Leaked report on costs of nuclear spells trouble for the government

If nuclear ends up being more expensive than offshore wind to generate, the entire rationale for the government’s approach will need to be urgently revisited.

Nuclear energy could end up more expensive than offshore wind... D

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Reg Platt is a research fellow at IPPR

The Times reports that EDF Energy is seeking a guaranteed price of £165 per megawatt hour (mWh) from government for energy produced by a nuclear power station it intends to build at Hinkley Point.

nuclearThis is almost identical to an estimate by Citi bank analyst, Peter Atherton, of £166/mWh.

If true, it could throw the government’s plans for the energy sector into disarray.

To enable the transition to a secure and decarbonised electricity grid the government wants to support investment in a range of low carbon technologies.

EDF, The Times claims, is arguing that they should receive the reported price as it is lower than that required for major offshore wind projects, which they expect to be £180/mWh.

This figure seems high. The current cost of energy produced from offshore wind is about £135/mWh. This may increase as the first phase of ‘round three’ projects get underway because they are in deeper water than previous developments.

But industry sources expect costs above £165/mWh to be unlikely. Moreover, after this phase, costs are expected to fall dramatically, with the government and industry working towards a target of £100/mWh by 2020.

If it is more expensive to get electricity from new nuclear power stations than offshore wind then the government’s commitments will become difficult to maintain.

The energy and climate change secretary Ed Davey has explained the government’s position:

“There will be no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator, unless similar support is also made available more widely to other types of generation.”

And:

“I want to make clear … that this means that nuclear will not receive a higher price than comparable generation technologies whether they be renewables or indeed gas generation once its emissions have been abated by carbon capture and storage.”

This should be a serious concern for the Liberal Democrats who have long opposed any new nuclear power.

As well as casting government policy on nuclear subsidy into doubt, the Times report also undermines the government’s entire rationale for electricity market reform.

 


See also:

Right-wing think tanks at odds with British business on green growth 9 Jul 2012

Going green since the 70s? Introducing the Energy Consumption Guide 22 Jun 2012

The government has no ambition on carbon reporting 21 Jun 2012

Budget 2012: The fossil fuel friendly Mr Osborne 27 Mar 2012


 

For the transition to a decarbonised power system to be as cheap as possible policy should be designed to get the maximum amount of generation from the cheapest technologies first. But the government has set out its ambition to have the maximum amount of nuclear that is currently feasible instead of a similar ambition for offshore wind. This has important implications.

The government’s plans would see up to 18GW of new nuclear by 2030, which will account for 40 per cent of the energy mix. In this scenario the Committee on Climate Change claim renewables would need to make up a further 40 per cent, with offshore wind accounting for 20 per cent.

But the committee claims that it is technically feasible for renewables to make up 65 per cent of the energy mix in 2030, with offshore wind alone accounting for 40 per cent. If offshore wind is, in fact, cheaper than nuclear then the government’s ambition should be to achieve this second scenario.

Some new nuclear is still likely to be needed to achieve a fully decarbonised grid but policy should be designed to get capacity from renewables as close to 65 per cent as possible.

As it stands, the government has proposed major reforms for the electricity market that will help build new nuclear but are unnecessary and potentially even damaging for renewables. The government has proposed that it will introduce a ‘Contract for Difference’ mechanism to provide financial support for both nuclear and renewables.

But financial support for renewables is already in place via the Renewables Obligation and, while it could be reformed to be more cost effective, it is well understood by industry and generally working well. The new mechanism however looks likely to add uncertainty and complexity into the market for the renewables industry and may make it harder for independent operators to do business.

If The Times report is accurate and nuclear ends up being more expensive than offshore wind to generate, the entire rationale for the government’s approach to electricity market reform, including the provision of nuclear energy, will need to be urgently revisited.

 


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70 Responses to “Leaked report on costs of nuclear spells trouble for the government”

  1. Clare McNeil

    "Leaked report on costs of nuclear spells trouble for the government". Read why in this blog by @regplatt of @ippr
    http://t.co/k8FtJcsp

  2. Kirsty Alexander

    In some ways it is frustrating that enormously wrong-footed guesses are being reported in otherwise reputable newspapers such as the Times (Times page 35, July 16). If it were true, the figure of £165/MWH would make new nuclear virtually untenable. Fortunately, it is not true.

    Rather, it is spectacular speculation. Well timed, it must be said, given that the negotiations between EDF Energy/Centrica and the Government on the strike price for new nuclear build are very much underway. The nay-sayers have a clear run since neither party is now inclined to wade in to the debate with any alternative figures at this point. We will not know the true cost until later this year, when the strike price has been agreed, and the details of the negotiation published.

    However, credible and independent analysis shows that nuclear is not just cost competitive with renewables, it is the best value overall[1]. So not only is nuclear good value for money, but it is also the safest[2] and most reliable form of low carbon generation.

    Our best guess is that we expect to see this reflected in the strike price agreed when the details are published later this year.

    In the meantime, EDF Energy could not rebut the figures being bandied about in stronger terms:

    “We totally deny these figures and any of this speculation. It is too early to talk about specifics. We continue to participate in the process defined by Government. As we have made clear before, the Contract for Difference for nuclear will represent a fair and balanced deal for customers. It will show the cost competitiveness of nuclear new build. The process will be transparent – and the details published in due course. Nuclear energy is competitive compared to other low carbon technologies and new capacity will provide clean, affordable energy for the nation.”

  3. truthdigger

    UK: Leaked report on costs of #nuclear spells trouble for the government http://t.co/WsHLxIG8

  4. Freya Foust

    #nuclear power slaps UK with a huge bill for power. Costs just keep going up. http://t.co/MamoTetg #toostupidtometer

  5. Daniel Blaney

    leaked report on costs of nuclear spells trouble for the government. Read why in this blog by @regplatt of @ippr
    http://t.co/DqKtVk58

  6. Martin McGrath

    Electricity from new generation of nuclear plants likely to be significantly more expensive than wind generated power http://t.co/nEnJjCDv

  7. Syd Walker

    British nuclear contractor EDF Energy seeks much higher guaranteed price than the current cost of wind power http://t.co/cH56YW7g

  8. Ramirez

    British nuclear contractor EDF Energy seeks much higher guaranteed price than the current cost of wind power http://t.co/cH56YW7g

  9. Trish Williams-Mello

    RT @leftfootfwd: Leaked report on costs of #nuclear spells trouble for the government: #nuclearpower http://t.co/3S7yzJ2t

  10. SESUK

    Leaked report on costs of nuclear spells trouble for the government, writes @regplatt: http://t.co/g0xZ17LH

  11. Chris Beckett

    Electricity from new generation of nuclear plants likely to be significantly more expensive than wind generated power http://t.co/nEnJjCDv

  12. Christian Wilcox

    Nuclear is more expensive than offshore wind?: http://t.co/6adccKZU. We'll know soon enough. #Croydon #Labour (@GavinBarwellMP)

  13. Croydon feed

    Nuclear is more expensive than offshore wind?: http://t.co/h840cO3Q. We'll know soon enough. #Croydon #Labour (@… http://t.co/uqm7EjkP

  14. UK economy will hit the rocks if Osborne follows Allister Heath’s plan | Left Foot Forward

    […] fiscal year 2010-11. According to recent reports, both onshore and offshore wind are likely to be cheaper sources of energy than […]

  15. Jenny Shepherd

    RT @leftfootfwd: Leaked report on costs of nuclear spells trouble for the government http://t.co/c9TsExQv

  16. B Shenanigans

    RT @leftfootfwd: Leaked report on costs of nuclear spells trouble for the government http://t.co/OcYFKG2d

  17. Kevin Sharpe

    Good piece by @regplatt on implication of new #nuclear costing more than even most challenging offshore wind scheme. http://t.co/pDwF71p8

  18. 'Greenest government ever' ditches "dirty fossil fuels" pledge | Left Foot Forward

    […] See also: • Leaked report on costs of nuclear spells trouble for the government 18 Jul […]

  19. Mark Smithson

    Leaked report on costs of nuclear spells trouble for the government | Left Foot Forward
    http://t.co/6O73rmvY

  20. elizabeth westgaph

    RT @leftfootfwd: Leaked report on costs of nuclear spells trouble for the government http://t.co/WSKxwK2h

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