UK grants feed-in tariffs to nuclear
The biggest news of the day is that the British government has announced a “strike price” for a new nuclear plant. A comparison with prices for wind and solar by the time the plant is built is enough to make one wonder what on Earth the politicians were thinking.
Good news for proponents of renewables! The UK has decided to build a new nuclear plant, and the price tag should suffice to end, once and for all, the debate on whether nuclear or renewables are the way to go.
If you have not heard the news, here is are the key messages from the government’s official press release:
- The strike price is 9.25 pence per kWh, equivalent to around 0.11 euros at today’s conversion rate.
- The price is guaranteed for 35 years
- The price will be adjusted for inflation (i.e., go up)
- And reviewed in 7.5, 15, and 25 years to “protect” Hinkley C, as the plant will be called, “from being curtailed without appropriate compensation”
Though the UK speaks of strike prices and “contracts for difference,” this is essentially a feed-in tariff, with a-c) reflecting the rate and d) ensuring priority grid access – for a technology that is half a century old. Another aspect of the agreement -- insurance coverage -- does not apply to wind or solar, however, which can be easily insured. At Hinkley, it seems that Her Majesty (or perhaps the public) may have to cover the plant a bit.
Proponents of nuclear argue that these prices are still far lower than what is currently paid for existing green power, but that comparison is flawed. We need to compare Hinkley to what green power will cost when the plant is running.
(For the chart above, see this report on uranium imports.)
The plant will go into operation in 2023, assuming that it is built on time (it would be the first time nuclear plant built on schedule in recent memory). What will prices look like by then?
New solar now starts at less than 10 cents and goes up to 14 cents in neighboring Germany, but those rates are falling by 18 percent per year now. They probably cannot continue at that rate; in fact, even a 12% annual reduction would put new solar at an unrealistic 2.8 – 3.9 cents by 2023.
A more likely outcome is Agora’s estimate of 8.9 cents for the most expensive new renewable power, falling by 1% each year. That puts us at around 8 cents per kWh by 2030 – for the most expensive solar and wind, mind you. Lots of onshore wind will be closer to 5 cents, as it is today (and prices continue to drop slightly).
Seen from Germany, the debate in the UK is therefore astonishing. Even the last remaining argument for nuclear – you can turn it on – seem baseless when we consider that solar and wind power will increasingly be competitive with Hinkley even if we include power storage.
Prime Minister Cameron has promised that, “If we don't make these essential investments … we're going to see the lights going out." Germany – where politicians also promised way back in the 70s that the lights would go out if we switched from nuclear to renewables – suggests otherwise; the country has the most reliable grid in Europe.
But the British public seems convinced that jobs are at stake and that the UK needs to invest in new nuclear to protect its expertise, judging from the list of comments in the Editor’s Choice list at the BBC. The political opposition also supports nuclear as a away of creating jobs. Indeed, the new plant will not only create work for engineers and builders, but also for British politicians, who will then have a harder time preventing the spread of nuclear power in places like Iran.
Hinkley will reportedly serve 7% of the UK’s power demand. By the time the plant is completed in 2023, Germany plans to have added 1.5 percentage points of green power per year to its supply at lower cost, equivalent to around 15% -- twice as much as Hinkley will serve in the UK’s smaller grid when the plant is finished. (Craig Morris)