By NIELS KRONINGER
New nuclear power in the UK comes at a high price. Is it justified to pay such a high premium for low carbon electricity which is reliable and does not depend on the weather?
Hinkley Point C, the first new nuclear power plant for decades which would generate 3,200 MW throughout the year (7% of the UK’s demand), requires a price guarantee from the UK government for 35 years at £100.68/MWh in today’s money (£92.50/MWh in 2012 money).
The wholesale price for electricity is currently below £35/MWh.
Supporters of Hinkley Point C correctly argue that wind and solar produce variable amount of electricity whereas Hinkley Point would produce a steady baseload. Their argument for Hinkley Point C is that despite the higher cost, it is needed because cheaper forms of low carbon electricity generation are less reliable, and that other forms of baseload power (such as gas or coal) are less green.
We analyse whether one could replicate the electricity generation of Hinkley Point C with a cheaper, equally low carbon combination of a) solar farms, b) wind farms, c) energy storage and d) backup gas generation at costs that would allow their deployment today.
Our analysis shows it is possible at a price of only £75/MWh, 25% less than for Hinkley Point C. This would save Britain’s consumers £720 million per year (or £25 billion in today’s money over the 35 year contract term).
Transforming weather-dependent solar and wind into a stable generator is possible because the weather variations between wind turbines and solar panels largely cancel each other out.
Any remaining variation is managed with energy storage (charging batteries when generation exceeds demand and vice versa) and with backup natural gas generators. Gas generators are the only technology emitting carbon dioxide, but as they are rarely used, the average carbon intensity is still 80% lower than today’s average of electricity from the grid.
At a carbon intensity of only 100gCO2/kWh our “renewable Hinkley Point” would meet the UK’s 2030 target already today. We also show a cost effective way to reduce the carbon intensity further.
This essay is not a diatribe against new nuclear in the UK. We look only at the economics and climate change aspect and leave out a number of other considerations, positives (job creation, industrial policy, attracting Chinese investments) as well as negatives (delivery risks, risks of radioactive contamination, uncertain end storage).
We merely argue that the case for new nuclear cannot rest on costs and security of supply alone as there are cheaper alternatives available already today. As 35 GW of power plants will be shut down permanently in the coming decade, we may have to install both new nuclear and new renewable energy with storage.
The analysis shows that politicians and civil servants should not pick winners but rather create a level playing field between all different technologies. This will stimulate innovation and bring forward substantial cost savings to consumers.
We encourage the Department of Energy and Climate Change (DECC) to negotiate with Green Hedge and other low carbon firms to put in place the contracts to deliver the same results as Hinkley Point but faster and cheaper.
NIELS KRONINGER is Joint Managing Director of Green Hedge Energy.
Green Hedge develops and operates low carbon electricity generation and storage projects. The group’s developer arm has realised over 200 megawatts of renewable energy projects to date, with a focus on large-scale grid connected and private wire solar PV systems (solar farms). The group’s O&M business provides operation and maintenance services for ground mounted solar farms. With over 150 megawatts under contract in the UK, it is one of the country’s top independent O&M providers