Why Hinkley C fails every test

Last edited 19 March 2013 at 12:38pm

BRIEFING

19 March, 2013

Two announcements are expected imminently on EDF’s proposal for a new nuclear power station at Hinkley. One is planning permission for the project and the other is the agreement reached between Government and EDF over the price that will be paid per unit of power generation at Hinkley – the “strike price”.

Greenpeace believes the project should not proceed on the grounds it is unfair to consumers, will lock the UK into high priced nuclear for decades to come, and will displace investment in renewables.

1)      Hinkley is unfair on consumers

Press reports suggest the strike price for nuclear power will be in the order of £100/MWh[1], that it will be fixed for 40 years[2] and that EdF is looking for a 10% rate of return on its investment[3]

£100/MWh is approximately double the current market price for electricity, and well above the cost of electricity from a similar reactor in France (which is expected to be €74/MWh (around £65/MWh).[4]

Meanwhile the National Audit Office, in its briefing for the House of Commons Energy and Climate Change Select Committee, quoted 2011 revisions to DECC’s costs of nuclear power as being £74/MWh.[5]

So not only is the strike price double the current market price for electricity, and significantly above the estimated cost of electricity from the same reactor in France, but it is also 25% above DECC’s original cost estimate for nuclear power. 

EDF is driving up the price by reportedly demanding a 10% rate of return on its investment – that’s double what is offered to renewables. When DECC was challenged over the reduction in the rate of return it’s willing to offer under the Feed in Tariff (FiT) for small scale solar PV, it stated, “we continue to consider that a significantly lower tariff is needed to provide generators with a rate of return of 4.5% to 5% for well-located installations. We are not persuaded that a higher rate of return would be reasonable given the focus of the FiT’s scheme ... and given the current investment climate.” [6] 

The Government contract with EDF for Hinkley will guarantee nuclear power a fixed price for a suggested 40 years, excluding inflationary indexing until 2060. This is double the commitment for renewable energy sources, which are expected to receive guarantees for just 20 years.

EDF has also reportedly asked for the Treasury to guarantee loans and to cover construction risk.[7]

It is not at all clear that this level of support would be legal under European competition law. European Commission officials have launched the first stage of a formal investigation into the use of taxpayer subsidies for nuclear.

2)      The renewable alternative is cheaper

DONG Energy, a big offshore wind farm developer, said this month that it could reduce its energy costs to £87/MWh by 2020.The Crown Estate has carried out research suggesting that the cost of wind will fall to £100 or below by 2020.

The cost of manufacturing and deploying other renewable energy sources at scale is falling. In the solar sector panels have fallen by 80% in the last three years and wind power is now around a quarter of what it was two decades ago.  

In Germany, the FiT for large scale solar PV has decreased from €450/MWh in 2004 to just over €180/MWh (£154/MWh) currently, and is falling further [8]. That’s with guaranteed support for only 15 years (compared with the 40 years demanded by EdF).

Even if this price regression slows in subsequent years, large scale solar support schemes will be cheaper than the suggested UK nuclear strike price in the early 2020s, the earliest at which the first reactor could come on stream.

But if Hinkley is gifted an exorbitant strike price by the Government of £100/MWh, this will displace investment in these cleaner, safer, newer technologies.

3)      We have nowhere to put the waste

The decision by the Cumbria local authorities to reject a waste storage site beneath the Lake District leaves the Government with no plan for waste disposal from existing or new nuclear power plants. No other local authorities have volunteered to host a waste store.

Instead waste would have to be stored on site at Hinkley, posing considerable environmental risk, for example from flooding. Storing waste locally and indefinitely breaches the Government’s own guidelines.

The Prime Minister has himself said that until the waste issue is sorted, no new nuclear is possible. Greenpeace has written to the Government warning it that new nuclear without a solution to waste may be illegal.

4) Nuclear won’t deliver

Delays to nuclear power could undermine the UK's ability to hit its climate targets and keep the lights on. 

There are two reactors being built in Europe that are similar to Hinkley - both are overdue and considerably over budget.

In Flamanville France, Italian utility, Enel recently pulled out after repeated delays and cost over-runs. In Finland the Olkiluoto 3 project (already four years overdue) recently announced it will fail to meet its latest deadline of 2014 and a new deadline has not been set. The delays are forcing Finland to burn more fossil fuels and have led it to rule out further reactors to the same design. 

Far from keeping the lights on, SSE's Dr Keith Maclean has argued that gambling our energy future on nuclear and shale will almost certainly put them out.  Parliament's Energy and Climate Change Committee also found no significant implications for UK security of supply if a deal with EDF is not signed. 

Even if built, nuclear power is far from an ideal energy source. The need to run it constantly forces significant investment in storage and nuclear power plants are prone to outages, requiring significant gas or even coal backup, and grid reinforcement.

5)      Renewables can deliver

Offshore wind and renewables offer a ready-to-deploy alternative to ensure security of supply at low cost. 

Committee on Climate Change Chief Executive David Kennedy has told Parliament that backing up wind to ensure power that’s always on would cost £10-20/MWh. Rob Gross from Imperial and the UK Energy Research Centre put the number at £3-5

There are also considerable opportunities from reducing waste and inefficiency in the power sector – a policy process which has been very slow to get started under EMR whilst nuclear policy has been the focus.

Germany and Denmark are both also seeking to make ambitious carbon reductions without nuclear power. 

Interconnectors, new developments in storage, gas plants which also provide heat and smart grids that help manage demand are just a few of the ways the UK could decarbonise without nuclear.

Meanwhile If the UK hits its target of 15% renewables by 2020, it will create 10 times more new jobs than Hinkley, even at the peak of Hinkley’s construction.

Conclusion:

Given the expected cost of nuclear build and the electricity price guarantee being demanded, this proposed nuclear deal looks to be deeply unfair to consumers. While a state-owned French company reaps the benefits, UK households would be getting ripped off for the next 40 years.

Even if Hinkley is completed to time and budget (which has not occurred with similar projects in Europe), it will displace investment in newer, cleaner, cheaper technologies and leave us locked into high priced nuclear for decades.

ENDS

For more information contact the Greenpeace press office on 02078658255 or Kathy Cumming on 07801212959

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