Friday, 20 April 2018

Problems with French nuclear plant could spell final end of Hinkley C project


This week's story about problems with pipe welding at the French nuclear plant being built at Flamanville could spell the end for the Hinkley C nuclear project. Treasury backed loan guarantees to build Hinkley C have been linked to a target date for commissioning of the Flamanville plant of the end of 2020. Yet the current target date of completion by the end of 2019 has been thrown in doubt by the freshly announced problems.

The main focus of attention of this problem for Hinkley has simply been that the design of the Flamanville plant - the European Pressurised Reactor (EPR) - is the same as that to be built at Hinkley C and that the engineering problems bode ill for the British scheme (1). That is right, but it is rather worse than this. The commercial issue is that if the French plant is not commercially operating by the end of 2020 then it seems the Treasury will not be able to give loan guarantees for the scheme. According to the analyst Professor Steve Thomas, the rules agreed between the European Commission and the British Government stipulate that ''until Flamanville 3 was in commercial service, there would be a cap on the guaranteed loans effectively meaning funding would be primarily through equity' (2)

It is very difficult to see how EDF could build the plant without the Treasury loan guarantee - something like £17 billion (probably more) would be needed as a loan. EDF just won't have the ability to raise anything like £17 billion on the bond markets. Indeed the decision to go ahead with preliminary works on the site (building a jetty and a cement works) alone, without the loan guarantee being in place, was regarded as so risky that the firm's Finance Officer resigned in protest at the decision. But EDF will not start building the main parts of the power station until it has the necessary finance. Even if all went well (what are the chances of this?) the Hinkley C project would not be up and running until 2027. But if the Treasury does not give loan sanction, and the contract seems to say that Flamanville has to be running by the end of 2020 for this to happen, then the project will not be built. - Unless the whole thing is re-negotiated of course, which would seem very difficult to achieve.

Construction of the Flamanville EPR began in 2007.

It may be that a failure to complete Flamanville by the end of 2020 will give anti-Hinkley officials some relief as they will be very worried that the offer of loan guarantees will turn into a black hole. Otherwise, given the experience of building nuclear power stations, including (especially) EPR projects, it seems highly likely that the Government would have to pay the bill through the loan guarantee agreements. The notion that the 'risk' of the project lies with EDF as opposed to the British  Government is very likely to be proved wrong. Some of us have known this since the start. Others have just been kidding themselves.

References


(1) Vaughn, A., (2018) 'EDF warns of faults at nuclear power station it is building in France', Gaurdian, April 10th,  https://www.theguardian.com/business/2018/apr/10/edf-warns-of-faults-at-nuclear-power-station-it-is-building-in-france
(2) Thomas, S (2016) Energy Policy Vol 96 pp 421–431, page 427

Friday, 13 April 2018

How the memory of the first world war is driving us to the third world war

A truly toxic combination of militant nationalism and liberal opposition to chemical weapons is driving the world seemingly inexorably towards world war. We know who the militant nationalists are - people including Trump and Putin but, amazingly, the memory of World War One and the anti-chemical weapons institutions that it spawned are leading liberal opinion into a coalition of the mad hurtling towards our own collective destruction.

The horrors of gas attacks in the First War War and the desperate need to avoid them are etched in the political psychologies of western liberal opinion. The efforts to combat chemical weapons were launched through the 'idealism' of the League of Nations and the Geneva Convention which banned use of chemical weapons n 1925. More recently, we are governed by the Chemical Weapons Convention signed in 1993.
It is one of paradoxes of liberalism that it appears pacific and noble in its ideals but will plunge into self-destruction in supposed defence of the ideals that it defends. The present Syrian crisis, and those probably even worse to come, expose the paradox of liberalism. It is aggressive in support of its ideals which are supposed to oppose barbarity yet often the consequences of the actions it supports result in much worse barbarities than those which its actions are meant to defend. Such is the myopia driving much opinion towards war with Russia.

Now by hammering away at liberal idiocies I don't mean to minimise the contribution of militant nationalism - which seems to have taken hold in large parts of the world. Few people these days seem to stop to think how the notion of putting your own country 'first' means a relative gain over another nation either by soft, or hard, power. At best this means that others suffer and maybe die, but at worst this means that if an opposing power simultaneously adopts this logic then the end product is war.

With some luck we shall avoid war in the current crisis that followed the chemical attack in Douma. Probably. But in some senses war has already started between Russia and the USA. It arguably began in February when American forces at Deir al Zor in Syria killed an unknown number of Russian irregulars who were part of a force attacking a Kurdish force that was fighting with the USA against IS.

A chilling thing about this incident was that these irregulars may not have been totally under the control of the Russian Government. But what is the Russian Government anyway? Was the Skripal poisoning organised directly on Putin's orders or was it orchestrated by a faction within the GRU/FSB? I don't know, but the possibility of a militant nationalist force which dominates Russia today being partly out of control in a dangerous confrontation with the West should really worry us to our core. Especially when matched by a militant nationalist US President who does not want to seem 'weak'. Both sets of powers (US and Russia)  are driven by an ideology of militant nationalism and try to give the impression that they are unpredictable and out of control. Well, to a great extent, they are.

We may avoid a direct war in the Eastern Med with Russia this time, by some covert agreement with the Russians to tolerate some token strikes. This may pass without a war, with luck. But what happens if, probably when, there is another chemical attack by Assad's forces?

The Syrian civil war is far from over. An incident like Douma may well occur again. That may be the point when the world plunges into the abyss. With Trump we are heading towards a trade war with China and a World War with Russia. The great liberal irony is that liberalism is helping this process along, ostensibly to avoid horrors of the First War War, but in reality triggering an armageddon that could prove even worse.



Wednesday, 11 April 2018

National Grid finally comes clean on missing renewable energy generation numbers

National Grid (NG) has finally released figures of 'distributed' renewable energy - that is solar and wind power connected at the distributed as opposed to transmission level of the electricity system. These figures reveal that such distributed renewables will contribute around 7 per cent of UK electricity supply on an annual basis. This includes around 5.7 GW of wind power and 13 GW of solar power, each of which types contribute roughly the same amount of energy on an annual basis.

For years people like me have been complaining that the National Grid's transmission figures - routinely repeated by people who think they know what is going on - have greatly underestimated renewable energy generation capacities. But now the NG has come clean - apparently, though, only in the process of using the information to argue that they have the answer - batteries. See:
https://www.ft.com/content/5381b45a-3caf-11e8-b7e0-52972418fec4
Of course the Government publishes annual renewable energy generation figures which includes all sources, but the NG data has always looked like (in fact was) a great underestimate of the total renewable energy capacity, which is now enough to generate around 30 per cent of UK electricity supply on an annual basis. But the new NG figures allow us to plug the rather large gap between the (misleading) NG figures for the capacity connected to the transmission network and the real total amount of electricity generation.

Of course what is really needed to deal with the 'variability' of distributed generation is a much bigger role for the electricity distribution companies in balancing their own levels of demand and supply rather than the problem simply being passed through to the National Grid. Whether the distributed electricity companies are up to the task is another question.

Perhaps it is here that greater public involvement in their management comes in. But it should be 'bottom-up' management, not a state replication of the current local distribution monopolies owned by different multinational corporations. Ideally boards of the distribution companies should be elected, and that will inject some desire to develop a sustainable energy system that responds to popular modes of generation and popular needs.

Monday, 9 April 2018

New report implies that the proposed Scottish Government Energy Company will NOT boost renewable energy


A report from Ernst and Young on the proposals to launch an Energy Company owned by the Scottish Government gives little hope that the Company will give a substantial boost to renewable energy. The report was issued by the Scottish Government in advance of consultations on the Energy Company being started.

At the time of the SNP's Conference last October (2017) Nicola Sturgeon announced the intention to start a Scottish Government owned energy company and that:

“Energy would be bought wholesale or generated here in Scotland – renewable, of course – and sold to customers as close to cost price as possible,” she told the Scottish National party conference in Glasgow on Tuesday. “No shareholders to worry about. No corporate bonuses to consider.” 

Hopes that such a company would be able to open the doors to the many possibilities for cheap onshore wind and solar farms in Scotland are likely to be dashed if the company is formed following the priorities set down in the report. The idea of 'increasing the proportion of energy from renewable sources' is relegated to 'phase two' of the agenda for the Company (see page 16). In political terms this means that whilst there may be a lot of advertising focus on how the company gets its energy from renewable energy sources, in reality little or no new energy will be sourced from new renewable energy projects - that is unless they would have been started anyway as a result of programmes funded by Westminster.

The Scottish Energy Company is likely to follow the practice of various self-styled green energy companies of saying they supply energy from renewable energy sources, even though these schemes would exist anyway (and otherwise be given supply contracts by other companies). The renewable projects come into being because of incentives from the Westminster Government (through the Renewables Obligation, feed-in tariffs or contracts for difference). It is true that Ecotricity (and to a much more limited extent Good Energy) has established a substantial amount of renewable energy projects through its generation arm, but again, this would not have been possible without the support schemes organised by Westminster.

It follows that unless and until Westminster revives some method of offering long term power purchase agreements (PPAs) to onshore wind and solar farms, it is difficult to see, under the priorities outlined by Ernst and Young's report, that the Scottish Government will procure much (if any) new renewable energy generation.

What renewable energy projects need are the offer of long term power purchasing agreements (PPAs) lasting say, 15 years. This is needed be cause unlike fossil fuels renewable energy projects are capital intensive.Even though such projects may be able to deliver energy for the consumer at the same, or lower, price than fossil fuels, they will not be built unless investors and bankers are insulated against the risk of power price market fluctuations. This can be done through the projects having long term PPAs.

Yet the priorities as outlined in the report offer little hope that the Scottish Government Energy Company will offer long term PPAs. The Energy Company seems likely to procure its electricity from short term contracts (or PPAs) from energy generators. This will preclude the possibility of helping new renewable energy projects start generating, because they will need much longer PPAs

The Energy Company therefore faces the prospect of trying to compete solely on price in an electricity market increasingly populated by many small companies all trying to do the same thing, whilst at the same time failing to deliver its promises of promoting renewable energy.

Some references:

https://www.theguardian.com/politics/2017/oct/10/sturgeon-proposes-cheap-state-owned-energy-for-scotland

http://www.bbc.co.uk/news/uk-scotland-scotland-business-43692809

The Ernst and Young report:

http://www.gov.scot/Resource/0053/00533962.pdf


Sunday, 1 April 2018

Why Britain's distorted electricity market means that 'subsidy free' renewable energy is a myth

The media is awash with stories of the imminent emergence of 'subsidy free' wind and solar power in the UK, but the reality is that the uncompetitive nature of the British electricity market mostly undermines that prospect. In theory onshore wind power and maybe some solar power projects would be able to generate power to sell at competitive prices on the British wholesale electricity market. In practice most of the potential buyers of energy from new renewable energy projects will not be interested in buying the energy even at cheap prices simply because it conflicts with their own generation portfolios.

True, there is a limited possibility for some very large corporate consumers who are interested in buying green electricity to fund new projects by issuing corporate power purchase agreements (PPAs). But in reality this market is small, and I have heard this estimated to be no larger than 100 MW a year. That means it would take around 20 years for not quite 1 per cent of electricity to be supplied this way.

PPAs are needed for new renewable energy projects that offer the generators the certainty that they can be paid a minimum amount for each MWh that they produce for the long term. The UK Government's PPAs, called contracts for differences (CfDs), last 15 years. However they are no longer available for onshore wind and solar.

The problem is that most of the market for offering PPAs that can fund new renewable energy projects comes from the big electricity suppliers, who have been known in the past as the 'Big Six'. Only PPAs offered by really large companies will be usually taken seriously enough by banks and and other institutions to enable renewable energy projects to obtain long term loans or equity. The trouble is that the Big Energy suppliers will usually have little interest in offering long term PPAs to new renewable energy projects. For a start they can buy in power at much the same price as the renewable energy generator can offer without needing to commit themselves to long term agreements. Crucially, the big electricity companies are struggling to keep their own power stations in business, and are not going to sign up competition from other people for their own business!

It is something of a trade secret that the only reason the Big Energy companies ever did offer long term PPAs to renewable energy companies under the Renewables Obligation was simply because they could make a lot of money out of doing so. In effect, they were compensated for the losses their power plant accrued through not being able to sell so much electricity. This goes a long way to explain how it is that renewable energy has, in the past, seemed so much more expensive in the UK compared to other European countries. But now those Government incentives are no longer on offer to new renewable energy projects.

Without financing renewable energy projects cannot be set up, and financial institutions will usually only invest/loan money to companies that they think have a pretty certain likelihood of being in business for the length of any PPA that they will issue. Various smaller electricity suppliers may have a very robust future. However, unfortunately, many financial institutions may not have a sufficiently positive attitude to smaller electricity suppliers to allow them to offer cheap financing to those potential renewable generators that have been offered PPAs.

There are, of course, various green electricity suppliers who offer renewable electricity, but of course these will invariably be existing projects that have been funded already through the Government's Renewables Obligation or maybe the feed-in tariff scheme. But these options are no longer available for new renewable energy projects.

At the end of the day there are a few independent big consumers - the Googles, Microsofts etc of this world - who will be interested in offering corporate PPAs to cheap new renewable energy projects. However such companies represent a very small segment of the electricity market.

At the end of the day, there may be lots of potential for generating electricity from renewable energy at prices that are no higher than that from new gas fired power stations. But the British electricity market is skewed against this happening. Renewable energy projects are capital intensive which means that investors have to take a long term risk to support them - so we need long term PPAs to be underpinned by the Government. But despite encouraging noises coming from Energy Minister Claire Perry on this subject, there seems little early prospect of such contracts (CfDs in government-speak) being made available for onshore wind and solar.

Wednesday, 14 March 2018

How Labour can really put the wind up the Tories



Labour is well placed to embarrass the Tories by attacking the Government’s war on the onshore wind industry in the UK. Despite onshore wind now being the cheapest widely available electricity source the Government is actively sabotaging the industry by refusing to allow long term contracts to be issued to wind developers. Meanwhile large subsidies are being offered to gas, coal and nuclear power stations.

Under the last Labour Government incentives were given to build up a large increase in onshore wind power, which now supplies around a tenth of UK’s electricity supply, with offshore wind and solar farms now supplying around another ten per cent of UK electricity. But right wing English Tory pressure has prevented any move towards enabling long term contracts to be issued so that new windfarms can be financed. Meanwhile the UK risks becoming increasingly dependent on supplies of gas from places like Russia and Qatar.

The Labour frontbench is beginning to realise that young people in particular want to see green energy being given a chance, and, for example, John McDonnell has recently attacked the Tories for failing  to doing anything to revive support for the feed-in tariff scheme that helped people install solar panels on their roofs. But attention ought also to be turned to promoting onshore windfamrs. Doing so would embarrass the Government and also sow division inside the Tory ranks. More practically, it would offer hope to people who are working in the industry that they might have a future. Places like Grimsby are benefitting from offshore wind projects which are still being built, but onshore wind factories are being closed down, the latest being the Glasgow based Gaia Wind.

Independent experts say that onshore wind can be built costing the consumer less than new large gas fired power stations. However  orders have dried up because the Government is refusing to organise long term guarantees of prices paid for electricity to be generated by the wind farms. Long term contracts are needed because the technology is capital intensive meaning that while the wind is free, the money for the equipment needs to be paid for at the start of the project. Hence effective (say 15 year) long term price guarantees are needed to persuade banks to offer loans to support windfarm construction.

The majority of the capacity of UK’s onshore windfarms have been installed in Scotland. Despite the fact that the Scottish Government is keen to have more windfarms, control over what contracts are issued for electricity supply rests with Westminster. Yet it is English Tory MPs, often allied to the climate-sceptic Nigel Lawson and his ‘Global Warming Policy Foundation’, that are preventing the Government from providing opportunities for onshore wind.

The Minister of State for Energy, Claire Perry, has, in recent months, been making some encouraging noises about providing some 'contracts for differences',  CFDs as they are know in trade-jargon, available for onshore wind. They were available for onshore wind when the CfD system was launched in early 2015 but since then, while some offshore wind contracts have been awarded, onshore wind has been carved out of bidding for such contracts. Yet Perry appears to lack the required political clout to do much that changes anything, especially to overcome the vocal hostility of the climate-and-wind sceptical group of Tory MPs.

Making  a priority of embarrassing the Government over this issue should be a win-win situation for Labour. Renewable energy, including wind power, is very popular among all voters, especially with young voters. On the other hand by supporting onshore wind Labour can proclaim it is promoting consumer interests of obtaining electricity - above all clean energy – from the cheapest possible source. Attacking the Government for its failure to support onshore wind is a very good way of taking votes from the Tories. Please, John McDonnell and Jeremy Corbyn, spend some time on this! Put some real wind up the Tories!

Tuesday, 16 January 2018

Future of Energy Conference at University of Aberdeen

Register for the Future of Energy Conference via the following website: http://www.store.abdn.ac.uk/conferences-and-events/conferences-symposia-seminars/school-of-social-science/the-future-of-energy-conference-2018

Details of Conference:

The Future of Energy

A Conference presented by the MSc in Energy Politics and Law, University of Aberdeen on Wednesday March 28th. Venue: Linklater Rooms, University of Aberdeen.
Itinerary 
9.45-10.15 Tea/Coffee and Registration 
10.15 A few words from Dr David Toke, Programme Co-ordinator of MSc in Energy Politics and Law 
10.20 Opening Address by John Scrimgeour, Director of the Energy Institute of Aberdeen University 
10.30 Rebecca Williams, Policy Manager for RenewableUK who will talk about onshore wind and other priorities for RenewableUK 
11.00 Morag McCorkindale from Aberdeen Renewable Energy Group who will talk about low carbon based transport policy in Aberdeen and the opportunities for existing oil and gas businesses in the new energy economy 
11.30 Dr David Toke, Programme Leader, MSc in Energy Politics and Law. ‘So why has offshore wind now become so much cheaper and easier to build than nuclear power?’ 
12.00 Sam Gomersall from Pale Blue Dot Energy will give a presentation about how Aberdeen is leading the hydrogen revolution  
12.30 – 1.15 LUNCH 
1.15 -1.45 Caroline Bragg from the Association of Decentralised Energy  who will talk about developing heat networks 
1.45-2.15 Professor Alex Kemp from the Economics Department at the University of Aberdeen who will talk about the issue of oil revenues. 

2.15- 2.45 David Ritchie, Head of Energy Industries in the Scottish Government’s Energy and Climate Directorate will talk about his work at the Scottish Government 

2.45-3.15 Thomas Mcmillan representing the Solar Trade Association (he is Director of Renewables at Savills) will talk about issues facing the solar pv industry 
3.15- 3.30 TEA and COFFEE 
3.30-4pm Professor John Patterson from the Law Dept at Aberdeen University who will talk about decommissioning of oil platforms 

4-4.30   Adam Ezzamel, the Project Director of the Aberdeen Offshore Windfarm (European Offshore Wind Demonstration Project) will talk about the project. 

4.30-5.15pm Expert Panel. Four experts will introduce themselves and a point of view and then answer questions raised  by the audience. These include Professor Peter Strachan, Aberdeen Business School, Robert Gordon University and Dr Daria Sharapolova, Aberdeen University Centre for Energy Law 

The Conference will be held in the Linklater Rooms of Aberdeen University https://www.abdn.ac.uk/confevents/venues/linklater-rooms-50.php, We would expect speakers to talk for 20 minutes leaving 10 minutes for discussion.


Tuesday, 2 January 2018

EDF launch so-called 'cheap nuclear' plan that will ruin taxpayers

EDF are about to persuade the Government to sign a blank cheque for another one of their failing European Pressurised Reactors at Sizewell C.  The plan is to get taxpayers to pay for a large chunk of the the 'equity' financing of the plant and get the Government to guarantee the bulk of the rest of the costs. EDF will say at the start that the plant would be 'cheap', but, magically, the cost would gradually escalate over time. But meanwhile the Government would be committed to foot the bill. This will lead to the biggest black hole in the nation's finances since the financial crash.

However, this will get around the humiliation of EDF having to be paid the high price per MWh that Hinkley C is to be paid. A lower price might be agreed. But instead the taxpayers will foot a bill that is likely to rise to well over £10 billion pounds. The plant will not be any cheaper than Hinkley C, its just that the cost will be hidden on Treasury books. But this will have a catastrophic effect on public finances and deprive the Exchequer of many billions £s that could otherwise be spent on public services. This will be the subsidy to top all subsidies!

It is a gross distortion to claim that in this way nuclear power can be made cheaper than any sources. Of course if the Government takes out its chequebook and promises any power generator to pay whatever it likes then the power price will be much lower. With the Government effectively promising to pay for any and all cost overruns on such a project, what is to stop EDF from racking up virtually any bill it wants? 

One might think that such a transparently biased scheme (towards nuclear companies, away from the taxpayer and renewable energy) would be dismissed by any Government. Yet energy minister Tom Harrington has already signed up to a generally similar type of plan full of fantasies of how the costs of the projects would be kept under control (as usual). 

Hinkley C was supposed to be online now, yet even by EDF's projections it will not be working before 2027. Yet we are now to believe that the next power plant at Sizewell C will be built on time. Of course EDF can promise that this will be happening, because they will not have to pay for the consequences. The taxpayer will, in time, as the loans guaranteed by the Government have to be paid by the Government -as well as the equity stake - and no doubt extra to ensure that the plant is finally built.

EDF are claiming that Sizewell C will cost '£5bn less' than Hinkley C. Of course EDF hasn't even begun the serious construction of Hinkley C, so how do they know how much it will cost anyway!!

Of course, with rumours circulating that Boris Johnson could be appointed Business Secretary, the nuclear industry could have just the right person to front its raid on the nation's finances. Boris Johnson is not known for his attention to detail, but he's a breeze at giving rhetorical backing to all sorts of fanciful ideas. He's just the guy nuclear power needs!

You can read about EDF's latest cunning plan at https://www.thetimes.co.uk/edition/business/cut-price-nuclear-power-plant-possible-says-edf-cmq37xm8q

The National Audit report in the summer of 2017, in their annexes, effectively backed the 'Government pays' option (ie blank cheque). See https://www.nao.org.uk/wp-content/uploads/2017/06/Hinkley-Point-C.pdf

You can see the nuclear industry's general thrust at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/665473/The_Nuclear_Sector_Deal_171206.pdf