U.K. power prices have climbed so high that the cost of a new controversial nuclear plant, criticized for being too expensive, is now looking reasonable. Wholesale electricity prices have pushed above 100 pounds ($139) per megawatt-hour for the first time since 2008. That’s higher than the guaranteed rate the government agreed Electricite de France SA would get for the power produced from the Hinkley Point C nuclear plant being built in southwest England. The so-called strike price of 92.50 pounds set in 2013 was described by the National Audit Office as “high cost and risky in a changing energy marketplace.” The level was about double the wholesale market rate at the time. Power prices are surging amid the soaring cost of natural gas, with concerns over low stockpiles and the lack of additional supplies pushing U.K. prices to the highest since 2005. Elevated prices are likely to extend into winter when colder weather starts to increase demand, according to RBC Europe Ltd. Hinkley Point C isn’t due to come online until 2026 but the price guarantee for its power runs for 30 years. The mechanism, called contract-for-difference, is also used to subsidize offshore wind farms. By 2026, market rates are likely to be below the Hinkley Point strike price, according to Elchin Mammadov, analyst at Bloomberg Intelligence. “People complain about the cost of Hinkley being too high,” Mammadov said. “Paying a premium for building the first U.K. European Pressurized Reactor is justified as we would use that experience to lower the cost of future nuclear projects.” For Hinkley, the strike price in 2012 prices will be adjusted for inflation and will drop to 89.50 pounds if EDF takes a final investment decision on a second project at Sizewell on the southeast coast.
Bloomberg 30th July 2021 read more »
Householders have been warned to brace themselves for the biggest energy bills rise in a decade with more than half facing an increase of about £150 a year. The cost of gas and electricity is expected to soar as a result of the energy price cap being raised, which is due to be announced next week. Ofgem, the regulator, is preparing to allow suppliers to increase prices for 15 million households by as much as 13 per cent from October. It comes after a huge rise in wholesale costs. The price rise is particularly sensitive for the government as ministers grapple with how to fund Boris Johnson’s pledge to hit net-zero emissions by 2050. Officials have drawn up plans for a carbon reduction scheme that could push up gas bills by a further £170 a year. The plans, which are being considered before the Cop26 climate conference in Glasgow in November, are intended to encourage people to move to hydrogen boilers and heat pumps in an attempt to reduce emissions. The prime minister is also considering giving people annual “green cheques” to offset the cost of higher gas bills, as the cabinet faces a backlash from Tory MPs over the impact on households.
Times 31st July 2021 read more »