There’s no doubt about it. The British Government is spreading untruths about the price of renewable energy.
Is it deliberate? One can only assume so owing to the consistency of the pattern and the equally consistent refusal to explain or correct its misleading statements.
The context is also significant: it’s always in the context of supporting nuclear power over renewable energy sources.
One example came a few weeks ago when the Chancellor told the House of Lords Economic Affairs Committee in their ‘annual evidence session’ that the agreed ‘strike price’ of £92.50 per MWh (in 2012 money, RPI indexed) is “substantially cheaper than other low-carbon technology like offshore wind or onshore wind.”
This statement is palpably untrue. After RPI indexation £92.50 is actually £96.24 today’s money. Onshore wind and ground-based solar projects have bid for ‘contracts for difference’ (the main current support mechanism) and been awarded them at a price of around £80 per MWh.
Hello?? Is anyone at home?
Pressed on the justification for the claim the Treasury issued a statement: “Nuclear energy is an important part of the UK’s energy mix as we move towards a low carbon future. It is also the cheapest low carbon technology that can reliably generate electricity at such a large scale.”
Was this a genuine retraction or correction? No. Did the Treasury contact the Lords Commitee to correct any false impression given to its noble members? We asked, but received no reply. Did anyone care? Apparently not.
Because on Monday George Osborne made a very similar claim when accouncing a £2 billion finance guarantee for planned Hinkley C nuclear plant: “Nuclear power is cost competitive with other low carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas.”
Come again? “Nuclear power is cost competitive with other low carbon technology“. Alright, so it might be cost-competitive with some low carbon technologies – but only the more expensive ones like offshore wind. But it clearly is not competitive with either onshore wind or field scale solar PV.
So back to the Treasury. What is the justification for the claim? Another statement: “A new generation of nuclear power stations is a key part of our future low carbon energy mix providing safe, reliable and affordable energy for the future. As one of the cheaper forms of low carbon electricity, new nuclear will have a key role meeting our goal to cut carbon emissions.”
So now nuclear is “one of the the cheaper forms of low carbon electricity” – a somewhat weaker claim. But equally untrue. It is no such thing.
It’s a whole lot worse than you think
Take that figure of £80 per MWh for the bids to build onshore wind farms in the UK earlier this year. It’s actually a whole lot higher than it should be, for reasons set out in June by Andrew ZP Smith of UCL.
In Germany, wind farms are being built for between £36 and £79 per MWh, although the UK is much windier, providing – in principle – much cheaper power. So why does it cost more here? Because the UK’s unfavourable policy environment is putting off investors and forcing them to seek higher returns:
“Many years of policy uncertainty and persistent meddling with the revenue schemes presents higher risks to investors. Planning regulations in England and Wales have created further uncertainty, with unpredictable local decisions. Often, rulings will be reversed on appeal, only for the energy secretary to step and reject the application. Investors, faced with higher risk, will require higher rewards …
“Even more significantly, investors in wind farm supply chains can choose to locate instead in jurisdictions which offer far greater long-term clarity and security. This is why both Denmark and Germany have strong wind supply chains, and Britain’s is still nascent.”
With a committed and supportive government, onshore wind prices should drop well below the German level – in the region of £30 to £60 per MWh – making the lowest cost wind directly competitive in the wholesale power market, where current prices average just below £40.
This is broadly in line with the findings of IRENA, the International Renewable Energy Agency, whose UK-specific calculation (page 42) indicates a raw cost of about £55 per MWh for UK wind. That rises to £80 with the additional costs of managing intermittency and grid integration at a penetration level of 30-40%. “For lower shares”, IRENA notes, “integration costs would be much less.”
Nuclear power, by contrast, ‘socialises’ its considerable integration costs onto the grid as a whole. For Hinkley C this will require the commissioning of a full 3.2GW of spinning reserve in case the whole power station suddenly drops out – something nuclear stations are prone to do.
The forgotten dimension: time
But the biggest fiddle the Treasury is trying to pull on us is in the fourth dimension – time. EDF recently announced that it will be unable to complete Hinkley C in 2023 as planned, and has given no new target date. Let’s assume a completion year of 2025 – bearing in mind that it could well take until 2030 given the abysmal example of other EPR sites in France and Finland.
So we should not be comparing Hinkley C’s £96.28 per MWh cost in today’s money against today’s renewable power prices. We should be looking at renewables prices in 2025 and through the full 35 years of its CFD period to 2060.
As far as solar power is concerned, the UK’s Solar Trade Association believes that UK solar generation can be fully cost competitive with fossil fuels, with no subsidy at all, by 2020.
According to its Solar Independence Plan, domestic rooftop solar installations could, by 2020, be as cheap as buying power off the grid, while large solar farms will compete directly on wholesale power markets. All with no subsidy at all. And after 2020 as the scale of worldwide solar deployment keeps on increasing, the cost will only continue to plummet.
With onshore wind, prices will also continue to fall, but less dramatically. For example BVG Associates estimate a 5-6% price fall from 2014 levels by 2025.
As for offshore wind, BVG estimate that prices will drop to about 73% of current levels by 2025. Offshore wind prices in the last CFD auction in February were between £114 and £120 per MWh. And 73% of that means prices of £83.22 to £87.60 by 2025 – considerably less than Hinkley C’s £96.24.
The way is renewable!
So the four main sources of renewable energy that the UK can quickly bring on stream – onshore and offshore wind, domestic and field-scale solar – are all going to be much cheaper than nuclear power by 2025, and some will even be undercutting fossil fuels as well. While Hinkley C – if it is ever built – will be forcing its overpriced power on UK energy consumers for another 35 years.
Nuclear power benefits from government largesse in another ways too. Hinkley C is being promised a 35-year CFD contract when renewable technologies get just 15 years. It’s also getting £17 billion in Treasury guarantees for bondholders in the project. Renewable energy financiers get none.
What does all this add up to? The government, its Treasury department, its Chancellor George Osborne and its energy department, DECC, are grossly and presumably knowingly misrepresenting the relative costs of renewable energy and nuclear power.
And it’s all part of plan to force upon us a new generation of hyper-expensive nuclear power plants that will cost energy users through the nose until 2060 and beyond, putting the country on a ‘back to the future’ path to the 1950s, while wiser nations reap the benefits of cheap, clean renewable energy.
They must be stopped. And shame upon them!