Hinkley Point C: The £16 Billion, 45 Year, Nuclear Gamble

The Government’s unprecedented move to become the first European country to offer state guarantees in order to finance nuclear development has meant that the energy debate has taken an interesting new turn. Many countries around the world have embarked on the road of nuclear decommissioning and Germany in particular is a leading example of this policy. Indeed, the United Kingdom looked to have also adopted this policy with 7 nuclear power stations being decommissioned since Sizewell B, the most recently built nuclear station, was completed in 1995.

This announcement has created further unease in the renewable energy industry which is starting to feel the effects of an increasingly difficult political landscape. There is concern that governmental support for nuclear power will be in spite of, rather than supplementary to renewable energy and there is real worry what kind of impact this approach will foster. This article will look at whether Hinkley Point C really is the best deal for the UK or whether we should continue to look towards the renewable energy sector to secure the future of this country’s energy supply.

We should perhaps immediately ask the topical and pertinent question of ‘will this development reduce household bills?’ It’s almost impossible to say. The Government’s guaranteed strike price of £92.50 per MWh is more than double the current market rate. If in ten years’ time the market rate is below this strike rate then the difference will be passed onto consumer bills. Therefore, to say that the tax payer will not be funding this venture is a little bit of a white lie as energy consumers and the taxpayers are surely one and the same.

It is also worth looking at the long term cost of nuclear. With renewables the decommissioning costs are minimal and at the end of their 20/25 years lifespan they can simply be dissembled and removed leaving no residual effect on the environment or the landscape. Cleary, with nuclear however, it is not so simple. 69% of the DECC’s annual budget is spent on the Nuclear Decommissioning Authority, around £2 billion, with the total amount provisioned for nuclear decommissioning costs amounting to £53.7 billion.

Regardless of the financial implications, this project will not address the short term needs of energy supply in this country; how can it when it won’t be operational for at least another 10 years? With Ofgem predicting that the country’s spare capacity could fall to 2% by 2015 unless new generation capacity is secured, it is vital that this energy gap is plugged. Mark Turner, the Operations Director of Lightsource Renewable Energy, believes that the solar/renewable equivalent of Hinkley Point C can be built within two years safeguarding the country from blackouts and rapidly rising energy prices. This statement is ambitious yes, especially within the current political climate and it would represent a dramatic shift in the Government’s energy policy. However, it is also realistic and necessary, we simply cannot afford to delay any longer. All renewable energy technologies, perhaps barring tidal and offshore wind, can be rolled out quickly, we know the benefits and the potential costs and it will immediately set about securing our energy supply for the next quarter of a century. This is in stark contrast to the nuclear alternative which is at least ten years from being ready, with already increasing costs and having no UK ownership over the system.

It is often assumed, wrongly, that to invest and construct an energy supply solely from renewable energy would take decades to implement. In fact, it is both realistic and feasible that solar PV could be installed to the scale of the Hinkley Point C power station within just 2 years, not 10. This is also working on the assumption that the Hinkley Point C nuclear power station will be ready for entry into service by 2023. Indeed, the Finnish and French latest nuclear power projects are spiralling out of control in terms of cost and time.

The Finnish, Olkiluoto Nuclear Power Plant was estimated to be completed by May 2009 at a cost of €3 billion; this has now been revised to 2016 and €8.5 billion, seven years and nearly 3 times over the original estimates. The French, Flamanville Nuclear Power Plant was due to be completed by 2012, a construction time of 54 months, at a cost of €3.3 billion. However, this again has proved to be dramatically inaccurate with the construction time extended by another 4 years to 2016 at a cost of €8 billion.

The signs are already there; the project is now quoted at £16 billion yet just a year ago it was estimated that it could be completed for £14 billion. This is already a staggering sum of money and is based on a business plan which has been written 10 and indeed 45 years in advance. Long term planning, especially in infrastructure and energy is crucial, but to agree to and bind the country into paying pre-agreed prices decades in advance is certainly a high risk strategy, if not a punt. Should such a gamble be taken on a £16 billion nuclear power station when so many unknowns still remain?

In agreeing this deal the Government are implying two things; that nuclear will be the cheapest form of energy source come 2023 and that it is the most viable and immediate solution in addressing the UK’s desperate energy needs. There is strong evidence to suggest that neither point is necessarily true. Indeed, the Solar Trade Association (STA) has indicated that it believes that the industry will require a lower strike price of £91 in 2018, 5 years before Hickley Point C is due to be completed. This will be reduced to £86/MWh in 2019/2020 and would be locked in for 15 rather than 35 years. Indeed, if support for solar was spread over 35 years rather than 15, the price would be even lower. It would then be extraordinary if the DECC were then to ignore a main trade body and to then set a higher strike price than the one requested so these projections put forward by the STA can be considered to be accurate and genuine.

It is all but certain that Hinkley Point C will now go ahead but it is vital that it shouldn’t be at a detriment to the renewable energy industry. The Hinkley development should not be seen as a ‘job done’ but merely one small step into revolutionising energy supply in this country. To pin all hopes on nuclear is dangerous financially (and yes environmentally too) and is only a long term solution that will not come into effect for a decade or more. In the meantime, we must invest and promote renewable technology, in onshore and offshore wind, solar PV, tidal, biomass and AD. It will be quicker, cheaper, UK/locally owned, environmentally friendly and will leave no residual impact on the landscape or environment when decommissioned.

One day in the future nuclear may still make up some of the energy supply in this country, indeed, it looks all but certain; state guaranteed support for Hinkley Point C is a gamechanger and it’s unlikely that it will be unique. However, ‘one day in the future’ isn’t enough, we need a localised energy supply desperately and we need it now. Renewables is the only way.

One little aside – Isn’t it fairly strange that Ed Miliband’s proposal to implement a price freeze for consumers for 20 months has him branded a Marxist, a socialist and a con-man. Yet it is perfectly fine to negotiate a 35 year price freeze (45 years if you take the additional 10 years until construction into account) with socialist and communist governments…go figure.

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