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EU Threaten UK’s Nuclear Plans

February 2, 2014

By Paul Homewood

 

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http://www.telegraph.co.uk/finance/newsbysector/energy/10611003/Nuclear-setback-as-EC-attacks-Hinkley-Point-subsidy-deal.html

 

Britain’s energy policy lies in tatters after the EU published a 70 page report, arguing that a landmark subsidy deal for the first new plant may constitute illegal state aid.

The Telegraph report:

Britain’s hopes of a nuclear energy renaissance were thrown into fresh doubt on Friday as the European Commission published a damning 70-page critique arguing that a landmark subsidy deal for the first new plant may constitute illegal state aid.

EDF’s proposed £16bn plant, at Hinkley Point C in Somerset, could be profitable even without the consumer-funded subsidies that could total £17.6bn, the EC said.

In a searing letter to the UK government, Commission Vice-President Joaquín Almunia fleshes out the EC’s December decision to launch a formal state aid investigation into subsidies for the plant, on the grounds that energy companies might build new nuclear reactors without a penny of public support.

Under a deal struck in October, France’s EDF and partners in the project will be guaranteed a price of £92.50 – twice the current market price of electricity – for each megawatt-hour of power that the reactors generate over a 35-year period. The subsidies will be funded through levies on all consumer energy bills.

 

Although Energy Minister, Michael Fallon, has tried to play it down, the report must cast huge doubt over the role of nuclear energy in the UK. At the very least, it risks delaying any final decision to go ahead, and creates a lot of uncertainty. EDF were due to make a final investment decision in July, but it is hard to see that this deadline can be met given how tortuous EU decision making can be.

Although the banner headlines are about illegal state aid, buried away are suggestions that other factors are in play. The Telegraph note:

In further criticism, it warns that support for support for nuclear may crowd out investment in renewables.

It questions whether nuclear can be “argued to be aimed at a common EU objective in terms of environmental protection in general, and decarbonisation in particular”.

It says that nuclear introduces new environmental risks due to “the need to manage and store radioactive waste for very long periods of time, and the potential for accidents”.

Almunia is the EU Vice President responsible for competition policy. His remit does not extend to environmental, energy or climate change policy, and it is a concern that he is allowing these factors to influence what should be a straight forward legal process over whether competition policy is being adhered to or not.

 

The Telegraph also make this comment:

The EC says it is “difficult to argue” that Hinkley can help the UK achieve security of supply, given it will not be running before 2023, too late to help in Britain’s looming power crunch.

This totally misses the point. While energy capacity could become tight in the next few years, as old coal power stations close, there is probably still sufficient mothballed gas capacity to make up the shortfall, along with emergency measures such as using diesel generators.

The real crunch, though, will come along in the 2020’s, when we are committed to be much more reliant on intermittent renewables. The table below summarises the current sources of electricity generation, along with the likely scenario for the mid 2020’s, (without Hinkley Point C)

 

  2012 Mid 2020’s
  TWh pa TWh pa
Coal 143 0
Oil 4 0
Gas 100 100
Nuclear 71 9
Hydro 5 5
Others 5 5
Sub Total – “Base Load” 328 119
Bio 15 30
Wind 19 ?
Solar 1 ?
Gap to Fill   323
TOTAL 363 472

 

For more detail on how these number are built up, check out my earlier post here. But, in essence, they are based around these assumptions:-

  • All remaining coal and oil power stations are shut. This seems inevitable if the UK is to meet the target set of reducing emissions from electricity by between 75% and 84% of 2009 levels.
  • There is no significant contribution from CCS fitted plants. While this technology may eventually become cost effective on a commercial scale, it is plainly ludicrous, and dangerous, to plan the nation’s energy supply on the assumption that it does within the next decade.
  • Given that natural gas produces about half as much CO2 as coal does, 100TWh from gas fired plants is broadly compatible with the above cut of 75% in CO2.
  • Out of the nine nuclear power stations currently operating, only one, Sizewell B, is scheduled to still be operational after 2030. The others are all due to shut by 2023, or earlier. Therefore, without new nuclear, output would drop to 9TWh.
  • Because of the planned switch from conventional heating and transport to electric alternatives, total demand for electricity is estimated by DECC to increase by 30%.

On the above scenario, therefore, there is a gap of 323TWh to fill. Even if this could be met by wind and solar capacity, (and this would be a 16-fold increase on current levels), it would still be intermittent and would need massive back up capacity from gas plants.

One possible option would be to extend the life of some of the existing nuclear plants, but this seems risky, and in any event would still leave a huge gap to fill.

 

What is certain though is that it is taking unnecessary risks with the country’s energy future if we simply delay making decisions for a few years, as the EU suggest, in the hope that prices might come down a bit.

Better still, perhaps we should just tell them to get stuffed, and go back to an energy policy that works in the interest of the UK.

3 Comments
  1. A C Osborn permalink
    February 2, 2014 4:32 pm

    Best news we have had this year.
    Now perhaps they will either get a proper deal or cancel this particular one as the country couldn’t afford Electricity at those prices.
    We should definitely tell the EU to get totally stuffed and start building nice cheap COAL plants as fast as possible, at the same start digging for Coal.

  2. John F. Hultquist permalink
    February 2, 2014 7:46 pm

    Being 2014, the 2020s are in sight. That is a big gap to fill. Time to get started.
    I wonder why the 2X current price? Why not set the price at the future market price? The EU folks must all be smoking something. An analogy is of a person standing in the middle of a track watching a fast approaching train and thinking it might be nice it the train stopped.
    Seems a bit odd that a man from Spain is lecturing others on how to handle the electric needs of a nation. Spain has done so well, hasn’t it? Maybe he has learned. Could be he is saying “Don’t do what Spain did.” If so, that’s advice worth taking.

  3. catweazle666 permalink
    February 2, 2014 7:59 pm

    Curious that they don’t invoke precisely the same legislation to produce a ban on the wind turbines, which operate under an identical subsidy regime…

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