United Kingdom

United Kingdom

WindEconomics: Boost for renewables over nuclear in the UK

UK: Britain's National Infrastructure Commission (NIC) has delivered a resounding vote of confidence in renewable energy by recommending that the UK aims for 50% renewable-electricity generation by 2030. It suggests only one more contract for a nuclear power station before 2025.

The NIC is an independent body tasked with providing clear advice to the government on how best to meet the country’s long-term infrastructure needs.

The commission’s advice is based on economics: "Modelling has shown that delivering a low-carbon electricity system for 2050, powered mainly by renewables, is a low-cost option, cost-comparable to building further nuclear power plants after Hinkley Point C [the nuclear project currently under construction with a 35-year power purchase contract]."

The NIC estimated the overall cost of electricity for different proportions of renewables and nuclear electricity and concluded that, in each case, a "high renewables" option was slightly cheaper, even taking into account the costs associated with the balancing of the variable renewables.

The modelling covered the period from 2030 to 2050. Solar capacity was estimated to be around 35GW by 2030, with wind at 25GW onshore plus 15GW offshore.

The report does not envisage much tidal power, carbon capture and storage or small modular nuclear reactors being installed up to 2050.

In its modelling, the commission assumed that renewables will become cheaper, noting that "in recent years, actual cost reductions have exceeded expectations".

In contrast, the report states: "It is much less likely that nuclear costs will fall," and points out that "the issue of long-term disposal for nuclear waste is still unresolved in the UK".

Moving further apart

The charts below show the trends in UK nuclear and wind costs. Installed costs for nuclear have more than doubled in the past 30 years, whereas wind-plant costs have almost halved.

The charts take the figures produced for the first public enquiry for Hinkley Point in 1987 as a starting point, when the estimated installed cost was £1,300/kW, or £2,877/kW (€3,213/kWh) in 2018 prices, using the UK Consumer Prices Index.

The power station now being built at the site is expected to cost £6,250/kW — more than twice the 1987 estimate.

The installed cost of wind energy (2018 prices) has dropped from £2,370/kW in 1987 to around £1,200/kW today, so costs have practically halved.

Installed costs are unambiguous, but energy costs depend on the financial terms.

In 1987, the UK’s electricity industry was state-owned, and electricity costs were derived using a 5% interest rate, with depreciation over the plant lifetime — 40 years in the case of nuclear and 25 years for wind.

Privatisation

At the time, nuclear, at £50/MWh, was cheaper than wind (£62/MWh — 2018 values).

The planned Hinkley nuclear station was not built as the electricity industry was on the verge of privatisation.

There were numerous discussions about the relevant "private-sector" cost of nuclear electricity, with one estimate at £125/MWh (rebased to 2018).

Installed costs were predicted to fall, offsetting higher interest rates, but after around 2000, the installed cost estimates rose sharply.

Installed costs for wind fell until around 2005, after which the steep rise in commodity prices pushed them up. Shorter contract periods (15 years) also pushed wind-energy prices up.

However, since 2010 there has been a steady downward trend, with recent reports suggesting the onshore price is now around £50/MWh.

This is exactly half the price that will be paid for the electricity from Hinkley Point. It may be noted that the 1987 wind price, if derived using the current 15-year contract period — would be around £87/MWh. Recent offshore prices are also shown and fall well below the nuclear price.

It remains to be seen whether the government will act on the NIC’s advice. At present, one new nuclear station is being built, negotiations for a second are at an advanced stage, and at least two others are being discussed.

At a glance — This month’s report conclusions

National Infrastructure Assessment, National Infrastructure Commission (UK), July 2018 Examines the UK’s infrastructure needs up to 2050 and concludes, in the case of electricity, that increasing the proportion of solar and wind energy will deliver cheaper electricity for the consumer than nuclear.

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