RAB

http://www.dieterhelm.co.uk/energy/energy/the-nuclear-rab-model/

Now EDF want us to pay for nuclear build cost overruns - tens of £billions down a nuclear black hole?

EDF is angling to get the UK Government to commit to pay what could be tens of billions of pounds  for  cost overruns on the proposed Sizewell C nuclear power project. This is part of the so-called 'Regulated Asset Base' (RAB) formula it wants the Government to adopt to fund the double plant power station. RAB is usually used for purposes where cost overruns occur much less frequently than they do with nuclear power stations. Usually they do not involve any commitment by the Government to pay for cost overruns.

Under this (RAB) system nuclear power is to be given a privileged postion (certainly not afforded to renewable energy plant) whereby its costs are guaranteed to be paid by the electricity consumer before the plant even starts generating any energy. But not only that, EDF wants the Government to effectively guarantee that anything above cost overruns of 30% are borne by the Government (with the electricity consumer or taxpayer footing the bill). The system is claimed to save consumers' money by allowing the project to be financed by the consumer (none of which have been asked of course). In reality, if applied to building new nuclear power plant, it is likely to do exactly the opposite and blow a great hole either in Treasury budgets, electricity consumer pockets, or both.

This means that we will be paying out increasing amounts once the construction period overruns by more than around 20 months. It should be borne in mind that construction of a similar reactor to that planned for Sizewell C (and also Hinkley C), at Flamanville in France, has already taken getting on for 12 years to build, far longer than the original plan to complete in 5 years. Flamanville already has cost overruns of over 200% compared to the original budget.

It is not too difficult to calculate the approximate minimum impact of construction overruns. This is because, on a rule of thumb basis, construction costs are akin to a multiple of the time taken to build them, plus additions to cover the cost of borrowing money to finance costs already incurred. Essentially, you have to employ a team (very large one in this case) of workers to do the job, and the longer you have to hire them the longer you have to carry on paying them.

Let's assume that EDF choose a slightly less implausible time to build the project at Sizewell C project than they did for Flamanville. Say they chose 7 years. In that case (still implausible compared to what they usually take in the West), then it would take less than 2 years of costs overruns before the Government would be expected to start carrying the can for the cost overruns.

It's going to be a very big can. Especially if, as I suspect, that EDF is projecting an implausibly short construction period. I have heard suggestions that Sizewell C's cost are going to be reduced by 25% compared to Hinkley C. How is that going to happen? It's the same design with the same highly specialised materials and parts that do not come off a production line. The only explanation is that they expect Sizewell C to be built in a short time compared to Hinkley C (whose real construction has hardly started). Another stab at doing it in 5 years? You must be joking! If they are planning on 5 years build time then the consumer will start paying for the cost overruns in under 6.5 years after the plant was started to be built.

I've been predicting for a long time that the Government would end up underwriting the costs of building nuclear power plant. It's likely to happen by stealth with Hinkley C anyway as costs mount, but in the case of Sizewell C, EDF seem to be going to get it written into the contract from the start. That could mean the state passing onto the electricity consumer tens of billions of pounds of costs for construction cost overruns.

Reference

https://www.thetimes.co.uk/edition/business/sizewell-budget-meltdown-could-hit-taxpayers-under-edf-proposals-wrjdkdx20

Offshore wind: the power source that could blow all other power sources away just on its own

As offshore wind technology fully blooms as its own distinct mass industrial technology producing power at low prices, and as the prospect of floating wind turbines comes closer, the potential for the technology threatens to eclipse everything else - at least in countries with a large waterline, such as the UK.

In reality solar pv technology costs are coming down at least as quickly, so that what is likely to happen in the coming years is that these two technologies will compete with each other (and onshore wind of course) for market share. Indeed such is the rate of cost reductions that some are now suggesting that the way to approach 100 per cent renewables targets is to minimise the use of batteries and other storage techniques, and simply to build gross overcapacity in wind and solar. That of course ushers in the possibility of uses for excess production, such as conversion to hydrogen, but that is another story.

The story here is that on its own the economic potential offshore wind available could generate over five times the anticipated total energy requirements for the UK in a 'net zero carbon' scenario. That is, based upon the Committee on Climate Change estimate that conversion to an all-electric economy supplied from low catbon sources would require 615 TWh of power generation in 2050. It could do this as the cheapest electricity source available - apart from solar power of course, with which the competition will probably be intense in the future.

BVG Associates, in collaboration with Wind Europe did a study two years ago of offshore wind potential in North Europe alone. It concluded that just on the basis of the North European exlusive economic zones (EEZ) (excluding Norway's EEZ) offshore wind could generate over 10,000 TWh a year - that's actually rather more than three times the current total of EU electricity consumption.

The development of floating wind turbines would be important to realise this for approaching half this potential - they are not yet as developed as the monopole or jacket based 'fixed' machines that are mostly used at the moment. But even here optimisation is being acheived quickly, with Equinor recently announcing a project near the Canaries with a capital cost that has dropped quickly, traveling towards the levels at which fixed offshore is at the moment. Rapid advances in improving turbine efficiency mean that even the criteria used by BVG Associates is being surpassed with the latest machines such as the 12 MW GE machine which, says GE, boasts a capacity factor of 63%.

Costs for the fixed offshore windfarms continues to plunge downwards, with the latest contact prices dropping well below below £50 per MWh for the Dunkirk offshore windfarm granted by the French authorities. These prices are very competitive with even power from gas fired power plant. Sceptics who say that such prices should be taken with a pinch of salt are being coinfounded by preparation for the commissioning of such projects, the first of these approx £50 per MWh schemes being the Danish Kriegers Flak scheme which is being installed as we speak (contract awarded in 2016). The latest British offshore wind auction, taking place now, is also expected to produce contracts with prices lower that the £57.50 per MWh (2012 prieces) issued in 2017.

Of course, the onward march of the offshore windfarms won't happen very quickly unless Government issues enough long term power purchase agreements, which they call 'contracts for difference' (CfDs)

Some References

Dunkirk offshore wind https://renewablesnow.com/news/edf-led-group-wins-600-mw-dunkirk-offshore-wind-tender-in-france-658075/

https://reneweconomy.com.au/norways-equinor-to-build-worlds-biggest-floating-wind-farm-near-canary-islands-88138/

https://theconversation.com/a-radical-idea-to-get-a-high-renewable-electric-grid-build-way-more-solar-and-wind-than-needed-113635

https://energydesk.greenpeace.org/2016/11/15/offshore-wind-power-vattenfall-denmark-record/

https://www.worldconstructionnetwork.com/news/vattenfall-commences-work-on-kriegers-flak-offshore-wind-farm/

http://www.vivideconomics.com/wp-content/uploads/2019/05/20190522-CCC-Accelerated-Electrification-final-report.pdf - offshore wind potential pages 48-49 up to 642 GW (inc 352 fixed)

BVG Associates offshore wind regime Europe https://windeurope.org/wp-content/uploads/files/about-wind/reports/Unleashing-Europes-offshore-wind-potential.pdf
 gross potential of 10,000 GW and over 50,000 TWh page 27

Committee on Climate Change(CCC) (2019) ‘Net Zero Technical Report’

https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-Technical-report-CCC.pdf

offshore notes

Dunkirk offshore wind https://renewablesnow.com/news/edf-led-group-wins-600-mw-dunkirk-offshore-wind-tender-in-france-658075/

http://energynumbers.info/uk-offshore-wind-capacity-factors

https://reneweconomy.com.au/norways-equinor-to-build-worlds-biggest-floating-wind-farm-near-canary-islands-88138/

https://theconversation.com/a-radical-idea-to-get-a-high-renewable-electric-grid-build-way-more-solar-and-wind-than-needed-113635

https://energydesk.greenpeace.org/2016/11/15/offshore-wind-power-vattenfall-denmark-record/

https://www.worldconstructionnetwork.com/news/vattenfall-commences-work-on-kriegers-flak-offshore-wind-farm/

http://www.vivideconomics.com/wp-content/uploads/2019/05/20190522-CCC-Accelerated-Electrification-final-report.pdf - offshore wind potential pages 48-49 up to 642 GW (inc 352 fixed)

BVG Associates offshore wind regime Europe https://windeurope.org/wp-content/uploads/files/about-wind/reports/Unleashing-Europes-offshore-wind-potential.pdf
 gross potential of 10,000 GW and over 50,000 TWh page 27

'Offshore wind is showing cost reduction, but still requires progress to reduce costs towards £90/MWh in the mid-2020s page 37 fifth carbon budget' https://www.theccc.org.uk/wp-content/uploads/2015/10/Power-sector-scenarios-for-the-fifth-carbon-budget.pdf

Labour and energy nationalisation. Why power should be given to local councils, not the pro-nuclear GMB

Labour’s proposals to take the national and regional energy grid back  into public ownership may give a boost to workers’ interests  over shareholder profits, but the way the proposals are set out produces an increased risk of nuclear power being given priority over renewable energy.  Put simply that is because the way the proposals are structured means more power to the GMB in particular, a body which is very pro-nuclear and which is relatively hostile to renewable energy and  a smart energy network.

Labour announced the plan, in May, to take the transmission and distribution energy structure into public ownership, as well as plans to set up a ‘National Energy Agency’ (to run the National Grid), Regional Energy Agencies (to run regional distribution), and give opportunities for municipal ownership of distribution on a local basis.

This plan can achieve traditional Labour Movement objectives, but its impact on pushing forward a green agenda is doubtful. Put bluntly, the more that power is given to  bodies that will be  influenced by organisations like the GMB (who favour centralised power station solutions), the less useful will be the outcome. The proposals make a gesture in favour of municipalisation, but for most places the reality will be central control.

A good case can be made out that the privatisation of the energy infrastructure monopolies (the electricity and gas grids) did not lower consumer bills; it merely transferred money from the labour force (by reducing its numbers and pay) to the private owners/shareholders. Piketty has written much about how income has been transferred from labour to capital, and monopoly energy infrastructure might make a good example of this trend. Public ownership could reverse this in this sector, albeit in the context of an argument about how much compensation the private shareholders should be paid.

However, if the (currently) putative national and regional energy agencies are set up, and as the Labour plan says, they  oversee decarbonising targets, there is little doubt in which direction policy on this topic will shift – towards nuclear power and away from  a decentralised renewable energy system. Currently the National Grid Company has been making noises in the direction of a more flexible, renewable energy, based system. 

Yet under a centrally controlled energy network, under Labour plans,  policy power would pass to a quango which could be much more easily influenced by trade unions. That, of course, as a matter of principle, is not bad. The problem is that the most important union in this sector (the GMB) has shown explicit hostility towards renewable energy and the ‘smart’ energy systems needed to integrate it.

For example, in 2016 Justin Bowden, the National Secretary of the GMB, described National Grid’s promotion of a ‘smart energy revolution’ as ‘fanciful nonsense’. Instead he promoted new nuclear power plants. Earlier this year Justin Bowden was again attacking National Grid plans for more electricity interconnectors, and in the same press release the GMB attacked the performance of solar power and wind power. 

The GMB has consistently urged the Government to shore up plans for nuclear power stations with state money. This is despite the fact that the nuclear power plant are taking decades to deliver at  very high costs for the energy consumer and almost certainly also the public finances.

Of course the GMB is guided by its members, and many of them work in nuclear power stations. Fair enough. But why should this fact dominate UK energy policy? Yet Labour’s centralist dominated proposals seem destined to achieve just this. Of course there is mention about how local authorities will have an option to take over their local grids, but the usual practice will be centralised ownership. Clearly the Labour plans are wrong. 

Control over the grid should be given to local authorities as a matter of course, perhaps in consortia (certainly at a national, transmission, level). Local authorities are influenced by the local electorate and local citizen groups. They will be sympathetic to green energy priorities. On the other hand centrally owned quangos  will be insulated from such democratic input and will be under the thumb of the existing  industrial establishment. Innovation will go out of the window.

People forget that in 1948 the electricity industry was not taken into public ownership. It was already largely owned by local authorities. It was nationalised, yes, but this was primarily an act of centralisation, not public ownership. What we need today is more decentralisation, not control by the dead hand of the fading industrial establishment.

References

https://www.solarpowerportal.co.uk/news/gmb_labels_national_grid_smart_energy_vision_fanciful_nonsense

https://www.gmb.org.uk/news/invest-clean-energy-dont-import-power-overseas

https://labour.org.uk/press/labour-will-take-national-grid-hands-private-shareholders-use-make-heat-electricity-human-right-tackle-climate-change/

Academics tell Labour that its support for nuclear power prevents it from achieving its own plans for renewable energy

Published below is a memorandum from the 'Red Lion Group' of 12 academics, to the Labour Party Shadow Energy Secretary, which sets out how Labour's support for new nuclear power prevents the achievement of its plans for renewable energy. This means that Labour's plans to give many £billions of state support for new nuclear power will merely replace cheaper renewable energy. The analysis was based on projections for energy demand used by the Committee on Climate Change.

Review of the CCC's projections of energy supply and demand

Letter to Shadow Energy Secretary from 12 academics and policy analysts

Dr Ian Fairlie, consultant, former Government advisor (for correspondence)

Emeritus Professor Andrew Blowers, Open University

Emeritus Professor Dr Godfrey Boyle, Open University

Dr Tom Burke, Visiting Professor, Imperial College and University College

Emeritus Professor Dr David Elliott, Open University

Dr Philip Johnstone, SPRU, University of Sussex

Dr David Lowry, senior research fellow, IRSS, Cambridge, MA, US

Ms Samantha Mason, policy advisor, PCS Union

Mr Peter Roche, editor, UK Nuclear News

Professor Andrew Stirling, FAcSS, SPRU, University of Sussex

Emeritus Professor Steve Thomas, University of Greenwich

Dr David Toke, Reader in energy policy, University of Aberdeen

Carbon Reduction Targets

Labour has recently announced plans to expand both renewable energy (RE) and nuclear power[1] to reduce carbon emissions. But our projection below, based on key parameters set out recently by the Committee on Climate Change (CCC)[2], demonstrates that Labour’s targets for carbon reduction would be achieved more quickly and cheaply by focussing solely on renewable energy (RE) and excluding new nuclear power. If a Labour Government were to back more nuclear, this would mean less renewable energy would be used. As discussed below, there is more than enough planned RE available to meet CCC (and Labour) carbon reduction targets by 2030. Giving nuclear power financial advantages over renewable energy through direct state investment, Treasury loan guarantees, insurance indemnities and R&D support will mean that taxpayers and electricity consumers will be paying more than if renewable energy sources alone were used. According to the CCC’s recent report, using RE to reduce carbon emissions reduces costs to consumers, whereas nuclear power adds to them^[3].

Renewable energy potential

The CCC’s report says: ‘... updated resource estimates, in line with other assessments, suggest potentials for 29-96 GW of onshore wind, 145-615 GW of solar power and 95-245 GW of offshore wind in the UK’[4]. (Other RE sources, such as wave, tidal and biomass, were omitted by the CCC.) We can convert the CCC’s cited potentials into annual power generation by applying the most recent available capacity factors[5] as a guide to future generation capacities. This is done by us in Table 1.

Table 1 – Our analysis of CCC’s estimates for potential UK renewable energy generation

(for justification of capacity factors -see endnote 4)

	Offshore wind	Onshore wind	Solar PV	Total
CCC’s “Low Capacity” estimate (GWe)	95	29	145	269
Our assumed capacity factors[6]	63%	30%	14%	-
Our Low generation estimate (TWh/year)	524	76	178	778

Projected electricity demand

In 2018, the UK’s annual electricity generation was 335 TWh. Under its carbon reduction plan, the CCC estimates UK annual electricity demand will be 365 TWh in 2030 and 645 TWh in 2050[7]. These figures take account of the increasing trend for energy in transport and building heating sectors to be incorporated into the electrical power sector, where it is more efficient[8]. Hence even using the CCC’s“Low Capacity” for wind and solar power, our key RE estimate of 778 TWh/year from table 1 shows there would be considerably more electricity generating capacity than that required to meet demand in both 2030 and 2050 – even when other renewable energy sources (biomass, tidal, wave, etc) are excluded, and even using the CCC’s lowest estimates for RE.

% Generation from RE: Labour’s Plan for 2030

According to the CCC: ‘Our power sector scenarios for 2030 include 75-85% of electricity generation being met through low-carbon sources’ [9]. In fact, Labour’s plans for RE already more than meet this, as Labour has projected 52 GWe of new offshore wind for 2030[10]. Taking into account the increased capacity factors for the latest wind turbines, a new 52 GWe offshore wind fleet would deliver around 70% of the 365 TWh of electricity demand projected by the CCC in 2030[11]. Added to the 24% from existing renewable energy would amount to 94% of electricity supply in 2030. Add Sizewell B’s contribution (2%) and there is not even enough room for Hinkley C’s output (were it to ever overcome its manifest problems), never mind onshore wind, solar PV and the other renewables.

More nuclear power would mean less renewable energy

The reality is that Labour’s renewable energy and nuclear plans are in conflict. Labour’s plan to support more (highly subsidised) nuclear power would mean less (much cheaper) RE being used, not less gas generation.Such is the potential for quick and cheap deployment of renewable energy (whose costs are still falling) that Labour’s targets would be easily achieved, even if the mooted Hinkley C were cancelled. Indeed, in order to make space for Labour’s published RE plans, Hinkley C would have to be cancelled. In our view, this would be a sensible step for other reasons, including its spiralling construction costs, EDF’s poor finances, ever-lengthening construction timetable, state security questions, its high electricity prices, legal obstacles, and serious technical flaws yet to be resolved in its French prototype under construction.

System costs for renewable energy

According to the CCC report which drew on work by Imperial College, the costs of integrating high levels of penetration of fluctuating renewable energy sources could be reduced to ‘to £20/MWh or below’ by measures of system flexibility[12]. The report adds ‘It is worth installing wind up to the cost of alternative forms of generation (e.g. nuclear or CCS at £70-80/MWh). Various analyses differ as to what this limit is, although some studies have shown that overall system costs continue to decline until penetrations reach over 80%’.[13]

Lower RE costs

Offshore wind contracts for £57.50 per MWh in 2012 were considerably lower than the (much longer) contracts offered for Hinkley C at £92.50 per MWh (its 2012 price: in 2019, over £106). This nuclear contract was further supported by several £billions of loan guarantees unavailable to wind or solar projects. In recent years, wind and solar PV projects have been built for around £50 per MWh without government-backed long-term contracts. Many more onshore wind and solar PV projects would be forthcoming if offered long-term CfDs, and these would be for less than £50 per MWh. Clearly, offshore and onshore wind and solar power are more cost-effective than nuclear power. In addition, they can be added online more reliably and quickly compared to nuclear plants.

---

[1]https://labour.org.uk/press/tory-energy-cancellations-risk-power-20-million-homes-rebecca-long-bailey/

[2] Committee on Climate Change(CCC) (2019) ‘Net Zero Technical Report’

https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-Technical-report-CCC.pdf

[3] ibid Table 2.3 page 43

[4] ibid, page 26

[5] That is, the percentage of potential power output actually realised on an annual basis

[6] The latest 12MW GE wind turbine boasts a capacity factor of 63%, bi-facial solar PV installed by Gridserve

will increase production by 20% and new systems such as LiDAR are boosting onshore wind performance

[7] See CCC (2019) endnote 2

[8] see CCC report, endnote 2, for more details

[9]See CCC (2019) endnote 2, page 43

[10]See David McPhee, 26/09/2018 ‘Labour pledge ‘seven-fold’ increase in offshore wind at conference’

https://www.energyvoice.com/otherenergy/182463/labour-pledge-seven-fold-increase-in-offshore-wind-at-conference/

[11] This assumes an average capacity factor for the offshore wind fleet of 56% - less than current ‘best’ of 63% (see endnote 6)

[12] CCC Net Zero Technical Annex (2019) , page 10 https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-Technical-Annex-Integrating-variable-renewables.pdf

[13]See CCC (2019) in previous endnote

One and a half cheers for Labour's proposals to bring energy networks back into state ownership

http://projects.exeter.ac.uk/igov/new-thinking-energy-distribution-service-providers/

https://www.bloomberg.com/news/articles/2019-05-16/u-k-s-national-grid-turning-more-american-every-single-year