Monday, 18 February 2019

Why I cringe when economists claim carbon taxes are the most 'efficient' way of curbing carbon emissions

With gilets jaunes blocking French cities, initially sparked by a carbon tax added to motor fuel taxes, and schoolchildren striking for climate change you would think that politicians were being forced in two contradictory directions. Especially when you get big time economists like Margaret Yelland (former Chair of the Federal Reserve) saying that carbon taxes are the key measure to reduce carbon emissions because they will be most 'efficient'. 

Well, carbon taxes are not especially 'efficient' for two reasons. First because they are not very good at encouraging technical and social innovation and secondly however 'efficient' they may be in economists mind they are politically very unpopular if set at high levels (ie they are politically very inefficient).

Certainly big corporations and right wing politicians tend to argue that that carbon taxes can solve the world's climate problems much better than regulations. This appeals to some US audiences on an ideological level, but again, misses out the practical measures that need to be taken. Carbon taxes of course can be useful, but miss the point that in order to promote technological innovation you have to have some regulatory measures to encourage 'bottom' up' technological innovation. Innovation requires niches supported by relevant incentives/regulations.

Energy conservation programmes are popular insofar as they help reduce the impact of energy price increases. In the UK we had some programmes when oil became more difficult to source and the UK has to access more expensive overseas sources of natural gas as North Sea reserves run down. But we are lacking the regulatory drive to make buildings carbon neutral. Measures to makes homes zero carbon have been scrapped, and local councils have been stopped from setting their own standards. Indeed local councils usually do not even have the capacity to ensure that current building regulations governing energy efficiency are properly implemented.

On the other hand advances in wind power and solar power, whose costs have dropped tremendously this century, have had nothing whatsoever to do with carbon taxes, or even much (in a direct sense) to do with energy price increases. The cost reductions have been driven because incentives have been given to these nascent technologies.

 These technologies have been given markets leading to technical optimisation and economies of scale which have reduced their costs. Indeed, last year a third of UK electricity was supplied by renewable energy. Given the fact that the cost of renewable energy have dropped so much, all they need now is the right regulatory arrangements and they can carry on increasing this proportion very rapidly without increasing costs to the consumer. 80 per cent of our electricity could be supplied from renewable energy by 2030 this way – and there is enough offshore windfarms in the pipeline to assure this even if we only had modest increases in the amount of onshore renewable. We can deploy new technologies like heat pumps linked to district heating systems to convert electricity in heat and store the energy in various forms.

It is obvious to people in the electric car sector that take-up of electric cars is not hampered so much by a lack of carbon taxes but by a lack of reliable fast charging points! More incentives/regulations to promote them is the key to that issue!

Yes, we can make a lot of progress through various regulatory devices. This is as opposed to solely  relying on a one-size-fits-all carbon tax that encourages mainly existing large scale technologies -  and which, moreover, will encounter political resistance from large sections of the population.  This is because if carbon taxes are applied as the ONLY measure on the level necessary to achieve big carbon reductions they will cause  political rebellion on a much greater scale than anything attending the regulatory and incentive measures promoted by  the renewable or energy efficiency trade associations and other NGOs.  We need lots of different methods; incentives, regulations, carbon taxes, local cooperatives....whatever.

I have been recently been supporting an innovative wave power technology called ‘Resen Waves’. The company involved is now bidding for its first orders to supply power for communication buoys and also to supply power for oil and gas rigs in the North Sea that are being decommissioned. Once established in this niche it will be able to optimise, get economies of scale and upscale so that in a few years time it will be able to supply power directly to the electricity grid. That’s how new technologies develop, and we can help them by giving specific incentives to help them fill those niche markets. Carbon taxes will not do that.

Existing big business, on its own, won't deliver technological change. We need a bottom up approach that delivers innovation. Then, after some success in this pattern the big companies will decide to change what they are doing. Or go out of business

Friday, 15 February 2019

OFGEM to boost large gas power stations and increase costs for renewables

Remarkably, on the day thousands of schoolchildren protested in Parliament Square to demand Government action on climate change, the energy regulators, OFGEM were sharpening their knives to cut down renewable energy and boost large gas fired power plant. They are doing this by sneakily changing a couple of difficult to understand regulations governing electricity transmission and network charging. These are things that the children, OFGEM hope, won't notice! The costs of renewable energy could be increased by up to 20 per cent in some cases as a result.

For OFGEM renewables are a big problem and large gas fired power stations, evidently, are a big solution. In the conclusions to their so-called 'Targeted Charging Review' their proposals will end regulations that have encouraged local, that is 'embedded' generation, and bring in different regulations that benefit large, centralised combined cycle gas turbines (CCGTs).

In order to understand this apparent eco-destructive atavism you have to understand how the big utility players and their friends in the Government/regulatory apparatus have been frustrated that their attempts to subsidise large gas fired power stations through their 'capacity mechanism' have failed to produce new CCGTs.

The capacity mechanism is supposed to ensure that there is sufficient 'firm' capacity at all times. A big reason that CCGTs have not won contracts under these capacity mechanism auctions is simply that they cost too much compared to so-called 'embedded', decentralised generation. The generators that have bid the lowest prices in the auctions to fill the capacity market have been small generators of various types.

Some of the winners of the capacity mechanism contracts, controversially,  have diesel generators. Even though it would be simple to just penalise diesels and let small gas fired plant (which are much cheaper and much more flexble than large CCGTs) anyway so the job, the Government, sorry OFGEM, has decided instead to penalise all small generators, including all renewable energy schemes. This is done by a) altering the way capacity is charged on the electricity system, and also by b) removing the ability of 'embedded' generators to contribute to reducing the need for peak transmission capacity (abolition of 'triad' charging).

But the impact on renewables will be especially severe. Increases in the cost of renewables seem likely as a consequence to range from 10-20 per cent depending on the technology and area of the country in which they are sited. Before this change there were reasonable expectations that in the next round of bidding for offshore wind generation contracts auction prices for offshore wind would drop below £50 per MWh. That would be very good given that recently wholesale power prices have been running at around £60 per MWh. Now it could well be that there will be no contracts for difference (CfDs) awarded for offshore wind because no projects will be able to bid under the Government's 'cap' of £56 per MWh.

But, whilst renewable energy projects will be put out of business, there a bit more chance that we'll get some large gas fired power stations. What, OFGEM preparing for the decentralised energy revolution. You must be kidding!


Quote from the introduction in OFGEM's get the drift.....

'These current arrangements encourage users who can afford to invest in on-site generation, Demand Side Response or storage to reduce their exposure to residual charges. Where this change in behaviour is in response to market prices or forward charges recover the total costs of balancing the system in each half hour and other system costs, and are generally difficult to anticipate, and hence provide limited forward-looking signals to network users on how they can affect their contribution to these charges. Where these activities are prompted by residual charge avoidance, they will not reduce costs for the system, and in some cases may add to them. These activities will also push residual charges up for other users. We do not think this this is a fair outcome – all users should contribute to the ongoing costs of the network infrastructure in exchange for the benefits it provides' (page 9-10) (see pages 28-29)

Some other sources:

New funding crisis looms for Hinkley C

It seems increasingly likely that the French or British Governments will be sinking more money into Hinkley C over and above what has already been agreed. EDF is close to failing to fulfil contract conditions necessary to be given loan guarantees by the Treasury. These conditions were set out in the agreement between the UK Government and EDF in 2013. This is because EDF's new French reactor at Flamanville continues to experience construction delays and seems unlikely to show good performance by the end of 2020 as required in the 2013 agreement with the UK Government.

The UK Government (in 2013) agreed a contract with EDF and agreed to pay them £92.50 per MWh for 35 years (2012 prices) from the date of commissioning. However, in addition the Treasury agreed to guarantee many billions of loans that EDF needs to borrow from banks on condition that the Flamanville 3 reactor was brought fully online by the end of 2020, something that now seems unlikely to occur.  It is only recently that EDF has begun serious construction of the Hinkley C reactor itself (as opposed to developing logistical support infrastructure), and given an expected 8 year timescale for completion of the twin reactor project, the reactors will not be fully operational until 2027 - of course, only if things go well.

The loan guarantees needed are estimated by Steve Thomas (1) to amount to £14 billion. Yet according to the UK Government's conditions, loan guarantees will only be approved, (according to the EU Commission's analysis of the documents)  if the the Flamanville power plant has fulfilled the performance requirements set by the Government during the 'trial operation period' by the end of 2020 (2). However, the trial operation period, that is after grid connection and first generation (3), is not going to start until, at the earliest, part way through 2020 itself. Even this dateline is highly likely to slip as the French nuclear safety regulator demands further assurances (4).  A trial operation period might be expected to last a year, so it will now be very difficult for EDF to fulfil the criteria set for the automatic granting of the loan guarantees. The point of this loan guarantee condition was that the Flamanville plant is of the same type (European Pressurised Reactor - EPR) as the design for Hinkley C.

If the Treasury refuses to give the loan guarantees because EDF had failed to satisfy the performance conditions attached to Flamanville then It would be pretty impossible for EDF to find £14 billion pounds out of its own resources. The French Government is now poised to re-nationalise the remaining (minority) of shares held in private hands as part of a process of rationalising the company to prepare it for the financial challenges of either refurbishing or decommissioning its ageing reactor fleet. Indeed the conditionality of financial guarantees in the Hinkley C deal formed a big part of the financial context which surrounded the resignation of EDF Chief Financial Officer in 2015.  Equity requires high returns to pay shareholders, and the potential reliance on such funding is very risky, and if EDF does not have the necessary loan guarantees the only way to complete the power plant would be to put the funding on its own balance sheet.

The outcome of this (delay at Flamanville) is that some financial restructuring of the Hinkley C now seems very probable, with either (or both) the French or British Governments taking on increased financial risk for the project. Of course the most sensible financial decision would be for the Government simply to use the terms of the contract to make EDF either pay for the rest of it or abandon it altogether.

The British Government could, under the cover of what has misleadingly been called the 'Regulated Asset Base' model, put in extra Government money, maybe in return for negotiating a slightly reduced return for EDF. But the cost of that would be that the UK Government would be taking on some of the construction risk, breaking the commitments made by Ed Davey as Energy Secretary in 2013, and, more to the point carrying the very probable outcome that the British taxpayer/consumer would end up paying billions of pounds extra for the likely cost-overruns. Perhaps the French Government could be pushed into providing some or all of this extra cash. Such a decision would rest on political calculations and would rate as a substantial further loss for the French Government and further drain on its finances.

Professor Steve Thomas has commented: 'If the plant was already under construction, the government could refuse to assist it and simply leave the plant to be abandoned part-built. All experience with large projects suggests this will not happen and the government will pour additional taxpayers’ or electricity consumers’ money into the project to ensure it was completed' (5)

It should be borne in mind that no nuclear power station built in the west this century has been built even close to its projected start date. We really should not believe all the stuff about how nuclear constructors have 'learned lessons', when the lessons we have learned are that the rose-tinted view of construction plans proferred by the developers have been worthless. The Treasury should use the opportunity of  EDF failure to fulfil the contract conditions concerning Flamanville performance to tell EDF either to pay for the Hinkley C itself or scrap the whole thing. Whether the Treasury has the sense or even the political ability to take this prudential step remains to be seen. As I and a great deal of others have been arguing, there's so much cheaper low carbon alternatives already available to supply the energy services necessary it makes no sense to increase the amount of of bail-out cash offered for Hinkley C. The project already resembles a financial black hole and if we do not watch this carefully the British Government will dig us deeper and deeper into it.


(1) page 9




(5) (pages 8-9)

Excerpt from EU document:
'The Base Case Condition is that satisfactory evidence has been provided that Flamanville 3 has completed the trial operation period and that the requirements of the Guarantor in respect of performance during such period have been met. The Guarantor has the option to extend the date for meeting the Base Case Condition into the future by increasing the amount of Base Equity and procuring that such increase benefits from the required credit support. The Base Case Condition date cannot fall later than 31 December 2020' ( page 50)

Saturday, 9 February 2019

Scottish Energy Minister pressed to back closure of Hunterston B nuclear power plant in favour of renewable energy

Why Hunterston B Nuclear Power Station should not be Restarted

Presentation made to Paul Wheelhouse, Minister for Energy Connectivity and the Islands

Dr Ian Fairlie and Dr David Toke

Feb 4 2019


In our view, Hunterston B nuclear power station needs to be closed for safety reasons, but this should not be lamented because
a)       there is presently a surplus of electricity generation in Scotland, and more is in the pipeline. Indeed there is so much renewable energy capacity being built that Scottish electricity exports to England and Wales will continue to increase,
b)       there will be no significant job losses in Scotland, and
c)        Scottish energy security will be improved as Hunterston B’s operation results in many Scottish windfarms being turned off at certain times and periods.

The two reactors (460 MW net each) at Hunterston B nuclear power station situated near Ardrossan are 43 years old - the oldest reactors in Europe. Their operating lifetimes have twice been extended at the request of the operators EDF Energy - a UK subsidiary of EDF in France, and they are now scheduled to close down for good in 2023.

They have been off-line since March 2018 (R3) and October 2018 (R4) for safety reasons. The decision as to whether these reactors will ever be allowed to restart is for the Office of Nuclear Regulation (ONR). It is currently awaiting a revised safety case for this from EDF Energy.
In recent months, EDF Energy, the trade union GMB, some politicians and newspaper editors have been pressing for the station to be allowed to restart. Quite a few incorrect  statements and misrepresentations have been made: this briefing sets out to put the record straight.

Need for Electricity?

Scotland has a surplus of electricity generating capacity, and this surplus will increase over the next decade regardless of whether Hunterston B, and even Torness, were both to close. According to the Scottish Government (SG), renewable electricity supplied 70 per cent of Scottish electricity consumption in 2017 and will supply around 87% in 2020.
On top of this, sufficient wind power has already been given planning consent to supply the equivalent of a further two-thirds of Scottish electricity consumption. Much of this electricity will be sold to England and Wales. As renewable energy costs continue to plummet, even more wind supplies will be forthcoming and Scotland will become the main source of low carbon energy for the whole of the UK, helping to meet both UK and SG targets for the reduction of greenhouse gas emissions.

Moreover, closing down Hunterston B will allow more wind power from Scottish windfarms  to be supplied to the grid, thus improving Scottish energy balance and security. The grid is currently overloaded partly because the Scottish nuclear power stations (Hunterston B and Torness) will not/cannot turn down their power to accommodate renewable energy, so windfarms have to be switched off regularly. This wastes their capacity and causes newpaper controversies over so-called ‘constraint payments’ paid to windfarm operators to compensate their lost income.

It would be ironic if Hunterston B were to be allowed to return to service, because the electricity it produces is considerably more expensive than that produced by the renewables. This is because the cost of nuclear fuel is high, whereas fuel cost of solar and wind is effectively zero.


Some exaggerated claims have been made by a trade union as to the ‘thousands’ of jobs that would be lost if Hunterston B were closed. The reality is that about 370 employees work there, and none would lose their jobs for at least two to three years after closure.  The reason is that when a reactor is closed, radioactive decay heat is still produced in the nuclear fuel – it cannot be switched off. This means the cooling circuits have to be operated day and night for at least two to three years until the radioactive decay rates have declined significantly. After that, the many decommissioning jobs will employ most of the existing workers, just as occurred at the Dounreay nuclear site in North Scotland. In fact, it is likely there will be more decommissioning jobs at Hunterston B than there were operating jobs.


The most important matter is, of course, safety. Would it be safe to turn the Hunterston B reactors back on?  In our view, the answer is, on balance, no. The vital issue is that the current unstable state of the graphite moderator cores increases the possibility of a major nuclear accident. Although the probability of such an accident remains low, the consequences could be so severe, ie the radioactive contamination and evacuation of both Glasgow and Edinburgh, that the risk should not be taken.

The main problem is what is called keyway root-cracking in the graphite moderator cores of the reactors. These cores consist of about 3,100 graphite barrels stacked ~10 m high by ~10 m wide and ~10 m long. These are normally locked together rather like a three dimensional jigsaw, by means of shims inserted into keyway slots. The difficult problem is that over 100 barrels have been observed to be split from top to bottom because of cracks in the keyway slots. And that is with only 28% of the barrels being examined. EDF has estimated that about 370 barrels are cracked, ie about 12% of the total number.

This is a serious matter because if an untoward incident were to occur – for example an earth tremor, gas excursion, steam surge, sudden outage, or sudden depressurisation, the  barrels could become dislodged and/or misaligned. According to John Large, the late independent nuclear engineer, this could in turn result in the following happening:
(a)   control rods could be blocked from dropping into the reactor core by the resulting displaced graphite barrels. (Only 12 of the 81 control rods in R3 are articulated).
(b)   coolant gas channels could become partly blocked by misaligned barrels, and
(c)    fuel assemblies could become stuck and not be able to be withdrawn. Large explicitly mentioned this in the BBC programme “Costing the Earth” at the end of 2017.

These events could in turn lead to large emissions of radioactive gases. Further, if hot spots were to occur and if nuclear fuel were to react with the graphite moderator they could lead to explosions inside the reactor core. In the very worst case, the hot graphite core could become exposed to air and ignite leading to radioactive contamination of large areas of central Scotland, including the metropolitan areas of Glasgow and Edinburgh.

This does not bear thinking about. In our view, it should not be allowed to occur.


In more detail, the decision as to whether to allow the Hunterston B reactors to restart is a matter for the ONR to decide. This is a difficult and complex decision as Probabilistic Risk Analyses are necessary and these require much research effort and are time-consuming.  Hundreds of computer programs and dozens of researchers are involved.
Barry Marsden, Professor of nuclear graphite technology at the University of Manchester has stated “The thing which will close (these reactors) down in the end will be the cost of ensuring safety. It is possible to make a safety case for a significant amount of cracked bricks but it takes time and costs money.”

But even this may be an optimistic view. Under the ONR’s rules (see a,b,c below), in the case of high consequence, low frequency events of beyond design basis, operators of nuclear power stations are required to conduct Probabilistic Safety Analyses (PSAs). These are expected to look hard at low frequency events. In judging the adequacy of safety cases, inspectors are required to especially consider the effects of very low frequency events, eg seismic events.

At the end of the day, EDF’s forthcoming revised safety case will have to demonstrate to ONR that its computer models indicate there is a less than one in ten million chance (ie 1 in 10,000,000 or 10-7) of such an accident occurring given its estimated number of graphite barrel cracks.  Will EDF’s models be able to show this? One needs to keep in mind that EDF’s computer models so far have not accurately predicted the numbers and locations of the cracked barrels at reactor 3.

And if the EDF models were to show this and if the ONR were to accept it, should the Scottish public necessarily accept it? Given that the reactors are very old, well past their sell-by dates, are not needed, and that closure would not threaten jobs, the public may well ask why they should be exposed to such an existential threat even if the chances of it occurring were very low.

Put another way, since the station is to close anyway in 2023, do we need to run the risk?


ONR (Office for Nuclear Regulation)  (2018a) Safety Systems, Nuclear Safety Technical Assessment Guide, NS-TAST-GD-003 Revision 8, Bootle: ONR,

ONR (2018b) Guidance on the Demonstration of ALARP (As Low As Reasonably Practicable), Technical Advice Guidance 5, (NS-TAST-GD-005 Revision 9) Bootle: ONR,

ONR (2018c) ONR Guide External Hazards, Technical Advice  Guidance 13, NS-TAST-GD-013 Revision 7, Bootle: ONR

Sunday, 3 February 2019

Why closing down Hunterston B nuclear power plant in Scotland will stop lots of wind power being wasted

Closing down Hunterston and Torness, the Scottish nuclear power plants, is likely to substantially reduce the amount of wind power that is currently being forced off the grid. There is controversy surrounding Scottish windfarms being paid 'constraint payments' at some times to avoid the Scottish electricity network becoming overloaded. Because it is windfarms that receive the payments, windfarms have, in reports carried by right wing newspapers, been singled out for sole blame for spending money on 'constraint' payments. This is despite the fact that it is the nuclear power stations' inability or refusal to reduce production when the Scottish part of the grid is overloaded which contributes greatly to the problem.

Groups such as the Renewable Energy Foundation (REF) (which has been described as 'an anti-wind lobbying organisation') (1) have regularly pointed out how large sums of money are spent on paying windfarms in Scotland to stop producing electricity. These payments are made in order to avoid the Scottish electricity grid from being overloaded. This is in a context where measures to increase the ability of the grid to absorb increasing generation of renewable energy (particularly including increasing the available capacity of large transmission lines) have been developed too slowly.

According to the Renewable Energy Foundation (REF) around £115 million was paid to Scottish windfarms in 2018 amounting to around £70 for each MWh of 'constrained' power (ie not generated). (2) This level of payment (£70 per MWh) is not excessive given that this amount is close to the average of what the windfarms earn for each MWh generated in a given year. Indeed, this is a bargain compared to what you would have to pay either of the Scottish nuclear power plant to turn down their power. Arguably they could not do at short notice at any price; certainly it would be very expensive for them. Both of the Scottish nuclear power stations are of a clunky design straight out of the early stone-age of nuclear power, replete with a dodgy (and cracking) configuration of graphite blocks which present a growing safety threat.

This problem of system overload is the reason that the recently completed transmission line linking Wales to Scotland was built. As Jonathan Marshall. Senior Analyst at the Energy and Climate Intelligence Unit put it recently: 'On top of reducing constraint payments, the link will reduce the cost of accommodating Scotland’s 2.6 GW inflexible nuclear power stations that work most efficiently when operating at full output'. (3)

In fact, in addition to increasing transmission line capacity, more decentralised solutions for absorbing increasing renewable generation should get more attention. These include development of local 'microgrid' strategies, more emphasis on storage solutions and a real effort to link large-scale heat pumps with district heating networks. The latter, heat pump solution, would also help to turn renewable electricity into heat. When there is too much electricity on the grid the heat pumps can produce hot water which is then stored in large hot water tanks to be used by local residents as is necessary. This is a technology that is being increasingly applied in Denmark.

Of course one immediate measure, with collateral safety advantages, can be taken to ease the current situation, and that is to ensure that Hunterston B is permanently closed. This power plant is currently shut down while the Office for Nuclear Regulation (ONR) conducts a safety review. A large number of cracks were found in the graphite blocks that surround the reactor core. The proper functioning of the blocks is essential for safety reasons, eg allowing fuel rods to be withdrawn and  the control rods to be inserted in order to avert a calamitous accident (4). EDF is currently conducting a big public relations effort to convince everybody that the plant can be restarted without safety fears.

But in terms of balancing out the Scottish electricity grid, closing down Hunterston B would be very helpful.

Some references: