The Electricity Market Reforms (EMR) are a
key to the governments energy plans, but have still to be consolidated in
legislation. There was media speculation about delays due to the complex proposals
for ‘Contracts for a Difference’ (CfD) that are meant to provide support for nuclear, renewables
and CCS. It seems that, in order to get the new contract auction market process
operating, DECC would have to set an
initial ‘strike price’.
That’s an interventionist approach and not something DECC is keen on.
DECCs energy markets director general Simon Virley said "We want to move
to market-based systems and tendering as soon as we can, which means we need to
have more than one player in any one market. And we need to have technologies
at a sufficient state of maturity to be able to bid into those auctions."
However, Dr David Toke from Birmingham
University calculated that the strike price would have to be set at around £150/MWh to make new nuclear viable, more than offshore wind now gets. See his May 5th entry:
http://realfeed-intariffs.blogspot.co.uk/ Even that might not be enough
to entice potential investors into nuclear: it may be a 50 year old technology,
but the proposed new plants (EPR
and AP1000) are as yet unproven
and, as the first EPR construction
projects in France and Finland
have ilustrated, costs can escalate alarmingly. Credit rating agencies have
already down-graded some companies considering investment in new nuclear - it’s seen as
increasingly risky.
Centrica and Gulf Suez are looking decidedly
wobbly on their proposed involvement as result. E.ON and RWE took the hint and
pulled out of the Horizon project- which was focused on reactors at Oldbury and
Anglesey. RWE said “The global economic crisis has meant that capital for major
projects is at a premium and nuclear power projects are particularly large
scale, with very long lead times and payback periods. Even more tellingly, E.ON
said : ‘We have come to the conclusion that investments in renewable energies,
decentralised generation and energy efficiency are more attractive – both for
us and for our British customers.’
With DECC evidently still hoping that new
backers will be found (perhaps from China) to replace E.ON and RWE, but EDF, the main surviving nuclear backer, pressing for a speedy resolution, you
can see why getting the EMR sorted
is very sensitive- many see
the main aim of the EMR as being to provide support for nuclear. Meanwhile Greenpeace's senior energy
campaigner, Joss Garman, urged ministers to resist any calls for a delay to the
legislation so that renewable energy projects could get proper backing.
"With a desperate need to leverage investment into securing clean,
affordable energy supplies, and with families and businesses feeling the
squeeze because of gas-fuelled energy bill hikes, it's astonishing the
government seems to be de-prioritising its energy market reforms. Ministers
must stop dithering and take decisive action to reduce our risky and expensive
over-dependence on gas, and to get both energy bills and pollution levels under
control."
Gaynor Hartnell, REAs chief executive
however felt that if there was a delay and revamp of the EMA, it would give the
government the opportunity ‘to reconsider its plans for renewables and gives
them the priority they deserve. They can deliver early CO2 savings in the
transition to a low-carbon economy and their build out should create 400,000
jobs by 2020.’
In the event, the EMR bill was tabled for
debate in the next parliamentary session. But who knows what will actually
emerge as that unfolds? It does seem odd to tie the fate of renewables to that
of nuclear (and indeed CCS). Some say that, rather than the CfD pretending to
be a Feed In Tariff, a separate premium price Feed In-Tariff for renewables,
with proper price degression, would be best as the replacement for the RO. As
for nuclear, let it sink or swim, unaided, while for CCS, well the debate
continues. Not everyone thinks it’s worth the effort- it’s expensive and technically
a long shot. And who would want to
insure against the risk of accidental CO2 release over thousands of years?
Lots of unknowns. And to add to them , as
it stands, the EMR issue and the fate of the competing technologies will remain
uncertain for some while- with
2014 as the earliest CfD start date.
DECC has issued draft proposals but they contained little new just the
news that the CfD contracts would be made with National Grid not, as some investors
had hoped, the government. So
there would be no government guarantees.
Following
the elections in 2012, nuclear power is now being challenged in France,
increasingly on economic grounds, this leading to potential knock-on impacts
for the UKs already diminished EDF-led
nuclear programme. Will the UK really be able to go against the tide and be the
only country in the EU with a major nuclear expansion programme?
