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Conflicting views of energy costs


UK gas and electricity consumer prices will rise by 2% under the latest cap announced by energy regulator Ofgem, so that typical households will pay £1,755 a year, up £35 a year on the current cap, or £2.93 a month. It’s not a huge increase, but it is on top of high prices.  About £1.42 a month of the increase will be used to fund the government's extension of the Warm Home Discount, giving money back off winter bills for some people on some benefits. Fixed costs to run the gas network will make up another 72p a month. And about £1.23 extra a month will go to the cost of ensuring a stable electricity supply, to balance when there is too much and too little power in the system. That especially met with a lot of negative reaction, with the Daily Mail saying ‘Wind farms are driving YOUR electricity bills up’, the Telegraph opining similarly.

Well yes, wind farms have negotiated contracts so that they are compensated when their power is not used, but that is often because of lack of a proper flexible grid system capacity to handle the power, and/or inflexible (and costly) output from nuclear plants. Storage will help reduce the constraints on wind farms (and solar) and the need for curtailment of their output- while providing backup when green power supply is low or energy demand high. So will improved grids. But it will take time to set this up and the major focus currently seems to be expanding expensive inflexible nuclear- capacity (Hinkley Point C and Sizewell C) which will make the curtailment situation worse. The new large nuclear plants will also need backup - as UCL Prof. Mark Barrett et al have noted, they do have down times, while refuelling or being maintained, and can also sometimes suffer from unpredictable faults.

So the already-costly nuclear option also has additional costs. In addition, the current approach to trying to compensate for all that by passing the risk of construction and then the running on to the consumers, will add to their bills. The final figure is still not clear but, under the Regulated Asset Base (RAB) funding model for Sizewell C, domestic energy users (but not registered large heavy energy users) will be charged at an extra Interim Levy Rate (ILR), for payments to Sizewell C & then at a smaller Operational Costs Levy Rate for running the scheme, set at £0.0028/MWh for April 2025-March 2026. There’s also Reserve Payments - contributions to a Total Reserve Amount (TRA) to protect the scheme if any suppliers default. In all, it may cost consumers up to 0.05p/kWh, although it looks like it will start lower at £3455/MWh from 1st November 2025 to 31st December 2025, with Ofgem saying that ‘this charge will be updated quarterly’.   

So who knows- it may be few percent of your bill. £10 perhaps p.a.?  Or maybe more, given that that are big uncertainties over possible major problems with or delays to construction and so large cost over -overshoots. That’s hardly unlikely with new nuclear - it’s what has happened at Hinkley Pont C and at EDFs other EPRs.  And, now, under RAB, all this being before consumers get any power delivered. And also it seems, it will still be left running, at some level, for the full operational period after completion (50 or 60 year maybe) as the investment matures and the profits are gained into the far future.  Something you can’t shake off- we will be saddled with it, and then paying for its closure and its waste disposal, almost for ever. 

Extra surcharges do get added to bills for renewables at present, and some can be larger, but they will hopefully soon be falling as the technology improves.  See this link to the latest BNEF data - renewables (including storage) are already much cheaper than nuclear. That is why we have the RAB - to force consumers to compensate and it seems going on continually to the bitter end. While this RAB may last almost for ever, at least current renewable project payments only last, under the CfD system, for short, specified, power supply contact periods while the plant is running. And their costs look like they will continue to fall. That’s not how it looks with large nuclear. The FT quoted Tony Roulstone, a former Rolls-Royce executive, as saying ‘I don’t think anybody in the world is going to build another EPR apart from Britain.’ Small Modular Rectors do not seem to be doing much better- still many years off and likely the be expensive.  

Indeed, given how rapidly renewables are building up, and their low costs, it seems rather pointless spending so much money trying to renew nuclear. Most of the media seems locked into a pro-nuclear whatever-the-cost line, but, as Jonathon Porritt says ‘the contribution of both big and small new reactors to a Net Zero electricity system in the UK will be literally ZERO before 2035 at the very earliest.’ And in his bitter overview article, he notes that the whole long running nuclear exercise seems to be getting us nowhere, except maybe increasing the spread and risk of use of nuclear weapons.  Even if we avoid that he notes that ‘the Treasury recently described the Government's proposals for a new Geological Disposal Facility to deal with the 700,000 cubic metres of spent nuclear fuel as ‘unachievable’. This is a truly extraordinary development – confirming that the UK still has NO idea what to do about its legacy nuclear waste, let alone the waste that will be produced by any new reactors.’ 

It does all sound a bit worrying, especially given the huge costs, like most things nuclear- for example, estimates for the costs of geological disposal facility (GDF) in Cumbria range up to £53bn, while Porritt notes that  ‘the Treasury's financial modelling for the new power station at Sizewell C (seen by the Financial Times) gives a range of roughly £80bn to £100 bn.’ Is this really the best use of  money on this scale - to produce very expensive state and  consumer subsidised electricity, and even more radioactive wastes to deal with?


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