STOP NUCLEAR GETTING A BLANK CHEQUE FROM THE TREASURY!

The key thing is to try and ensure nuclear does not get given a blank cheque on electricity consumers’ behalf – and to make sure that there is transparency on such a deal

Nuclear power stations (NPSs) will only be built in the UK if their costs are underwritten by Government. In practice this will most likely mean that Treasury accedes to pressure from EDF etc that electricity consumers will pay for any cost overruns in building nuclear power plant (costs including mounting interest charges on debt).

Despite the existence, in the proposed Energy Bill, of ‘strike price’ contracts for nuclear power (that will give nuclear power new subsidy income streams paid for by electricity consumers) pension funds and banks will not fund nuclear power without a government promise to pay any cost-overruns. This is because of the very great uncertainty about the costs of building NPSs, costs which escalate very quickly in the case of NPSs because of the very long construction times and the interest charges which accumulate (often such charges are misleadingly left out of descriptions of NPS costs). The uncertainties have been greatly exacerbated because of the problems with the Finnish (Olkiluoto) and French (Flamanville) European Pressurised Reactor (EPR) projects.

Companies such as EDF would be very reluctant to finance the plant from their own funds because this would lead them open to potential downgrades by credit rating agencies leading to falls in share prices and increases in borrowing costs. Hence they want guarantees underwriting the investments from Government. In the cases of Flamanville and Okiluoto such guarantees were provided, in effect by the French Government, since EDF (was) nationalized – now it is part-privatised and open to part liberalization measures which prevent further nuclear plant being built. Okiluoto was only built because AREVA, the French state owned nuclear construction company gave financial guarantees to the Finnish developers TVO to pay for cost overruns – indeed AREVA have had to pay a lot of money for cost overruns and this has resulted in AREVA itself suffering financial problems. It is possible in theory to have a similar deal whereby the French state effectively pays for a large part of British nuclear construction costs, but maybe AREVA are not in a position to carry on doing this!

Hence it comes down to the Treasury, who are reluctant to give ‘blank cheques’ on behalf of electricity consumers  (this is the phrase that should be used), because, apart from anything else, the renewables lobby would also ask for similar consideration – and the Treasury are imposing some strict funding envelopes on renewable development.

So the key thing is to try and ensure nuclear does not get given a blank cheque on electricity consumers’ behalf – and to make sure that there is transparency on such a deal. The nuclear lobby would prefer such an arrangement to be made in secret, cloaked by commercial confidentiality, although these days this is much more difficult to achieve than it used to be even in the early 1990s when the ‘non-fossil levy’ was used to pay for Sizewell B.

We need real feed-in tariffs for renewable energy (note , not the confusing 'contracts for difference' on offer and tendering etc), not blank cheques for nuclear!

Has the Scottish Government done a deal with George Osborne?

On the face of it the Scottish Government's targets and statements about renewable energy seem impressive, but under the surface doubts are emerging about how strong this policy really is. At the end of 2010 it seemed that the Scottish Government was critical of of the Westminster Government's proposals for Electricity Market Reform (EMR) which threatens to shift subsidies away from renewable energy and towards nuclear power. However, in recent months the Scottish Government has fallen silent on this topic. 


For example, the Scottish Government appears to have accepted without challenge the 10 per cent cut in incentives for onshore wind outlined in the Department of Energy and Climate Change (DECC) review of banding of Renewable Obligation Certificates (ROCs). This is despite the centrality of onshore wind for reaching the Scottish Government's ambitious '100 per cent' renewable energy supply target for Scotland by 2020. 


Of course the reduction in incentives for onshore wind will at least go some way to satisfy the pressures coming from Tory backbenchers to cut funding for so-called 'low windspeed' sites. This is despite the fact that even so-called 'low windspeed' sites represents a cheaper source of energy than nuclear power (given that new nuclear power will require higher levels of incentives and guarantees to go ahead).


However, coincidentally, in November (the same month as the results of the renewable banding review was announced) the Government announced that the Treasury was releasing £103 million to be given to the Scottish Government. This money comes from profits made by the Government in selling electricity generated from old renewable projects set up under the renewable Non-Fossil Fuel Obligation (NFFO) scheme that operated in the 1990s. The Treasury otherwise pockets the money that comes from the sale, by the Non Fossil Purchasing Agency (NFPA which adminisiters renewable NFFO contracts), of renewable electricity through its auctions.


So, has the Scottish Government done a deal with the UK Government so that a sop can be given to English lowland Tories at the expense of onshore wind development? Certainly there seems little financial sense in this if renewable energy targets both north and south of the border are concerned, but the Scottish Government seems very pleased about the £103 million which it can use to pay for direct investments into renewables. Yet while such investment is very welcome, it is coming from Westminster, and not from Scotland. 


Moreover, the Scottish Government has been unable to clear up uncertainty over the future of renewable incentives created by the possibility that Scotland will become independent after the referendum. The financial analysts Citigroup expressed such fears in a recent report. Asked specifically about this by the BBC, Scotland's First Minister Alex Salmond seemed unable to guarantee the continuation of renewable incentives under Scottish independence. On the contrary, he implied that the English would continue to pay for offshore renewables installed in Scottish waters!


Salmond told the BBC that investors 'know that renewable power from the seas around Scotland is going to be required to fulfill England's electricity requirements....it is power for export'.  See


http://www.bbc.co.uk/news/uk-scotland-scotland-politics-15551366 


Salmond seems to assume that the English will have no other choice but to buy Scottish offshore renewable power to keep the lights on. However, given the direction of UK Government policy of cutting incentives for renewables, it seems increasingly likely that the UK Government would simply build more gas fired power stations before they paid extra for renewables from an independent Scotland.

Of course, the power can only be exported if somebody is willing to pay for it to be generated in the first place. It does require a bit of leap of faith to believe that another country will pay the extra incentives needed to produce offshore renewable energy from schemes located in Scottish waters. Given that the UK Government is opposing plans for Scottish independence renewable energy interests can be forgiven for being rather sceptical that the continuation of incentives for renewable energy is more-or-less guaranteed. 


The remaining confidence for continued incentives being available for renewable energy seems to reside in a belief that Scottish independence will not actually happen and that Scottish renewables will continue to be supported by English money. The fact that the Scottish Government seems all too compliant in allowing the UK Government to cut support for the most cost-effective widely available renewable energy source, onshore wind, does not encourage faith in the Scottish Government's ability or willingness to back up their bold pronouncements about renewable targets with the deeds necessary to make them happen.

Storm causes sudden shutdown of Hunterston B nuclear power plant...again

A Scottish nuclear power station was forced to shutdown by the storm on December 8th. Attention has been focussed by anti-windfarm sources on the shutdown of windfarms in and around Scotland in what has been called the strongest winds in 25 years, but what has received hardly any attention was the storm-induced grid failure which shutdown the 480 MW Hunterston B nuclear power station in Ayrshire.

Such sudden nuclear shutdowns are in fact quite common, and, as covered in my blog on a Sizewell B failure on March 14th (scroll down to read this), these quite unexpected shutdowns of nuclear power stations are much more dangerous to grid stability and supply services to consumers than storm-induced shutdowns of windfarms. This is because storms can be predicted in advance, meaning that the National Grid System Operator can take mitigatory measures in good time on the basis of anticipated declines in windfarm production of electricity, and also because the windfarms, which will typically cut out when windspeeds reach 25 metres per second, do not all cut out at exactly the same instant.

Unfortunately when nuclear power stations cut out (and the most 'modern' ones are over 1000 MW in capacity), they do so without warning taking off large chunks of generating capacity off the grid in an instant. That is far more dangerous to the prospects of 'keeping the lights on' than the well known variability of windfarm output. This emphasises how wind power is in fact more reliable for grid stability purposes compared to nuclear power stations. See a report on the storm shutdowns (both wind and nuclear) on http://www.bloomberg.com/news/2011-12-09/battered-u-k-turbines-switch-on-after-halting-in-165-mph-winds.html. This is not the first time a storm has suddenly shutdown Hunterston B. See also the1998 report: http://news.bbc.co.uk/1/hi/uk/244765.stm.

Of course, because nuclear power stations are built to run all the time they are useless in providing so-called 'back-up' to windfarm variability, but they are a major threat to grid variability compared to windfarms. So don't accept any of the nonsense about how nuclear power is better than renewable energy because it provides firm power. It needs plenty of back-up itself!

US to tax solar panels?

As if it was not bad enough that European states are clawing back on the solar feed-in tariff rates, the US is moving towards actually artificially increasing prices of solar panels through putting TAXES on imported solar pv panels. I will explain that even more starkly. While Europe is still subsidising solar pv panels, the US is going to tax them! The US International Trade Commission has, according to the online journal Renewable Energy World, 'unanimously determined that Chinese solar panel and cell imports are harming the American solar manufacturing industry'. This, it seems, is a precursor of  import duties being levied on solar panels imported from China. To add an ironic twist, this policy is being promoted by some US based solar companies themselves. They argue that China is 'dumping' lots of solar panels on the US market and putting them out of business.

Essentially, Chinese manufacturers are selling at cheaper prices than western ones. Partly this is a case of the Chinese having the foresight to invest in green industries, and partly this is a part of the busienss cycle that you get when periodically supply exceeds demand, as opposed to vice versa which pushes up prices.

However, for the solar industry to start arguing that, in effect, prices must be put up through protectionism is the complete opposite of what should be an ecologically driven policy to drive down global prices for renewable energy technologies. The US position is also sacrificing progress in solar technology for protectionist purposes, and this at a time when the world needs to be as internationalist as possible in its trade policies to avoid the selfish nationalism of the 1930s which brought ruin on everybody. If the allegedly idealistic renewable energy industries cannot hold the line on this, who can?

As far as I can see, the main US case seems to rest on claims that the Chinese are putting barriers in front of imports of US solar panels. It is in fact fairly debateable to argue that Chinese barriers are worse than US ones for renewable energy given, for example, the relative availability of incentives like the production tax credit for US based rather than non-US based companies. At its most charitable best the US argument is one for taking the issue to the WTO. It is certainly not an argument for taking unilateral action, such as setting import tariffs on solar panels,  which is likely to adduce retaliation of various sorts. At worst this is sheer hypocrisy as the west in general (including the US) subsidises its own industries in various implicit and often quite obvious ways (as in the case of agriculture) to allow its products to be well and truly 'dumped' on developing nations.

We often hear disparaging noises from the US (even from some solar companies) about European feed-in tariff policies. Well, parts of Europe are developing large capacities of solar pv, led by Germany, that stand in contrast to the sluggishness of progress in the USA. US policies seemed designed not only to fail to give much encouragement to expansion in solar capacity, but actually to stop it happening by increasing prices for solar power through restrictive trade tariffs and policies. What this issue does expose is the sad truth that the leadership of the renewable energy industries has increasingly little to do with the US.

See the Renewable Energy World Report on:
http://www.renewableenergyworld.com/rea/news/article/2011/12/itc-determines-harm-in-solar-trade-case?cmpid=WNL-Wednesday-December7-2011

How Tories have abandoned pre-election solar promises

Those of us who were active in the campaign to install feed-in tariffs for small renewables remember how the Conservatives captured the support of many greens at the end of 2007 with their policy paper 'Power to the People - The decentralised energy revolution'. Now, far from extending the decentralised revolution, the Conservatives are busy destroying the industry that was established by Labour legislation.

The cut of 43 p/KWh to 21 p in the solar pv feed-in tariff will, as we have heard through industrial testaments recently, kill off most of the solar pv industry. Meanwhile, despite the Government's intentions about seeking the most cost-effective renewable policy, it is cutting back incentives for the most cost-effective widespread renewable source, onshore windpower. Its 'ROC' value is being reduced by 10 per cent as a political sop to anti-windfarm campaigners. Essentially, then, this policy is about giving ground to the strident calls from the political right and pro-nuclear interests for incentives to renewable energy to be cut. Never mind that lots of voters thought that they were voting for a Conservative Party that wanted better support for renewable energy at the 2010 election.

Let us remember a few of the bold statements from the Conservatives' 2007 green makeover document:

'Other European countries have shown what can be done. In Germany, there

has been a micro-generation revolution, based principally on photovoltaic

technology, over the last decade (p 19)

‘With a feed-in tariff system, a fixed price is paid for the electricity producedfrom decentralised, low-carbon energy sources, usually with different price

levels set for different technologies. In Germany, for example, the basic tariff

paid for electricity generated from solar photovoltaics was 0.518 euros in 

2006 (p 23)’

Of course, in its 2010 election manifesto itself, the Conservatives were allowing an impression to be formed that we would follow the German example with regard to solar power.

Talking of the city of Freiburg, the manifesto commented: 'Solar panels have been installed across the city – on schools, churches and private houses, and even on the sports stadium and the City hall' (p91)

But the final quote must come from the Conservatives 2007 document which says:

'By contrast with Germany and the Netherlands, the British micro-generation

industry is tiny' (p 20)

Yes, and Government policy will ensure things stay that way!

Split up the big six! - Green Competition not brown oligopolies!

I wrote this post in October 2011, but it makes sense now as well since some independent generators have recently been reported as complaining that they cannot compete with the stranglehold of the Big Six. Their 'oligopoly' ensures that their generation gets priority for sale to their suppliers rather than other options - David Toke, August 2014:

Is Labour Energy spokesperson's Meg Hillier suggesting that the 'bix six' energy companies that control most of the UK electricity market will be split up into 'generation' and 'supply'? That would be a significant boost for prospects for more green and decentralised energy if she is saying this. However, a danger has already arisen that the issue is being diverted into a debate about whether we should have some sort of 'pool' arrangement for selling wholesale electricity or the current system of 'bilateral trading' where generators and energy suppliers find their own arrangements to buy and sell electricity in the wholesale market. That is a secondary issue.

The central point is that the current set-up whereby the big electricity generators also own the main electricity suppliers means that the big six make it very difficult for independent companies, whether generators or suppliers, to compete. The current regulations make a distinction between generation, distribution, transmission and supply of electricity. But they allow generators to own suppliers, which mean they own most of the suppliers! This has a significant impact on sustainable energy policy. The big six make the bulk of their profits from generating electricity - not in supplying it - so it will not usually be in the interests of the electricity suppliers to do anything that decreases, rather then increases, the production of electricity. But if the generators did not own the suppliers, if they were prevented from owning suppliers (or at least, suppliers to whom they sold energy) then the suppliers would have more of a choice to choose between making money by avoiding generation options and choosing demand side reduction measures instead.

This makes a big difference when it comes to balancing fluctuating renewable energy supplies. In California major electricity suppliers have installed 'smart' devices in commercial premises. Such devices mean that when demand for electricity is at peak periods the microchips can decide whether electricity, used in say heating or cooling services, can be temporarily suspended without affecting the services themselves. This avoids the need to buy in expensive electricity supplies and means that fewer power plant are needed to 'back up' the system. In the UK companies such as Flexitricity are working to implement this type of activity. See http://www.flexitricity.com/

What are called 'demand response' measures such as these (and there are various types of measures adding up to a lot of equivalent power plant capacity) have obvious advantages for balancing fluctuating renewable energy supplies. You can reduce the need for so-called 'back-up' plant. Yet the current market domination by the 'big six' electricity companies means that there is little interest in developing such strategies. The big six make their money from generating electricity from power stations, so if they control the suppliers they will want them to buy power from the power stations, not look for demand reduction options.

In addition to this it is possible to encourage electricity suppliers to be more interested in saving energy through conventional energy efficiency measures if they are not controlled by generators and made to sell as much power as they can. That involves a lot of detail, but we cannot even start thinking about it under present arrangements where the interests of the power plant producers are paramount.

Of course splitting up generation and supply reduces control, by the 'big six', of the market so that they are less able to disadvantage their smaller, often decentralised, competitors. Many more independent generators, combined heat and power plant and also those offering demand side measures could gain a foothold in the market without the dead hand of the big six. Also independent electricity suppliers would have more of a chance to compete.

Splitting up the big six is not going to green the electricity system by itself - we need regulated, real, feed in tariffs and energy efficiency measures for that - but it will introduce some genuine competition into the system and make some much needed green techniques more possible. That is what we need - green competition rather than the brown oligopolies we have at the moment.

Government to cut subsidies for community wind power?

Despite being acclaimed as being a low cost carbon source even by the nuclear-friendly Committee on Climate Change, onshore wind is due to have its subsidies cut in a Government review of the Renewables Obligation (RO). This will ensure that many community wind power schemes cannot be built.
See
http://scotlandonsunday.scotsman.com/news/Cut-looms-for-wind-turbines.6826574.jp

PLEASE WRITE TO YOUR MP TO ASK FOR INCENTIVES FOR ONSHORE WIND POWER TO BE MAINTAINED AT THEIR CURRENT LEVELS RATHER THAN SPENT ON NULCEAR POWER

The Renewables Obligation is the system that currently funds renewable development through renewable developers being able to sell 'renewable obligation certificates' (ROCs) to the electricity suppliers who have to achieve an increasing obligation to supply renewable energy, or pay a penalty. It is the electricity consumers who effectively pay a levy to support this of course. But the Government is under pressure from its own backbenchers who do not want the windfarms in their constituencies, and so a good way of stopping the windfarms is to cut the subsidies.

This has nothing to do with costs, or efficiency, as the Government claim - since onshore wind on even the less windy sites is still very cost-effective (and likely to receive much less subsidy than will be given to nuclear power in various forms). It is to do with meeting demands of anti-wind farm groups who do not want the landscape to be graced by the sight of windfarms. Also, by coincidence, of course, cutting subsidies for windfarms will enable such subsidies to be transferred to nuclear power from 2017.

The Government is considering cutting the number of ROCs that are awarded to onshore windpower. Currently it is 1 ROC per MWh generated. The Government is considering cutting this to 0.75 ROCs or even 0.5 ROCs. Community wind power schemes tend to be established on the lower wind power sites and thus will be the most likely to be the schemes that are prevented from going forward.

In addition to this the Government proposals for a 'contract for differences' feed-in tariff (to be introduced from 2017) are likely to mean that independent generators will receive at least 30 per cent less income per unit generated than the stated feed-in tariff rate, the bulk of this money going to the major electricity suppliers. See the recent post on this blog about this 'Give feed-in tariffs to renewable energy not electricity suppliers!' (August 1st).
You can see information about Community Windfarms projects in the UK from the following websites:
http://www.westmill.coop/westmill_home.asp
http://www.energy4all.co.uk/projects.asp