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Solar and wind substantially cheaper than nuclear, even in UK

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The first renewable energy auction held in the UK under its new “contract for difference” pricing mechanism has pulled the rug from underneath the nuclear advocate argument that it is the cheapest form of clean energy. It has also surprised the UK government, and some of the renewable developers themselves.

We publish a more in-depth look from Simon Evans at Carbon Brief here, but the striking result of the renewable energy auction was how both wind and solar came substantially below the price budgeted by the government.

Ignoring a couple of outlying bids, both wind energy and solar came in at around £80/MWh, which is well below the £120/MWh budget for solar, and the £95/MWh by the UK government, and the £92.50/MWh negotiated for the proposed £42 billion Hinkley C nuclear reactor.  The strike prices for these wind and solar technologies will be progressively scaled down in coming years. The UK government hopes they will require no subsidies post 2020.

uk cfd

Offshore wind remains above the cost of nuclear, although recent experience in Denmark suggests that those costs are also coming down more quickly than imagined.

We should be cautious about some of the prices though. The £50/MWh price bid by a couple of  parties appears to have been an accident, a result of them not quite understanding the bidding process.

“We got our CfD … oh Dear,” was the title of a brief blog written by James Rowe, director of Hadstone Energy, which is the promoter of the 19MW Wicks solar farm. Rowe lamented that the result is barely above the market price for electricity, meaning virtually no subsidy. At around £79, it would have been doable, but at a squeeze, he says. This was confirmed by another developer, Lightsource, which bid £79/MWh for its 15MW solar farm, but said it would result in wafer-thin margins.

“The Solar Trade Association will no doubt welcome this as another great leap towards subsidy-free solar. Wick Farm just got there a couple of years before anyone else!” Rowe quipped. Both solar developers said solar should be added more capacity in the next options.

This is a more detailed breakdown of the bidding.

UK cfd 2

There is often disbelief in the ranks of project developers at the results of such auctions. This occurred in the Dubai auction that obtained a price of US5.84c/kWh for a 200MW solar plant, and at both the recent wind and solar auctions held by the ACT government in Australia.

Still, the results of the bids underline that wind and solar are cheaper than the nuclear option, and require prices for just 15 years, after which they will get the market price. The Hinkley contract increases with inflation for 35 years, by which time it will be something around £320/MWh, according to a recent Austrian study. (Austria is outraged by the scale of state subsidies for Hinkley and is seeking to have them reversed).

And before anyone starts posting comments about the “grid” costs of solar or wind, let’s not forget that UK’s National Grid said that upgrades to cope for Hinkley C would result in additional grid costs of £160 million a year, which will be passed on to consumers. That’s about $12 billion over the first 35-year lift of the project.

   

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  • John Irving

    Can someone enlighten? Are nuclear waste processing, long term waste storage, and plant decommissioning factored into its costs here?

    • No, they are not.

      • John Irving

        Well… I fail to understand how such significant costs could not be taken into account.

        Thanks.

        • Sparafucile

          In the scale of all other costs, they’re not “significant” at all.

        • BasM

          The Hinkley contract restrict such costs for EDF (the owner) to a low max. UK government takes all costs if that low max is not enough.

          That nice arrangements for EDF concerns the costs for:
          – nuclear waste (UK has already a nuclear waste pile which is estimated to cost ~$100billion)
          – accidents & disasters
          – decommissioning

          So those costs are not significant for the utility (EDF), but of course very significant for the taxpayer.

          It’s one of the reasons Austria, Luxembourg, some utilites and other organizations went to the EU high court in Luxembourg to reverse the decision of the EC commission.
          They have a good chance to succeed (as far as I can judge).

    • Sparafucile

      It doesn’t really matter, since those costs are minuscule compared to plant construction cost. In the US, the funds reserved for those purposes, paid by ratepayers though often maliciously mis-stated as “subsidies” by certain activists, amount to a fraction of a cent per KWh.

    • Alex

      Yes, these are factored in

  • CaptD

    It is really sad that US Energy R&D is primarily determined by Tax Incentives instead of what is best for the USA in the long run!

    Because we now live in a far different country than we did several decades ago, we are now at the mercy of elected officials that support whatever is best for their BIG Donors, most of which represent Old School Energy Producers.

    Happily, Public opinion is shifting and we are now seeing large numbers of both investors and ratepayers that are demanding better from their Utilities. These Utilities must now pay attention to this demand if they are to convince investors and ratepayers that they don’t need to install their own Solar Energy generating systems, which now threaten the profitability of Big Utilities bottom line as never before.

    Big Utilities must now cope with decreases in Energy generating costs that make long term investments in Old School energy generation like new Nuclear, something that is becoming ever harder to justify, since Solar (of all flavors) cost is decreasing almost monthly and storage battery technology is going to dramatically change the Energy Generation/Storage equation in the very near future.

    Here is one just one example of what is coming very soon to the Energy Marketplace:

    LOOK OUT NUCLEAR PLANTS ===> Putting the world’s largest and most powerful gas turbine to the test

    http://www.gizmag.com/ge-harriet-gas-turbine-test/36176/

    Just imagine what will be “online” in 10 to 30 years from now at much less cost than using Nuclear…

    I believe that turbines this size and even larger ones which will follow will be used to maintain Large Capacity Grid Storage batteries in various locations across the USA and make sharing Energy an even better deal, once the Grid gets upgraded.

    Posted here:

    http://oilprice.com/Alternative-Energy/Nuclear-Power/Is-There-Any-Hope-Left-For-Nuclear-Energy.html#top and

    http://www.forbes.com/sites/kensilverstein/2015/02/24/biomass-plants-gaining-steam-but-do-they-result-in-less-carbon/2/

  • HansB50

    All this renewables are not available 24h/7d, but only in about 15% of the time like solar and 25% for wind (figures from the yearly German renewable energy report).
    What are the additional power plant costs for having electricity available when you need it and not when your renewable landlord wants to press his volatile energy into the market? Who will then operate the plants when you really neeed electricity? And which plants are this, coal or the not existent large capacity energy storage plants?

    Thats the difference to Hinkley Point. It will deliver electricity whenever you need it and not wehen you renewable lord and the sun is able to deliver. And this little more service needs some investment which is the difference of the energy costs for real and reliable power plants.

  • Sparafucile

    It’s cute how the solar and wind rates don’t include any component of the amortized subsidies, while the nuclear rate includes them all. I call fraud.

    • Actually, the nuclear rate does not include the 16 billion pounds of loan guarantees from the government, does not include the assumption of construction risk, production risk, or insurance risk by the government. It does not include the 160 million pounds a year cost of additional system back-up identified by the grid, and it does not include decommission or storage costs. I think you are the fraud.

    • Alastair Leith

      Why the hidden user profile? Something to hide?

  • Hermit_Thrush

    Nuclear vendors should not despair nonetheless. There’ll always be customers around the world eager to learn how to tap nuclear’s multiple possibilities:

    http://www.foreignaffairs.com/articles/137731/kenneth-n-waltz/why-iran-should-get-the-bomb

    http://foreignpolicy.com/2012/04/02/dont-fear-a-nuclear-arms-race-in-the-middle-east/