The statement comes as the Department of Energy and Climate Change (DECC) gave the massive 3.26 GW project the green light, in an effort to get the government’s ambitious 16GW new nuclear programme off the ground.
But not all are convinced: “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,” Greenpeace said in a briefing released on Monday.
Central to the group’s concerns is that of the strike price, the subsidised guaranteed power price, being demanded by EDF – currently reported to be in the region of £100/MWh, double the current UK market price for power. In addition, EDF is demanding a 40 year strike price for Hinkley Point, far longer than the 25 years on offer for renewables, as well as for its debts for the project to be underwritten by the UK.
Negotiations are on-going, but Greenpeace warned that renewables stands to lose out if EDF is granted its wish. “If Hinkley is gifted an exorbitant strike price by the Government of £100/MWh, this will displace investment in … cleaner, safer, newer technologies,” Greenpeace added.
One likely consequence of the government caving to EDF’s demands is that the eight other nuclear projects in the new nuclear programme will feel more confident about striking a similar deal.
“If EDF succeeds in setting a relatively high strike price, this would certainly encourage other investors to look at new nuclear in the UK again and encourage them to ask for a similar strike price,” Claudia Belahmidi, analyst at IHS told Renewable Energy Focus.
IHS’ analysis does not support the notion that nuclear would replace subsidy for renewables completely, but Belahmidi admitted that funds are limited. “Given the intermittency and limited scaling options for renewables, expensive support for nuclear will certainly divert some funds away from wind and solar projects,” she said.
“This is a particular concern as the Government does not appear to be united on renewables support as a number of Conservatives have repeatedly lashed out against onshore wind support, for example, and last year’s cuts in renewable subsidies underline this view,” she added. “This does not mean that the UK government is not committed to renewable energy, but lacking a consistent energy security strategy, renewable power projects might not see the level of financial support that would be warranted to reach the country’s ambitious renewable energy targets.”
However, industry remained circumspect about the investment prospects for renewables in a new-nuclear age, highlighting that as most nuclear projects are not due to come online until the next decade, they should not have any impact on the funds available for renewables support in the Levy Control Framework, which only caps spending until 2020.
“We’re not concerned [about the levels of nuclear funding] under the LCF this decade, especially as many renewable technologies will not need that kind of level of support,” said Leonie Greene, head of external affairs at the Renewable Energy Association (REA). “But if nuclear is eligible for this level of subsidy then it is right and proper than renewables should be eligible too. At the moment, some of them aren’t eligible for anything, tidal barrage technology for example.”
Investment decisions for renewables are being impacted by a general level of uncertainty, she added, but this is not directly related to nuclear, rather that the government is yet to give any clear signs as to what the strike prices will be for renewables. “The Energy Bill as it stands is not delivering, and there is the sense that the Government is not listening,” she said.
The nuclear question is problematic for politicians in the current coalition Government, which had pledged not to subsidise nuclear and is facing increasing hostility from the electorate about the level of consumer-funded energy levies.
In addition, the European Commission has launched the initial stage of an investigation into whether the UK is permitted to subsidise the technology at all. But, faced with the closure of around a fifth of the UK’s generating capacity over the next decade, the Government is now looking increasingly to nuclear as a “silver bullet” to its power generation problems, and is now resorting to any loophole possible in order to subsidise investment in nuclear.
However, the viability the nuclear power programme has been looking extremely shaky, particularly since the Fukushima disaster in Japan in 2011, which saw widespread public backlash against the technology and heightened concerns about safety. Since then, RWE and E.ON have withdrawn from the Horizon project, selling it to Hitachi last year, while Centrica opted out of four nuclear projects it had been developing with EDF.
But while confidence in the sector may be low, it is still not entirely clear why Hinkley Point requires such a high level of subsidy. EDF argues that the project is using European Pressurised Reactor (EPR) technology, which has not been used in the UK or indeed anywhere else in the world yet.
Yet, EDF’s soon-to-be completed Flamanville project in France, which is also using EPR technology, is only reported to cost £65/MWh, even after cost overruns of over €2 billion. This fact is apparently on the radar of UK MPs, who noted it in a recent report into nuclear programme – although with the caveat that it did not know how the two projects could be compared.
What does seem certain however is that the government is on the back foot in its negotiations with EDF, which at one point last week downed tools at the Hinkley Point site in an effort to press home its point that it is prepared to walk away from the project if officials will not play ball.
“The UK is in the unenviable position to have to secure scalable new capacity additions,” said Belahmidi. “A number of coal-fired and nuclear plants are set to retire around 2020, giving any potential investor in nuclear power a lot of leverage vis-à-vis the government as nuclear power is the single largest scalable source of power.”