The soon to be UK Prime Minister, Andy Burnham, is being portrayed as a ‘new broom’ that could, or might, adopt better polices in all areas. Well, what about the energy sector? It’s in a mess, economically, driven by high fossil gas prices, with retail electricity prices at an all-time high, despite renewable energy doing well (65 GW so far) with its wholesale price mostly being low. It’s in a mess technologically, at risk of undermining the crucial next stage of its important renewables programme by diverting cash to support major high-cost nuclear and fossil carbon capture and storage projects.
Both of these programme involve multi-billion funding. The much delayed Hinkley Point nuclear plant may end up costing £40-50bn, inflation adjusted, when it finally gets completed, probably in 2030. Its follow-on project, Sizewell C, may not do much better, despite promises about learning from Hinkley, and despite the investment risks being met by a consumer levy. There are already construction issues. A late 2030s start up at best? By then we might also be seeing some outcomes from the very speculative funding for small modular reactors and even maybe some results from the even more speculative fusion funding, with £2.5bn set aside for it.
Is any of that good value for money? Will it deliver anything useful on time? On past performance, it’s very uncertain. Same for the £21.7 bn Carbon Capture and Storage programme, the full cost of which has been put at possibly up to £264bn by 2050. CCS is basically an attempt to allow us to keep burning fossil fuel. Is that sensible? Or for that matter the controversial Drax wood pellet combustion plant- it got £1bn in subsidies last year. Burning imported wood from forests does not seem to be a very sustainable option…
There are arguably so many more worthy projects, for example in green hydrogen production and storage, a vital new area for expansion. Heat storage linked to local heat networks too. To be fair, some of these ideas are now getting a bit of funding. For example, pioneering green hydrogen producer ITM Power has received £86.5 m from Great British Energy and DESNZ. It will be used to expand ITM’s electrolyser production at its Sheffield plant to 1GW p.a. But we need more like that for the rapid expansion of short and long duration storage. Freed from drain of endless nuclear and carbon capture diversions, we could also accelerate the newer renewables, like tidal stream turbines, via expansion of the Contacts for Difference (CfD) system.
Some say that tidal lagoons may be viable as long-term infrastructure projects, but free- standing tidal stream systems may be better- although they are still expensive, with the administrative maximum strike price set for the forthcoming 8th CfD round at £371/MWh. Wave projects are set even higher at £386. But hopefully exposure to market pressure could force these prices down. That’s what happened in stages for wind and solar. The next round strike cap prices for wind is set a at £113/MWH for offshore wind, £92/MWh for onshore wind and £75 for PV solar- and the auction process usually results in significantly lower actual prices being agreed. If the UK could find some way to stop the retail price of power being set by gas prices, then these sources would be open market competitive with just about all-comers. All we have at present is pressure for the older renewable projects to move away from the old Renewables Obligation to new more competitive CfD project support. That should reduce consumer bills slightly. But it’s not the full decoupling from gas prices that has been called for- although NESTA has made some new proposals which might help.
The full picture must also include grid development, often a contentious issue. Weak local grids are one reason for curtailment and grid congestion. It can be a real local problem for renewables. However, variable pricing, which might help with balancing surpluses, has equity problems. In a new paper from Cambridge University David Newbery works through these issues and comes out in favour of spatial transmission charges as the simplest least cost option, but it’s complicated stuff - there are equity issues.
What next? Hinkley Point C is about half-built, so a lot of capital has already been sunk in it, but there are yet more billions scheduled to be spent on it. Burnham is unlikely to be willing to halt it (he is, it seems, pro-nuclear) but he might be persuaded to ditch Sizewell C, work on which has hardly started. And the big proposed CCS programme too, so as to release further billions. To soften the change of policy, he could keep some small projects going (an SMR perhaps, or a CCSU project) as ‘insurance’ options, much as some renewables were treated in the past (including, at one stage, offshore wind) when nuclear was seen as the main new UK energy option. More or less everyone, except some deadhead Reform supporters, now see renewables as that. The only debate seems to be on what backup might be needed. Large inflexible nuclear plants are not much use at that, nor are costly CCS fossil gas plants, while SMRs are as yet uncertain in terms of cost and viability. But we don’t need any of this to deal with variable renewables. Storage, large and small scale, is part of the answer, along with improved transmission and flexible demand management plus smart grid systems, so as to balance local variable demand and variable supply efficiently.
We have to build a new system and that will inevitably be costly, although, arguably, not as much as trying to keep the old system going with dubious supply choices and carbon fixes. For example, on the basis of its latest LCOE data, Lazard says ‘Despite rising and inflationary cost pressures across all generation technologies, renewables remain the most cost-competitive form of new-build generation on an unsubsidised basis’. And economic cost is not the only issue. For example, if built, Sizewell C will produce around 40,000 kg of plutonium in its spent fuel over its 60-year lifespan. Plutonium has a half-life of around 25,000 years, with SMRs, if they ever work, also adding to the pile. Is that what we want to bequeath our far-off descendants? Along with other long-lived nuclear wastes? As well as vast amounts carbon dioxide gas trapped in undersea strata from fossil CCS - and also from Direct Air Capture and Storage …That’s not an environmentally sustainable approach. Renewables are. Some natural carbon removal projects may be helpful- but what we need to aim for is direct real zero carbon not theoretically net zero carbon.
That’s a big challenge. Andy Burnham has made some commitments on energy and climate, but only so far mostly in a limited and cautious way. Will he now come up with something more radical? We will have to wait to see. Meanwhile, the latest data show that over 70% of DESNEZ expenditure is now nuclear related…
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