per cent cheaper than the current value of the contract for Hinkley C. The contract has been awarded to DONG, in which the Danish Government has a majority share.

This price for Borssele 1 and Borssele 2 includes transmission costs but, unlike the case of the proposed Hinkley C nuclear power station, the price does not include any offer of loan guarantees from the Government. Hinkley C is routinely reported as being paid £92.50 for a 35 year contract, but this is in 2012 prices. The current (jJune 2016) price is £97 per MWh, which puts it as being a lot more expensive than the Borssele offshore wind project.

Offshore wind prices have been tumbling in the past couple of years compared to earlier contracts awarded in the UK. Last year Vatenfall won a contract with the Danish Government to build the 400 MW Horns Rev plant at 103 euros per MWh (£88 per MWh) although this figure does not include transmission connection costs.

So why have costs for offshore wind been falling so much, and how come the costs appear to be so much lower than the UK's, whose last (2015) auctions revealed prices for offshore wind of around £120 per MWh?

According to DONG, their cost reduction can be ascribed to: 'The reduction of cost of electricity is driven by cross-industry collaboration, ongoing innovation of wind turbines and blades, continuous improvements of foundation design and installation methods, higher cable capacity, a growing and competitive supply chain and not least the synergies from building large-scale capacity sites such as Borssele 1 and 2. In addition, the Dutch sites offer good seabed conditions as well as good and stable wind speeds, which contribute to high output from each turbine.' http://www.dongenergy.com/en/media/newsroom/news/articles/dong-energy-wins-tender-for-dutch-offshore-wind-farms

It should be noted that both the Danish and the Dutch tender processes are much superior to the relatively 'laissez faire' approach of the British, an aloofness that increases uncertainty and thus investment costs. In the Dutch and Danish cases the sites have been carefully evaluated for technical and planning considerations before the tender, and permits have been assured. In the case of the UK, developers are left to bear the risk of these factors.

Although the UK Government has said it wants to give contracts for more offshore wind schemes, timing of this has been thrown into uncertainty by recent political events. It is now far from certain that the (new?) ministers at the Treasury and the Department of Climate Change will adhere to agreements about issue of future 'contracts for differences' (CfDs) that have been made between Osborne and Rudd.
Nevertheless, RenewableUK calculates that offshore wind schemes, including those which already have finance and planning in place for construction, will provide 10 per cent of UK electricity supply by the year 2020. However, the UK Government is refusing to make any contracts available for the cheapest electricity power option, onshore wind, which is currently being installed under the Renewables Obligation for around £70 per MWh.

For further information see also:

Tuesday, 28 June 2016

With Brexit UK may not need any more power stations as electricity demand falls still further

One largely unintended consequence of 'Brexit' is that the economic uncertainty and reduced economic growth are likely to produce a further fall in electricity demand which may mean we do not need any more big power stations other than those already being built.
Lost behind the usual blizzard of insistence that blackouts will result if we don't build more gas and nuclear power plant is the fact that electricity demand has fallen over the last decade. According to Government figures (see DECC energy statistics) electricity demand fell from 406 TWh in 2005 to 359 TWh in 2015. Even since the economy began to grow again after the crash consumption fell from 384 TWh in 2010.

The reasons for the decline are threefold. First electricity prices have remained high. A lot of this is because we are having to import increasing quantities of natural gas from abroad,  and that gas is more expensive than what we have enjoyed coming from the now depleting North Sea fields. Grid costs have increased and green levies such as the carbon floor price have put prices up. Second, energy efficiency policies (including energy efficiency standards introduced by the EU) have repressed demand, and thirdly economic growth these days is much less energy intensive than it used to be (even in the 1980s) because of a switch from industrial production to services.

But now Brexit seems likely to reduce economic growth to at best a few points of a per cent in the near and perhaps more prolonged future. Consensus Economics, for example, has predicted UK economic growth to be down to 0.4 per cent in 2017. Any rate of economic growth below 2 per cent per annum seems likely to see falling electricity demand on the basis of recent experience.  In addition, as Cornwall Energy Associates have pointed out, electricity prices are going to keep on rising. Ok, perhaps by not as much as an increase in the longer term as if we had Hinkley C (which seems now even more likely to be cancelled), but they will still rise.

If you put all of the factors together electricity demand seems likely to fall, perhaps quite substantially. Aurora energy have already been projecting (before Brexit) that our new power station requirements for the medium term would be modest.

The Government has yet to make good use of its levers to make the electricity system more flexible. The National Grid has been criticised by the House of Commons Energy and Climate Change Select Committee for alleged conflicts of interests which deter it from making optimum use of demand side response and other demand reduction techniques. There is only a snails pace response by the Government to encourage the more widespread adoption of electricity storage techniques. In addition to that the National Grid already has, through the 'Supplementary Balancing Reserve' the means to take-up supply from power stations that might otherwise be closed down.

In the 2030s we are likely to see an increasing demand for electricity to power electric cars. Yet such demand has great potential to fit into an electricity regime increasingly dominated by fluctuating renewable energy sources. ''Grid to vehicle' and 'vehicle to grid' electricity systems will act as a crucial means of matching demand to supply.

I do also disagree with arguments suggesting that the alternative to Hinkley C is gas fired power plant in the quest for decarbonisation of our electricity supply. It is not. It is renewable energy, and the Government is ignoring vast resources of cheap onshore wind and solar power, in addition to the resources of offshore wind. All of these options are going to be a lot cleaner, cheaper and certainly much more deliverable than new nuclear power.

Monday, 27 June 2016

UKIP set for major boost as Johnson forced into humiliating u-turn on freedom of movement

As predicted in earlier posts on this blog the UK is heading for the worst of all worlds compared to retaining full membership of the EU. Boris Johnson, in a staggering u-turn, has effectively accepted a 'Norweigian' solution whereby we are bound by the EU's rules (including free movement of labour) except that the UK will have no say in making the rules to which we will be subject! See http://www.bbc.co.uk/news/uk-politics-36637037

But at least the British experience will dissuade others from trying the same!

Of course the protection of the economy and the rights of free movement of people are important, vital, objectives, and indeed this concession may take some of the sting out of the Scottish Government's challenge (see previous post). However papering over the cracks torn in the national fabric created by an unnecessary and ill-fought referendum will now be achieved at a terrible political cost. Besides the evisceration of UK influence in and outside the EU, UKIP will be given a major boost as that they will now claim that they have been sold out by Boris Johnson and others in the new Government.

Of course Johnson is trying to make out that somehow Britain will increase controls over migration into this country. This surely must be cloud cuckoo land. The idea that the EU is now going to give into British demands now that they are not in the EU to a greater extent than if we are members is itself nonsense. To imagine that the EU are now going to concede to the Swiss in their arguments with the Swiss over immigration controls and anybody else order to agree terms with the UK is the most fanciful of all proposition. The EU are not about to change the whole basis of the original  Maastricht Treaty in 1992 for the sake of some trade deal with the British.

'Open Europe' have given a simple explanation of Norway and Switzerland's position at http://openeurope.org.uk/intelligence/immigration-and-justice/norway-and-switzerland/

But now we face the whirlwind of rising xenophobia. UKIP represents the 'respectable' face of this movement, while in the wings the English Defence League and other far right movements harass people perceived be a 'foreigner'. But as we go into the General Election UKIP will now be presenting itself as the 'guardian' of the Leave vote. Many right wing Tories will be torn between supporting them and the Tory leadership. The result looks like the UK is turning in a very short period from being a tolerant country to just another state with a rising tide of racism and xenophobia.
As UKIP's influence expands, so does their influence over policies, such as green issues, over which they have little real support among the population, but which damage society and the environment.

The terrible irony is that one of, perhaps the main, architect of this situation, Boris Johnson, is set to take over the leadership of the country!

I hate to say 'I told you so' but check out what I wrote near the end of March at http://realfeed-intariffs.blogspot.co.uk/2016/03/how-brexit-could-make-ukip-largest.html
UKIP is successfully hijacking the support of many poorer sections of the population on the basis of the age-old technique of 'blame the foreigner'.

A few days ago I was reading a good popular account of British history written by the archaeologist David Miles (The Tribes of Britain, Phoenix, 2006) and on page 340, he describes conditions in England in the late 17th century. That period saw the arrival in the UK of many 'Hugenot' people fleeing persecution in France.  He wrote on page 340:

'The arrival of Hugenot workers did not meet with universal approval. People complained that they worked too cheaply, drove up the rents and the prices of timber and coal, polluted rivers, ate strange food - such as garlic, snails, oxtail soup and root vegetables. The number of refugees was exaggerated. Popular prejudice blamed them for the Great Fire of London in 1666, and illogically assumed that they were papist agents of the powerful french state'.

So what's new today?

Well, a new twist is that the power and influence of Germany is increasing, ironically, precisely at a period when the Germans want to be part of a democratic Europe. In effect they are being forced to take a leadership position they do not want.
We read about how there are a stream of countries lining up to have referenda about leaving the EU. Well, usually far right parties are saying that - will they get into power? Will any other EU political leader do a Cameron? Maybe not after the growing chaos and ludicrousness that is represented by the British example.

But there would be a growing absurdity if this happened. Like the UK, they would leave, then come to a trade agreement with the EU that would mean they would have to accept EU rules over which they had no control. Imagine it, an increasing number of countries leaving the EU and economic decision-making to Germany!

It's ludicrous, I know.

The reality is that Europe is now so interconnected that it is extremely difficult for one country, even as big as the UK to simply walk away. But, now we have three important countries, Norway, the UK and Switzerland who have decided to give away their effective sovereignty over wide ranges of policy areas to a body over which which they have no control leaving a reluctant Germany to make decisions on their behalf!

Germany - the sovereign power in Europe by default!

Sunday, 26 June 2016

Are we heading for constitutional crisis as Sturgeon threatens to 'veto' Brexit

We can see in the headlines that Nicola Sturgeon is threatening to 'veto' Brexit on the grounds that consent from the Scottish Parliament is required to stop Scotland being subject to EU laws. See http://www.bbc.co.uk/news/uk-scotland-scotland-politics-36633244 Are we heading for a full blown constitutional crisis with Scotland simply refusing to withdraw from the EU?

Well, probably not in that sense, but the upshot is likely to be in a sort of quid-pro-quo that the Scottish Government's desire for a another independence referendum will be granted before the UK leaves the EU.
As is argued in a legalistic explanation which you can see at: https://waitingfortax.com/2016/06/25/can-the-scottish-parliament-block-brexit/ (and thanks to Paul Cairney for pointing this commentary out), it is the case that for 'normal' legislation the consent of the Scottish Parliament would be needed if Westminster wishes to amend the 1998 Scotland Act. And this Scotland Act specifies that Scotland is subject to EU law.

The apparent downside for the First Minister's strategy is that Brexit is hardly 'normal'! In practice Westminster could amend the 1998 Scotland Act and assume, with some confidence, that the judiciary would uphold Westminster's version of the law. Despite what some of the more excited supporters of Scottish independence may be tempted to suggest, the Scottish Government is not going to make a unilateral declaration of independence under these circumstances.

But then I strongly suspect Nicola Sturgeon realises the likely legal outcomes but is highlighting this issue as part of the pursuit of a strategy to induce the Westminster Government to grant a further 'indyref'. Failure by Westminster to give this concession, and an attempt to disarm the SNP Government by staging, and winning, a new referendum on Scottish independence, is likely to have increasingly problemmatic political consequences. Indeed as tempers rose in the years leading up to the 'Brexit' legislation being passed by Westminster the stage could be set for mass demonstrations, especially one timed for the day that Westminster passed the amendment of the 1998 Scotland Act. Thousands of demonstrating Scots arriving at Westminster..........etc etc

No, the most likely outcome is that Westminster will agree to another indyref to take the sting out of this. The problem for the Westminster Government in dealing with this is that now the ranks of nationalist voters are being supplemented by former unionists who are changing their tune after  their votes to remain in the EU have been frustrated. And there are some quite surprising shifts taking place.
For the moment the Scottish Government's storyline is to keep Scotland in the EU, as well as preparing the way for another referendum on independence. In this they will have the support of the Scottish Greens, giving the strategy a majority in the Scottish Parliament. Even the Scottish Liberal Democrats appear to be showing some sympathy with this and Kezia Dugdale is sounding pretty ambivalent.

Whatever people may say, however, Scotland can't stay part of the EU and part of the UK if the UK leaves the EU. Apart from anything else, the EU will not entertain an application from just a part of another country. Scotland will have to leave the UK first, and then apply to join the EU. But in that case the EU is likely to be a lot more helpful to Scotland than they were in 2014. Many in the EU would want to reward Scotland. Meanwhile many in the EU want to punish  the UK with poor trade terms in order to stop other countries (eg the Swiss) picking and choosing rights such as immigration controls.
The Institute for Fiscal Studies  say there would be big economic penalties for Scotland in leaving the UK. Certainly public finances may suffer very substantially as long as oil prices stay relatively low. But in the current uncertain economic circumstances facing the UK (or reduced UK), such arguments may not carry as much weight as you would think, especially with bravado from Holyrood being spread about possibilities for Edinburgh replacing London as an EU financial centre etc. Besides, how seriously did the people who voted to leave the UK in our recent EU referendum take the predictions of economic disaster? Identity politics seem to be ruling the roost in today's world, like it or not.

Of course it is possible that this strategy could be undermined if Marine Le Pen won the French Presidency next year and talked about 'Frexit'. But it doesn't look like she'll win at the moment. It is beginning to look like it will be a struggle for a divided 'rest of UK' and a weakened unionist position within Scotland to hold the unionist line in another indyref which is may occur as early as a year or 18 months time. Yes, the break-up of the UK is looking now like a very plausible proposition. In that way then, we are heading for constitutional crisis.

Sunday, 19 June 2016

So seriously, how will leaving the EU affect green energy.....

I'm of course for 'in', but I thought I'd try and put the green energy implications of a 'leave' decision in perspective in as balanced a way as I can manage......Technically speaking of course there's nothing to stop the UK pursuing a sustainable energy strategy outside of the EU, but I suppose the summary is that it would help considerably if we stayed in if (especially) we take broader political factors into account. I shall discuss this later on in this post.

Note, where I talk about the 'single market' I also mean the EU's internal market'. I use the terms interchangeably.

Let's break this down into sections

Energy Prices

I can't actually see much direct effect on energy prices if we leave or remain. Energy markets tend to set their own prices levels independent of governance arrangements and such markets tend to be global or regional.
Leave have talked about removing the 5 per cent VAT on energy. This would increase carbon emissions. In practical terms the prospect of removing this tax seems unlikely since you'd either have to increase taxation somewhere else (equally unpopular no doubt) or cut back state spending (more 'austerity').

There would be nothing to stop the UK remaining a member of the EU-ETS - after all, Iceland is a member.

Regulation of energy markets

Now this is an area where the EU has a major impact, and regulation needs to be talked about in different boxes. First there is the overriding regime of the internal market, which, the UK has been driving in the direction of more liberalisation.
But this liberalisation is bounded by complex sets of rules administered by bodies such as the European Network of Transmission System Operators (one for Electricity, ENTSO-E) and one for gas (ENTSO-G). As in the case of some small non-internal market states (like Serbia) The UK would still be members of these bodies, but its role in governance would be reduced. These are obscure, but important bodies since they define a lot of important technical rules and identities. They implement EU rules, and so it follows that if we leave the EU the UK will have much less influence on the rules. On the other hand the general direction of policy favours greater and more transparent energy trading within Europe and this trajectory is unlikely to change. But it would not be so easy for the UK to ensure that the technical changes are to its liking compared to the  present.

Energy efficiency standards

Much controversy about alleged Brussels meddling with our kettles etc is in fact about efforts to improve the energy efficiency of appliances we use. In general, then, to achieve energy efficiency, it serves us to have a European identity rather than just a British one. Outside of the EU and its internal market British manufactured products may become divided into two types: one for the EU market with higher energy efficiency, and one for the British market where the appliances are cheaper to buy but which cost more to run, and which produce more carbon emissions.

Renewable Energy

The EU has certainly had a very big impact on the UK through the 2009 Renewable Energy Directive. There is no mandatory post 2020 EU Renewable Directive, so the impact will be less in the future. However, it is the UK Government,essentially, that controls the regulatory and incentive regime for renewable energy at present, so little would, in a technical sense, change from the present arrangements in this area.

Nuclear Power

Despite the much publicised battle over 'state aid' for Hinkley C, whereby the UK has to get special permission from the European Commission to give 'state aid', the impact would be relatively small. Delays in giving state aid clearance are hardly an important factor in in the non-delivery of nuclear power in the UK (see other posts!). Moreover, it is the UK Treasury that is proving (understandably) reluctant to dole out the multi-billion £s worth of loan guarantees for Hinkley which have been authorised by the EU.

The political context

I would argue that the political context post Brexit will be the crucial determining factor in shaping the UK's energy trajectory, and I believe quite firmly that this would be very damaging for sustainable energy strategies. As I argued in a previous blog UKIP are likely to be big gainers post Brexit. See  http://realfeed-intariffs.blogspot.co.uk/2016/03/how-brexit-could-make-ukip-largest.html
In sum, whilst the majority of the House of Commons would negotiate for continuing membership of the EU's internal market, UKIP would denounce this as a sell-out since this settlement would involve the UK having to continue with current immigration arrangements. Tory right wingers would get sucked along with them no doubt, and a strengthening rightist bloc would emerge within the UK. Indeed, one could argue that even if we left the internal market and then even this failed to have that much impact on immigration, the right would gain further given the central focus of immigration in UK politics.
As the right gains more influence then the pressure for green energy policies is much reduced. This can be seen in other countries - eg Denmark where the renewable energy programme is being cut back after gains by the right wing Danish People's Party.
In short, the technical implications for green energy post-Brexit may be relatively moderate, but it is the contextual political ramifications that are likely to feed back to have substantial deleterious consequences for green energy strategies.

Thursday, 19 May 2016

Will Japanese or US Governments end up paying for Moorside nuclear plant?

According to spokespersons for the proposed 'NuGen' nuclear development at Moorside in Cumbria either or both the Japanese and American Governments could end up part-paying for the proposed 3.8 GW project. That is if it ever happens (which I doubt).

According to a report in World Nuclear News, NuGen's boss Tom Samson said that they were hoping to get the US and Japanese Government's support to supply export credit guarantees for the debt element of the necessary investments - as well as the British Treasury. What this means is that if there are serious cost overruns on the project that exceed the equity (risk capital)  element of the project then the Governments would end up paying out. Given the track record of the only western-based nuclear plant using the AP1000 technology from Toshiba that is earmarked for the project then this scenario is all too plausible. The only two projects in the West are at Virgil C Summer in South Carolina and Vogtle in Georgia. Both are suffering serious cost overruns and will not be built on time. It is just a question of how high the cost overruns will be. Of course these plant are being built with what amounts to a blank cheque. The developers are monopoly electricity suppliers with compliant regulators who allow the electricity companies to charge the electricity consumer (in advance) for whatever the power plant costs.

In Georgia, one serious estimate is already suggesting that Vogtle will cost 50 per cent more than the original estimate. And this figure could well rise! If the debt element is two-thirds of the total investment then this would already be at the outer margin of what the project could pay for before invoking Government guarantees.

This could lead to the bizarre position of Japan and or the USA paying for a British power station. Given, it seems, that now the only way Hinkley C will be built is for the French Government to contribute to the costs of the power station, this just adds to the bizarreness rating of the British nuclear programme. But then, at least in the case of Hinkley C there are theoretical investors for the equity portion of the investments. These are EDF, for some crazed reason, given their general finances, and the Chinese, who are being given rights to build their own power plant in the UK as a 'reward'. In the case of the NuGen development, there are no plausible investors - no doubt Toshiba can put in a bit, but not much, partly because they couldn't afford to take that risk, and also because manufacturers usually don't pay for their own products.

Quite where the developers will find anybody mad enough to bet billions on the chance that a nuclear power plant will be built more-or-less within project cost parameters is the big question. No nuclear plant that is being constructed in recent times even approaches this notion. Then there is the question of how much the UK Treasury would be persuaded to offer - Hinkley's cost, in current prices is £100 per MWh for 35 years even with the Treasury;'s loan guarantee, and that resting on EDF taking the first risk of cost overruns.

It all sounds highly unlikely to me. The Nugen developers say their plant will be generating in 2025. I will bet them (or anybody else) £100 that it is not generating by then. I am just arranging to pick up £100 in a bet that Hinkley C's construction would not have started by the end of 2015. I'll happily bet the same sum for completion of the Moorside project.

Come on Tom, give us a whirl!




Thursday, 12 May 2016

UK renewable energy auctions system discredited by offshore windfarm contract fiasco

The Government's much vaunted 'contracts for difference' (CfD) auction system for funding renewable energy has been thrown into disrepute after a key project awarded a contract has had its contract cancelled by a government agency. This is because of a delay in a court appeal against the (Scottish) Government's own planning consent for the project. There is no procedure for allowing more time for the project or for awarding a contract to one or more runners up in the auction contest.

The RSPB lodged a judicial review case which began hearings almost a year ago against planning consent given to four Scottish offshore windfarms on the grounds that they damaged bird species. Meanwhile the Government which had awarded a CfD contract in early 2015 to one of them, to Mainstream power for the 448 MW Neart na Gaoithe project near the Forth Estuary, has allowed the contract to be cancelled by the Low Carbon Contracts Company (a government agency). This is on the grounds that the project has failed to meet its milestones to ensure the project begins operation in 2018. Mainstream says that the only thing holding it up before its contract was cancelled was the court procedure.

The apparent failure to deliver this project, in addition to the failure to deliver solar pv projects awarded contract means that so far it is all but certain that at least nearly a quarter of the renewable energy capacity awarded contracts will not be delivered. We do not know how many more projects will not now be delivered. This is an indictment of the auction system in general and in particular the British version of it which fails to pick up on the experience of auction systems organised elsewhere in the world, especially in nearby Denmark for its offshore wind schemes.
There are a lot of claims permeating the web these days about how auction systems are driving down the cost of renewable energy (RE). There is no evidence for this, as my own research demonstrates. See my paper on renewable energy auctions at http://journals.aau.dk/index.php/sepm/article/view/1197 
Auction systems have been introduced in a period of rapid decline in renewable energy costs and it is the technology that is driving costs down, and the competition among manufacturers to supply it to the developers, not the contract procurement process.

I comment in this paper that, amongst various other things, for RE auction systems to work, Governments have to give certainty of grid connection and planning consent to projects that are awarded contracts. The UK Government has lamentably failed to do this. Of course the RSPB (or anyone else) is perfectly entitled to seek judicial review, but in that case the Government has to take action to ensure that the project can still go ahead if its planning consent is confirmed or ensure that somebody else can build the capacity. The Government has done neither. Of course in Denmark the Government ensures that all of the planning issues are resolved before asking for bids to develop offshore wind projects in sites that have been carefully researched and planned in advance.

So now future renewable CfD contracts are liable to challenged by well resourced groups who know that all they have to do is to get permission for a judicial review to be held to kill the project. This makes the auction scheme into a shambles. In the UK in the 1990s the last time we had an auction system three-quarters of the projects never got implemented, a lot of the time because of planning failure. Also a big cause of failure to implement the projects is that the developers themselves bid unrealistically low prices in an effort to secure the contracts, and many schemes were not carried out as a result. This has already been seen to be the case with a couple of projects in the first CfD auction. So here we are again, 20 years later, and we've learned very little!

One of the most outrageous aspects of all of this is the fact that offshore wind schemes can get their contracts withdrawn for flimsy reasons while Hinkley C, now at least 8 years behind schedule, is kept on the government books!

Amber Rudd's claims that we have lots of renewable energy investment is a shambles. Confidence in RE investment in the UK has crashed, and it seems the Minister is unable even to deliver the capacity that it claims to have awarded contracts. The UK has crashed down the attractiveness list of countries for RE investment. See http://www.renewableenergymagazine.com/article/attractiveness-of-uk-for-renewable-energy-investors-20160511

Altogether the UK Government is developing a reputation of issuing press releases about fantasy power schemes. Maybe the Ministry should be renamed the 'Department of Fantasy Energy and Climate Change'. Of course Amber Rudd is only the monkey, with George Osborne being the organ grinder as far as the messages are concerned. The Treasury's determination about  ensuring renewable energy projects go ahead is about as strong as the alcohol content in orange juice.

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Friday, 22 April 2016

EDF postpones Hinkley C decision until next year

A report in the Independent says that the EDF Board of Directors has agreed to undertake discussions with the company consultative council before taking a decision, a process which is likely to take a long time ie until next year. However this could well be a cover for the numerous problems facing the project, not least EDF's own parlous financial position and the fact that it needs the French Government to bail it out even without going ahead with the Hinkley C project.

There has been a game of 'pass the decision' to abandon a project that no independent financial consultant would come within a light year of recommending for the go-ahead. The French Government has been faced with what seems to many to be the ludicrous prospect of heavily subsidising a power station to supply the British with electricity. This is despite the fact that the British themselves have promised to pay EDF around £100 per MWh in current prices for 35 years with the British Treasury agreeing to guarantee a £17 billion loan for the project! It is not as if even such a project could be a 'loss leader' for the French. Two versions of the same (EPR) plant design have been spectacular construction disasters already in Finland and France. Various engineers and managers, company unions and employee shareholders have pleaded for the project to be abandoned or put in deep freeze, and last month the Chief Financial Officer of EDF resigned in protest at the apparent determination of the EDF leadership to proceed with the project.

Earlier today Greenpeace announced a legal opinion which said that the French Government would need to apply to the European Commission for state aid for the billions of euros of money that they would need to throw down a probable Hinkley black hole. The Commission consented to the British state aid request in 2013, but a further consent could not be taken for granted - indeed, under the circumstances it would seem a bizarre request. In any even such an application (if it was ever made) would take a year or more to be resolved.

Certainly many nuclear experts have, in any case, been scratching their heads wondering how on Earth EDF could take a 'final investment decision' before the results of the safety tests being conducted on dodgy-looking EPR reactor vessels by the French safety regulators, the ASN, were known (they will not be known until next year). The suspicion must be that the directors of EDF, the French Government and the British Government are just stringing out the death-knell of a project that they know is not going ahead in the hope that a different member of this troika than themselves will take the blame. Who knows, maybe the troika have decided that they can take the matter to the Commission in the hope that they will refuse the state aid request and everybody can blame the EU! - As often happens for decisions that other people do not want to take themselves!

Thanks to 'Bristolboy' for pointing out to me the Independent piece; See http://www.independent.co.uk/news/uk/18bn-hinkley-point-nuclear-power-station-plan-could-be-coming-to-a-grinding-halt-a6997131.html

Wednesday, 20 April 2016

French Government obfuscates on Hinkley C as EDF managers predict legal action if EDF goes ahead

The insanity of the Hinkley C project for the French nation in general and EDF in particular was underlined today by two events. First, the French Government found itself unable to solve the gordian-like knot of problems facing EDF. Second a group of EDF managers wrote a letter warning  the directors that they could face legal action to make them take responsibility for taking on the Hinkley C project if, as they fear, the project goes wrong. This follows an earlier letter from engineers doubting the wisdom of proceeding with Hinkley C and the resignation, last month, of EDF's Chief Financial Officer who feared Hinkley C would undermine EDF's finances.


Yet again a high level political meeting of French ministers billed as giving a green light for the project has prevaricated. It is a wondrous testament to the trust we wrongly place in the press releases issued by EDF and its allies that we believe every one of the now dozens of times that the green light for the project is to be given for the project. Of course, if it is so certain, why the need for these repeatedly stated 'final investment decision' meetings that never resolve the issue? Why aren't they just building the damn thing!
See http://www.connaissancedesenergies.org/afp/edf-le-gouvernement-reaffirme-sa-vigilance-totale-apres-une-reunion-lelysee-160420

Now of course with any privately owned company the merest hint that there were serious internal doubts about a project would send the shareholders scattering and the project would not be implemented. Indeed the employee shareholders have opposed the project and EDF's share price has plummeted. But this matters not to the directors who try and browbeat the Government, who own 85 per cent of the shares, to go ahead with the self-destruction, mainly it seems, to have one last gasp attempt to rescue the pride of the EDF leadership. Any notion that this is a vaguely competitive project - even with offshore wind projects, is rendered nonsensical by all of this, with some made-up price that the British would have to pay being paraded as the 'cost'. Now it seems the cost includes the French Government injecting billions of euros in various types of support even if all goes well. The chances are it will not, and the French state will be on the hook to pick up the pieces of EDF which will effectively collapse as a result - indeed the company could well go under even without the added weight of Hinkley C.

Then Amber Rudd comes out and says that EDF is taking the risk of the project according to the contracts. Well, legally, some risk maybe. Except that we are on the hook for may £17 billion worth of loan guarantees. And we're protected from paying this out are we because of the legal paraphernalia? Think again about what happens in the nuclear business, which is really not a business at all despite the made-up fantasy costs (as high as they may be) that are bandied around in government press statements.

Ultimately whatever the contract terms actually say, the politics are that if EDF runs out of money half way through (they already have!) because of cost overruns and says 'we can't complete it', of course the British Government will step in. Just as they did with Sizewell B post privatisation and declare it was now economically necessary to pour even more cash in.....

Strange attitudes are developing. Increasingly many pro-nuclear supporters are hoping that the project is cancelled for fear that the coming disaster will ruin the prospects of nuclear power in Europe forever. On the other hand anti-nuclear advocates are hoping that the project is actually attempted on the grounds that will finally destroy EDF and its nuclear power mission.

see also my earlier comment on the bleak prospects facing EDF at http://realfeed-intariffs.blogspot.co.uk/2015/10/could-hinkley-c-spell-end-of-edf.html

Monday, 18 April 2016

Renewables 'too much power' problem is really nuclear's fault

Electricity nerds were getting excited (April 17th) as the national grid issued a 'negative reserve active power margin' notice, meaning that for North West Scotland there was too much power on the grid. According to the Daily Torygraph, who write for the renewable hating Tory hordes in darkest Surrey, this crisis is  the fault of renewable energy. The 'emergency' scenario is marked by the fact that the National Grid:
'could be forced to issue unprecedented emergency orders to power plants to switch off........Businesses will also be paid to shift their power demand to times when there is surplus electricity, as the UK energy system struggles to cope with the huge expansion in subsidised renewable power.'

Later on in the same article, there is an obscure mention to the fact that wind and solar farms may be encouraged to turn down their generation because of 'inflexible' generation, which of course is mainly nuclear power.

So let's get this right, the Torygraph is saying that nuclear power plant can't or won't turn down their power stations, so it's windfarms and solar farms that are the problem?

The strange thing is I often hear nuclear power industry representatives going on about how nuclear power is flexible and can turn up or down when required, except that in the UK it doesn't happen, not even with the newest station Sizewell B. There is confusion over whether future nuclear power stations will be able to vary their power, but I am pretty confident they won't.

Why will nuclear power stations never be turned down (voluntarily that is) in the UK? Well first, because nuclear are always given grid priority - that is the policy of the British state -  and renewables will get the blame as a result for any resulting 'emergency' measures. A few years ago EDF was busy arguing that renewables should be restricted to 25 per cent of electricity supply precisely because they didn't want or could get their nuclear power stations turned down. This is now more or less government policy is seems - fantasy nuclear will provide the rest of the required non-fossil generation. Second, of course, following on from this latter sentiment, I am confident that in future there is no chance of new nuclear power stations being flexible because there will probably be no new nuclear power stations (apart from some small failing 'smr' demonstration maybe) actually built!

A French Economy minister appeared on Andrew Marr's show recently to declare that a final investment decision for Hinkley C is only 'weeks or months' away - as it has been for the last 4 years! I suppose the delays in Hinkley C must be renewables fault somehow too!




NOTIFICATION OF INADEQUATE NEGATIVE RESERVE ACTIVE POWER MARGIN issued for the period from 13:35 hrs to 17:00 hrs on Sunday 17/04/2016 has been cancelled For North West Scotland