EDF demands profit guarantee for new nuclear in UK
On Wednesday, Bloomberg reported that Electricite de France may become the next in a growing line of firms to back away from new nuclear plant construction in the UK. But if new nuclear is not bankable in Britain, where is it?
After half a century of generous public support, nuclear is apparently still not able to compete on the market, judging from the difficulty that the UK is having finding firms to build new nuclear plants. On Wednesday, Bloomberg reported that the CEO of former French energy monopolist EDF has threatened to become the fourth firm to back away from new nuclear construction unless the government's price is high enough.
The statement is revealing because of the frequent charge that renewables have only been successful in recent years because of price guarantees that some governments grant in the form of feed-in tariffs. As Renewables International has pointed out before, the renewables sector should be wary of calling for an "end to subsidies" for itself; after all, other technologies that have received subsidies for much longer continue to be subsidized, and there seems to be little talk about the need for nuclear to become competitive on the market without governmental support.
At present, there seems to be a general push for the kind of guarantees provided by feed-in tariffs even when it comes to coal power and nuclear. US energy expert Paul Gipe wrote last October about how the UK is looking to use FITs – which are commonly described as a policy designed to get fledgling renewables ramped up – to protect nuclear, which should be mature enough to compete on its own by now. If renewables were given the same duration of policy support as nuclear, we would not need to talk about phasing out subsidies until midcentury.
It is worth keeping in mind that feed-in tariffs do not "guarantee profits," which is how Bloomberg describes what EDF is asking for. Rather, it guarantees a price for a kilowatt-hour of electricity. But if your system turns out to be poorly designed – or, simply, if the weather is bad – you might not produce enough kilowatt-hours as expected from the wind and the sun. As a result, a lot of investors in Germany, which uses feed-in tariffs for all renewables, have indeed struggled to turn a profit, especially because wind forecasts turned out to be overly optimistic over the past decade, leaving a number of relatively small, community-owned wind farms struggling to stay alive. Simply put, the price per kilowatt-hour of wind power was good, but the number of kilowatt-hours that could be generated was bad.
In contrast, large utilities asking for guaranteed profits is not only nothing new, but it used to be the rule. Traditionally, utilities had "natural monopolies," so they sat down with government officials (utility commissions in the US) to negotiate retail rates. The politicians told the public they were monitoring the firms to prevent customers trapped in these monopolies from price gouging, but in return the utilities worked out a guaranteed profit – again, something that investors in renewables have never had, not even with feed-in tariffs.
If the UK cannot go ahead with nuclear, the question is who will. The British focus strongly on "decarbonizing" their power supply, and nuclear fits under the umbrella of low-carbon energy along with renewables. Already, Germany's Eon and RWE have backed away from nuclear in the UK, and Centrica followed suit at the beginning of this week. EDF now has the British government right where it wants it – and is demanding a level of support not provided for renewables. (Craig Morris)