In a demonstration of how out of touch the UK government is with public opinion, it intends to pay approximately twice as much for electricity from the proposed Hinkley C nuclear power plant near Bristol than is paid for electricity from solar power in Europe. With high public support for solar PV and low support for nuclear, that’s quite absurd. It’s also very absurd from an economic standpoint.
Dr David Toke of the University of Aberdeen writes: “Looming large over the UK Government’s EU state aid application for Hinkley C is the charge that this deal will distort the EU’s internal market, in particular to undercut solar pv arrays in Germany over 10 MW in size. Such arrays are no longer eligible to receive premium prices under the German feed-in tariff system. Such plant will only receive the wholesale electricity price, which is less than half the rates to be paid to Hinkley C.”
Dr William Nuttall of the Open University writes: “Today’s news is that a two reactor power station is to be built at Hinkley Point near Bristol capable of supplying 3,340MW, or roughly 7% of British electricity in the 2020s. This has come at a price, called the ‘strike price’. French company EDF Energy, the lead firm of the construction consortium, has secured a long-term commitment from the government that the nuclear-powered electricity it generates will be bought at the hefty price of £92.50 per megawatt hour. That wholesale price is almost double today’s market price, and isn’t far off what the end consumer is paying today to keep their lights on. When wholesale prices meet retail prices things are unsustainable. Don’t forget that between power generation and use there are businesses that deal with transmission, distribution and supply, and they all need their cut.”
Furthermore, as a summary by Craig Morris of Renewables International indicates, the payments are supposed to be guaranteed even if electricity is not provided to the grid because of curtailment, and the guarantee is supposed to last for 35 years, which would be from 2023 (if the power plant is miraculously built on time) to 2058.
With the guaranteed price already well above what solar and wind power cost (and their costs continuously declining), the taxpayer commitment for this power plant is so crazily high that it seems this story should be coming from The Onion rather than reality.
The UK’s move to subsidize nuclear power to such an insane degree is simply astonishing.
Dr Toke has more on how this commitment goes completely against EU rules:
The fact that the Hinkley C deal distorts the EU’s internal market to give a state aid to nuclear power that is not available to renewable energy directly flies in the face of the EU’s state aid regulations. Under these rules it is permissable to give premium price incentives to renewable energy, subject to clearance by the EU Commission that they have been applied according to the correct procedure. However, state aid for non-renewable energy, while not necessarily illegal under EU rules, has to be the subject of a special application. The issue that arises here is that the UK Government, in effect, is wanting to give priority state aid in the EU electricity market to a fuel which has no exemption over and above a fuel which does have an exemption.
The UK is going to be increasing trade in electricity along with the others, with increased electricity interconnector capacity helping this. But what is going to be happening now? British policy will be giving a state-aided competitive advantage to nuclear power in this cross border trade over and above renewable energy. This threatens to directly contradict EU competition and internal market policy and law.
This issue will be a prominent factor in the European Commission’s investigations in the UK Government’s application for state aid for Hinkley C (for which it has recently notified the Commission). Renewable generators across the EU will be pointing out how the UK policy may be contravening EU law. Analysts will remember that it took a case at the European Court of Justice (ECJ) to establish the right of the German state to give premium prices to renewable energy. What would the ECJ say about a case where nuclear power was being given priority premiums in the EU electricity market against renewable energy? I can see no basis in law for this, as discussed above.
For other interesting nuclear stories, take a stroll through our nuclear energy archives.