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Nuclear plants face shutdown over tax on windfalls

January 2, 2023
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By Paul Homewood

 

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Two nuclear power stations crucial to keeping Britain’s lights on risk being closed next year as a result of Jeremy Hunt’s windfall tax, their French owner warns today.

EDF, which operates all five of the country’s serving nuclear plants, said the Chancellor’s raid on power producers will make it harder to keep the ageing Heysham 1 and Hartlepool stations open as long as hoped.

It would mean the sites close in March 2024, potentially removing the "cushion" of spare capacity used by the National Grid to avoid blackouts and reducing nuclear power generation in Britain to its lowest level since the 1960s.

Mr Hunt’s windfall tax levy on electricity generators, which was announced in the Autumn Statement in November, comes into force today. Conservative MPs have warned that the raid will reduce investment in the UK’s energy market at a time when the country needs dependable energy sources to balance more intermittent wind and solar power.

The two nuclear stations supply more than two gigawatts of electricity to the grid, typically providing enough power for four million homes per year and around four per cent of the power the UK uses on a cold day.

Rachael Glaving, commercial director of generation at EDF UK, which is owned by the French state, said the windfall tax will damage the business case for the facilities at a time when inflation is already pushing up other costs.

She told The Telegraph: “We accept there’s definitely a need for a levy of some kind – you’ve got to break the link between really high gas prices and the impact they have on power prices.

“But of course that’s going to factor into the business case of life extension and we’ll have to take that [the windfall tax] into consideration. It’s not going to make it easier.

“We will review the technical aspects but we also need a business case to support any life extension, so that has to be factored in as well, and we will have to work out what the right balance is between those two things.”

Experts last night warned that closing the two nuclear power stations would mostly wipe out the four-gigawatt spare capacity the National Grid maintains to avoid blackouts on still, overcast days when wind and solar generation is limited.

Kathryn Porter, an energy analyst at consultancy Watt Logic, said: "Going into winter 2024, we will lose all the coal power stations and could also lose two nuclear plants, so we will be losing roughly the same amount of power as we currently have in spare capacity now.

"We will pretty much be replacing it with wind – and that is replacing readily dispatchable generation with intermittent generation.

"So if you have periods of still winter weather where wind output drops, then you could be in a situation where you really struggle to keep the lights on."

Two of EDF’s fleet in the UK have already closed this year due to age, making it more difficult for National Grid to cope with power shortages.

Heysham 1 in Lancashire and Hartlepool are meant to close in March 2024 because they are getting old, but EDF is considering a two-year extension to their lifespan to ease the energy crunch.

The move is regarded as feasible following recent safety inspections, although it would depend on regulatory sign-off.

EDF is expected to take a decision on Heysham 1 and Hartlepool within the next two months.

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https://www.telegraph.co.uk/business/2022/12/31/nuclear-plants-face-shutdown-tax-windfalls/

I don’t place too much store in EDF’s threats. If market prices had stayed around £50/MWh, would they have gone ahead with the extension anyway?

The real issue of course is the energy crunch, whether it hits in 2024 or two years later. As the Telegraph note, Heysham and Hartlepool have 2GW of capacity, while the 3GW of remaining coal capacity at West Burton and Ratcliff will also disappear next year, as the government was delighted to brag about two years ago:

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https://www.gov.uk/government/news/end-to-coal-power-brought-forward-to-october-2024

37 Comments
  1. Mad Mike permalink
    January 2, 2023 11:36 am

    If you’ve ever had a dream about seeing a toddler wandering in to the path of an oncoming car but can’t do anything about it you might know the feeling of what I’m feeling about witnessing this debacle. Surely this is a just a bad dream?

  2. Nicholas Lewis permalink
    January 2, 2023 11:36 am

    Whats the worry we have loadsa of wind coming on line!!

    Seriously this just illuminates how screwed our energy market has become with inept regulation working in perfect harmony with inept politicians. Much as i dont want to see it nothing short of a major black out event is going to get anyone to see the reality. Even then it would probably be some elongated public enquiry with a weight tome produced after two years telling us what we already know.

    • Ben Vorlich permalink
      January 2, 2023 11:53 am

      The “six phases of a project” have been jocularly described as:

      1. Enthusiasm,
      2. Disillusionment,
      3. Panic,
      4. Search for the guilty,
      5. Punishment of the innocent, and
      6. Praise and honor for the nonparticipants.

      I think that politicians are still at Phase 1 despite warnings about potential problems. When the renewables house of cards collapses phases 2 to 5 will happen in parallel, not sure which nonparticipants will be praised and honoured

    • Mack permalink
      January 2, 2023 5:43 pm

      Sadly, I think you are right Nick. By day 4 of a major blackout event widespread anarchy would ensue which the ‘authorities’ would struggle to contain. What are they going to do? Bring in the army? The once mighty British Army that has been so emasculated that almost a quarter of its’ staff are medically unfit for front line duty and can’t even muster one full WW11 sized combat division? Hopefully, from the ashes of such a disaster, some grown ups might emerge to take charge.

  3. January 2, 2023 11:49 am

    Was the phrase ‘unintended consequences’ designed to describe the outcomes of politicians’ decisions?

    • M Fraser permalink
      January 2, 2023 7:03 pm

      These are actually ‘intended consequences’ as per UN remit, which makes it all the more diabolical!
      Its bordering on Treason.

  4. January 2, 2023 12:58 pm

    Sharma’s UK Gov press release should of course read:
    ‘The UK’s leadership in driving down…entirely the wrong road on electricity generation, by replacing baseload power with overpriced, intermittent short-life renewables.’

  5. Ray Sanders permalink
    January 2, 2023 2:09 pm

    Not too sure about the graphic and figures. Hinkley Point B closed last summer!
    Regarding the remaining coal plants, they are both over 60 years since construction started. If 1950’s designed knackered out coal plants is our back up plan then we really are in deep do-do.

    • Nicholas Lewis permalink
      January 2, 2023 2:37 pm

      simple well understood technology that can be kept running. What’s daft is the way we import the coal for them half way round the wold in less than environmentally friendly ships when we have plenty under our feet. Any govt serious about energy security would have used some the “innovation” money that its spews around on hydrogen projects on how to use better technology to burn coal with much reduced emissions.

      • Thomas Carr permalink
        January 2, 2023 2:58 pm

        One thing Maggie taught us was that if you put strategic resources at the disposal of militant unionised labour such as might be the railway unions and was the NUM you run the risk of being held to ransom by the providers of essential services. Yes ,I know, those working at coal importing docks could do the same but history shows that to have been less severe or often.

      • Ray Sanders permalink
        January 2, 2023 4:59 pm

        Nicholas, yes they can be kept running but probably not that reliably given they are largely well past their useful life. It would be silly to continue to flog these almost dead horses and much more sensible to build new quality units like this.
        https://www.ge.com/steam-power/coal-power-plant/usc-ausc
        Just when we desperately need them, West burton A and Ratcliffe upon Soar will probably just give up the ghost.

      • Micky R permalink
        January 2, 2023 5:44 pm

        Further to Ray Sanders’ post and as previously posted, Japan claim to operate a coal-fired power station that can match CCGT gas-fired for emissions.

        ” Unit 2 at J-POWER’s Isogo Thermal Power Station, a 600-MW ultrasupercritical unit in Yokohama, Japan, ranks as the cleanest coal-fired power plant in the world in terms of emission intensity, with levels comparable to those from a natural gas–fired combined cycle plant.”

        https://www.powermag.com/who-has-the-worlds-most-efficient-coal-power-plant-fleet/ … from 2017

    • Jules permalink
      January 2, 2023 3:30 pm

      Also Sizewell B has been relocated to Norwich! It is on the coast south of Lowestoft.

      • Jordan permalink
        January 2, 2023 4:00 pm

        And Torness has relocated to the Bass Rock, just off the coast of North Berwick.

    • Chaswarnertoo permalink
      January 2, 2023 5:52 pm

      Isaac, our beloved leader, Mr Hunt, proves it again.

  6. Sean Galbally permalink
    January 2, 2023 2:13 pm

    How did the Torys finish up with a lefty leader and chancellor. They are done for, as we are probably too.

    • January 3, 2023 2:00 pm

      They have been sliding leftwards ever since they removed Thatcher. Labour will be the more likely to have a tax cutting manifesto come next year than the Tories.

  7. Harry Passfield permalink
    January 2, 2023 2:42 pm

    A better definition of hubris I have yet to come across:

    “…highlighting the UK’s leadership to go further in driving down emissions and tackling Climate Change.”

    The only valid responses to such nonsense is to ask: What difference will it make? “How will you/we know?” And, “When?”

    • Curious George permalink
      January 2, 2023 4:00 pm

      Long live the UK’s leadership. Down with the country!

  8. Phoenix44 permalink
    January 2, 2023 4:09 pm

    It’s a bit of a strange story. Why should a windfall tax on unexpectedly high prices impact the long term decision on investment? I can understand that an unstable tax regime impacts investment decisions but that’s not what’s being said. Maybe they should speak more plainly – for the first decade or so of my career in the 1990s I advised government after government that if they wanted foreign investment the level of taxation mattered much less than the stability of taxation.

    • Micky R permalink
      January 2, 2023 5:14 pm

      Our glorious gubmint does not appear to have much interest in extending the life of any AGR nuclear power station:

      https://www.energylivenews.com/2022/06/28/government-slammed-over-failure-to-ask-edf-to-keep-hinkley-point-b-open/

    • It doesn't add up... permalink
      January 2, 2023 7:20 pm

      The current value of the Hinkley C CFD is £113.83/MWh on the assumption that the lower index price applies that depends on Sizewell C also getting the go ahead as an EPR. Of course, all subject to renegotiation. But to be told that Hinkley C might be considered to be earning £38.83/MWh that the government views as excessive and liable to a 70% tax might well make EdF nervous.

      • January 2, 2023 9:34 pm

        But the windfall tax specifically excludes CfDs

      • It doesn't add up... permalink
        January 3, 2023 10:34 am

        That presumes you commence a CFD.

  9. John Hultquist permalink
    January 2, 2023 5:29 pm

    It appears “the Plan” in many countries is to make electricity more expensive and less reliable while simultaneously requiring more use thereof.

  10. January 2, 2023 6:09 pm

    UK Government announced today January 2nd 2023 £75 million for encouraging Nuclear Fuel manufacture in UK. I had to reduce the length of the URL. Link here: https://tinyurl.com/3w4r4323

  11. January 2, 2023 7:35 pm

    As long as they spend the so-called “windfall tax” levy on Magic Unicorns, the wind mills and solar panels will have no problem making up the paltry shortage of just two-gigawatts. A gigawatt here, a gigawatt there–before you know it you are sitting in the dark. More Magic Unicorns, NOW !

  12. Max Beran permalink
    January 2, 2023 11:04 pm

    What’s not to like – one in the eye for the frogs! Let it be adieu, not au revoir, and who needs their garlic infused gigawatts anyway; plenty more where that came from? Theirs only one reason why they’re here and that’s to reimport it back through the interconnector.

    Looking forward to a load of Likes and a job offer from BEIS or better still the French Desk at the F.O.

  13. tomo permalink
    January 2, 2023 11:15 pm

    A reasonable conclusion to draw from the appointees and decisions emanating from Westminster.

    “They clearly have no confidence in their own judgement”

    – well, gosh … do you think?

  14. tomo permalink
    January 2, 2023 11:41 pm

    Easy to imagine one of these being floated up the Severn Estuary (just) before the ribbon is cut on Hinckley “C”

    • Ray Sanders permalink
      January 3, 2023 11:09 am

      It has been argued for a long time that floating nuclear barges/ships are the way to go. Way back in 60’s the precedent was set with MH-1A and there were plans to expand upon this
      https://en.wikipedia.org/wiki/MH-1A
      More recently the Akademik Lomonosov started both generating and supplying heat.
      https://en.wikipedia.org/wiki/Akademik_Lomonosov
      US nuclear powered Aircraft Carriers are even producing synthetic aviation fuel on board for their aircraft from seawater extracted CO2 and H2 from seawater electrolysis.
      China are developing in this area so I see no reason why Rolls Royce should not partner with a ship builder to exploit this “plug in and play” option.

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