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United Kingdom

Wind loses out to nuclear following UK deal

UK: The UK nuclear industry is receiving more government support than the wind sector, according to independent experts responding to plans for the construction of EDF's Hinkley Point C nuclear power plant in south west England.

The government set Hinkley Point C’s strike price at £92.50/MWh (EUR 109) for its electricity for 35 years, after production begins in 2023, which will be reduced to £89.50/MWh if it develops Sizewell C, in Suffolk.

The government’s new incentive system, contracts for difference (CfD), will see generators receiving a top-up payment when the wholesale electricity price is below a pre-agreed ‘strike price’ and paying money back when the price rises above it.

In June the UK government announced draft strike prices for wind generation, which are expected to be confirmed "soon".

Offshore wind’s strike price is £155/MWh and onshore it is £100/MWh (EUR 118) until 2016/17.

Prices for new build will decline from 2017-19 as a result of predicted falling technology costs. By 2019 the strike price for offshore will be £135/MWh and onshore £95/MWh.

Credit: Bircham Dyson Bell

 

David Toke, a reader in energy politics at Aberdeen University, said: "Wind is getting absolutely undermined under the whole thing. Onshore wind is getting a much inferior deal.

"Hinkley Point C has been given a 65% government loan guarantee which massively reduces the interest charged – it would be totally un-fundable without that. If wind got that subsidy it would be much cheaper."

Department of Energy and Climate Change (Decc) is restricting contracts to 15 years for wind whereas nuclear’s contract is 35 years.

Decc secretary of state, Ed Davey, said: "The duration of the payments under CfD for Hinkley Point C would be for 35 years, which is around 60% of the 60-year operating life of the plant, proportionally similar to the length of CfDs being offered to most renewables technologies."

However, Toke said no nuclear power station has run for 60 years and that wind’s contracts have been cut from 20 to 15 years even though they could last much longer.

He noted: "A lot of us suspect part of the agreement will allow EDF to increase the strike price if costs increase."

David Milborrow, Windpower Monthly’s economics consultant, said: "Even if we accept their argument, you could, after 15-20 years build a replacement wind farm and that will almost certainly come in with a lower generation cost, given the way that wind turbine costs are falling.

He stated that if nuclear power was subject to 15-year contracts, like wind, it would increase the strike price by about 25%, making it far more expensive than onshore wind, and not far short of the offshore wind price.

The electricity market reform package is currently going through the legislative process in the energy bill, which is due to get royal assent by the end of the year.

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