On Hinckley Point Bart'at.

[danieldwilliam]

I doubt that Hinckley Point C will ever generate a megawatthour of electricity.

I'm not saying that it definately won't happen but my money is on it not happening.

It's a risky project. Building nuclear power stations is difficult and fraught with technical and political risk. They are vast, difficult and very regulated construction projects with plenty of scope for things to go wrong. They are also subject to risk of legal challenge or outright civil disobedience actions from opponents.

It's expensive in interesting ways. At a budgeted £18bn for construction it puts a lot of money at risk for EDF and any of the investors. Which include both the French and Chinese state. They should be looking at the project execution risk and worrying whether £18bn will buy them a working power station. My view is that they won't get a working power station for £18bn and might not be able to get a working power station at any money.

It's also expensive in terms of the price for any electricity produced. £92.50 / MWH in the 2012 market was expensive. That strike price is index linked and estimated to be £120 / MWH. You can buy onshore wind today for about £60 / MWH. The price of that is falling. As is the cost of solar PV.

Now there is some value in having a diversified energy supply. What would we do if we discovered that all our new wind turbines had a latent defect or that solar PV caused cancer? I'm not sure it's worth paying double the going rate for electricity.

So, it's a difficult project that represents a financial risk to its investors and a bad deal for consumers.

And it won't be finished for ten years, probably longer.

By which time technology and the economics that go with that technology will have moved on. Solar PV will be cheaper, wind will be cheaper, I'd expect storage to be cheaper. All available in small increments. The oil price looks like it won't get much above the value implied by the long term cost of US fracking - so about $80 a barrel. In 2012 oil was above $100 a barrel.

if you can't build the project unless you can sell the power at £92.50 plus then I don't see how you can build the project.

This was true in 2012. I mean that had the plant gone ahead when first planned we would be looking at a one third complete power station that had started as expensive and was now out of the money but we'd have been committed to it. We now have four more years of information about the likely trajectory of energy prices. By the time the UK government conducts its review we'll have another year, perhaps two of information.

If my major premise about energy prices (that over the coming decades they are capped by the cost of fraking and then the cost of solar PV) is correct then Hinckley Point will look like a worse idea with every quarter that passes.

Comments

Re: Strike Price of Hinckley Point C

[danieldwilliam.livejournal.com]

(Just had a look -- the grid wind total today right now is 310MW or about 2.5% of dataplate installation and about 1% of demand. We're buying in 2GW of French nuclear electricity as usual and burning fossil carbon gas like crazy but it's cheap.)

This in a nutshell is why I'm sceptical about Hinckley Point C specifically. In the long term it might be necessary to build some new nuclear capacity in the UK. I, personally, think we won't need to. I don't think it's Hinckley Point C right now.

May's decision is either to approve the Hinckley Point C deal with prices currently at about £100 / mwh and rising or let the market stick on wind whenever it can and burn cheap gas like crazy. Add a few more big interconnectors to improve the market conditions for wind and counter the intermittency issue. Jobs a good 'un.

May won't be Prime Minister in 2050 when Hinckley Point C is (perhaps) belting out carbon free electricity with all the financing paid off. She will be Prime Minister through 2017-2020 when Greenpeace occupy the site, the pressure vessels experience their first delay, the lowest ever UK price for wind power is achieved and then bettered.

Interconnectors, wind turbines and CCGT's take a few years to stick up. If you are May you can avoid committing to Hinckley Point C for years and still add generating or transmission capacty if needed in a few years time for a lower price with less technical risk.

I think the British public's willingness to commit to spending significantly more than the current electricity price to avoid climate change is limited. Especially when there is the alternative of burning cheap gas when the free wind isn't blowing. I definately think the Conservative Party is less fussed about burning cheap gas than the average Brit.

I *think* gas stays cheap for the next decade as OPEC, then fracking and then global supply of solar PV and wind keep the price down.

If as you suggest the offer was for a couple or three APR1000 Hualongs at $5bn each and they could offer the electricity for a price of £70 / mwh or less then I'd be less sceptical.

But I think the question isn't about whether we need to solve the entire island of Great Britain's electricity industy in order to for May or EDF to not proceed with Hinckely Point C. It's about wheher the certainty of paying more than the current going rate coupled with the project risk of actually building the thing is more or less of a headache then waiting to see how many CCGT's, wind turbines and interconnectors get build over the next ten years.