Hinkley Point C nuclear station: an expensive solution to a cheap problem. In 10 years it’ll be outdated, costing more than other energy alternatives and raising UK electric bills, writes Andreas Gandolfo. My colleagues and I at Bloomberg New Energy Finance are still scratching our heads at how such a project was greenlighted. We’ve spent two years analysing the project, and it’s clear: by the time the plant is operational in 10 years it will be completely outdated, trying to keep up with a modernized grid. But perhaps most concerning, Hinkley will cost more than other energy alternatives and will increase electric bills across the UK. When we compared this price to any alternative, it’s clear that nuclear is the most expensive option (see chart). Worse still, the UK taxpayer will indirectly fund the project to guarantee its owners’ revenue. To get Hinkley built, the government signed a 35-year, inflation linked, contract for difference (CfD) — a price guarantee —with EDF, at a staggering £92.5/MWh (in 2012). Other new nuclear plants are expected to get similar contracts, both in price and duration. As a comparison, for the 2017/18 delivery year, onshore wind and solar projects received much less, with 15 year CfDs at £80/MWh. We found that the government’s new nuclear policy would cost UK electricity consumers an extra £24 billion compared to our fall-back alternative. This money could be used to encourage the adoption of new, clean, and promising technologies. In the past, government support schemes have driven the build out of uncompetitive technologies, helping lower their costs significantly. For example, wind and solar costs have dropped by 21 per cent and 62 per cent respectively over the last six years, during a period of high government subsidies and build targets. It is true that in 2040, a UK electricity sector without nuclear, and (conservatively) assuming more gas, would emit 37 per cent more carbon emissions. This, though, misses three issues. First of all, our modelling shows that between 2015 and 2040, emissions from electricity generation in the UK will fall by 60-70 per cent, irrespective of scenario, the lower end of this range representing the fall-back scenario and the higher end the nuclear scenario. That drop is primarily driven by a large uptake in renewables. Second, the power industry will evolve as rapidly in the next 10 years as it did in the last. Given space and opportunity, new clean, flexible technologies will come to the fore. Finally, nuclear comes with its own environmental concerns, as the storage of spent fuel is a long term issue. Given the data, all the analysis we’ve written for the past two years is proof that Hinkley Point and the policy it represents come with few advantages that other technologies can’t offer. The disadvantages are many. The UK government is locking bill payers into a few large projects that will deliver a lot less bang for their buck, and divert resources away from other, more promising, technologies.
LSE 26th Sept 2016 read more »