Thursday, 19 May 2016

Will Japanese or US Governments end up paying for Moorside nuclear plant?

According to spokespersons for the proposed 'NuGen' nuclear development at Moorside in Cumbria either or both the Japanese and American Governments could end up part-paying for the proposed 3.8 GW project. That is if it ever happens (which I doubt).

According to a report in World Nuclear News, NuGen's boss Tom Samson said that they were hoping to get the US and Japanese Government's support to supply export credit guarantees for the debt element of the necessary investments - as well as the British Treasury. What this means is that if there are serious cost overruns on the project that exceed the equity (risk capital)  element of the project then the Governments would end up paying out. Given the track record of the only western-based nuclear plant using the AP1000 technology from Toshiba that is earmarked for the project then this scenario is all too plausible. The only two projects in the West are at Virgil C Summer in South Carolina and Vogtle in Georgia. Both are suffering serious cost overruns and will not be built on time. It is just a question of how high the cost overruns will be. Of course these plant are being built with what amounts to a blank cheque. The developers are monopoly electricity suppliers with compliant regulators who allow the electricity companies to charge the electricity consumer (in advance) for whatever the power plant costs.

In Georgia, one serious estimate is already suggesting that Vogtle will cost 50 per cent more than the original estimate. And this figure could well rise! If the debt element is two-thirds of the total investment then this would already be at the outer margin of what the project could pay for before invoking Government guarantees.

This could lead to the bizarre position of Japan and or the USA paying for a British power station. Given, it seems, that now the only way Hinkley C will be built is for the French Government to contribute to the costs of the power station, this just adds to the bizarreness rating of the British nuclear programme. But then, at least in the case of Hinkley C there are theoretical investors for the equity portion of the investments. These are EDF, for some crazed reason, given their general finances, and the Chinese, who are being given rights to build their own power plant in the UK as a 'reward'. In the case of the NuGen development, there are no plausible investors - no doubt Toshiba can put in a bit, but not much, partly because they couldn't afford to take that risk, and also because manufacturers usually don't pay for their own products.

Quite where the developers will find anybody mad enough to bet billions on the chance that a nuclear power plant will be built more-or-less within project cost parameters is the big question. No nuclear plant that is being constructed in recent times even approaches this notion. Then there is the question of how much the UK Treasury would be persuaded to offer - Hinkley's cost, in current prices is £100 per MWh for 35 years even with the Treasury;'s loan guarantee, and that resting on EDF taking the first risk of cost overruns.

It all sounds highly unlikely to me. The Nugen developers say their plant will be generating in 2025. I will bet them (or anybody else) £100 that it is not generating by then. I am just arranging to pick up £100 in a bet that Hinkley C's construction would not have started by the end of 2015. I'll happily bet the same sum for completion of the Moorside project.

Come on Tom, give us a whirl!


http://www.world-nuclear-news.org/V-Bringing-lenders-into-UK-nuclear-17051601.html


http://flagpole.com/news/capitol-impact/2015/12/16/georgia-power-s-plant-vogtle-overruns-will-cost-you-big-time

http://www.powermag.com/challenges-continue-for-summer-nuclear-plant-project/

Thursday, 12 May 2016

UK renewable energy auctions system discredited by offshore windfarm contract fiasco

The Government's much vaunted 'contracts for difference' (CfD) auction system for funding renewable energy has been thrown into disrepute after a key project awarded a contract has had its contract cancelled by a government agency. This is because of a delay in a court appeal against the (Scottish) Government's own planning consent for the project. There is no procedure for allowing more time for the project or for awarding a contract to one or more runners up in the auction contest.

The RSPB lodged a judicial review case which began hearings almost a year ago against planning consent given to four Scottish offshore windfarms on the grounds that they damaged bird species. Meanwhile the Government which had awarded a CfD contract in early 2015 to one of them, to Mainstream power for the 448 MW Neart na Gaoithe project near the Forth Estuary, has allowed the contract to be cancelled by the Low Carbon Contracts Company (a government agency). This is on the grounds that the project has failed to meet its milestones to ensure the project begins operation in 2018. Mainstream says that the only thing holding it up before its contract was cancelled was the court procedure.

The apparent failure to deliver this project, in addition to the failure to deliver solar pv projects awarded contract means that so far it is all but certain that at least nearly a quarter of the renewable energy capacity awarded contracts will not be delivered. We do not know how many more projects will not now be delivered. This is an indictment of the auction system in general and in particular the British version of it which fails to pick up on the experience of auction systems organised elsewhere in the world, especially in nearby Denmark for its offshore wind schemes.
There are a lot of claims permeating the web these days about how auction systems are driving down the cost of renewable energy (RE). There is no evidence for this, as my own research demonstrates. See my paper on renewable energy auctions at http://journals.aau.dk/index.php/sepm/article/view/1197 
Auction systems have been introduced in a period of rapid decline in renewable energy costs and it is the technology that is driving costs down, and the competition among manufacturers to supply it to the developers, not the contract procurement process.

I comment in this paper that, amongst various other things, for RE auction systems to work, Governments have to give certainty of grid connection and planning consent to projects that are awarded contracts. The UK Government has lamentably failed to do this. Of course the RSPB (or anyone else) is perfectly entitled to seek judicial review, but in that case the Government has to take action to ensure that the project can still go ahead if its planning consent is confirmed or ensure that somebody else can build the capacity. The Government has done neither. Of course in Denmark the Government ensures that all of the planning issues are resolved before asking for bids to develop offshore wind projects in sites that have been carefully researched and planned in advance.

So now future renewable CfD contracts are liable to challenged by well resourced groups who know that all they have to do is to get permission for a judicial review to be held to kill the project. This makes the auction scheme into a shambles. In the UK in the 1990s the last time we had an auction system three-quarters of the projects never got implemented, a lot of the time because of planning failure. So here we are again, 20 years later, and we've learned very little!

One of the most outrageous aspects of all of this is the fact that offshore wind schemes can get their contracts withdrawn for flimsy reasons while Hinkley C, now at least 8 years behind schedule, is kept on the government books!

Amber Rudd's claims that we have lots of renewable energy investment is a shambles. Confidence in RE investment in the UK has crashed, and it seems the Minister is unable even to deliver the capacity that it claims to have awarded contracts. The UK has crashed down the attractiveness list of countries for RE investment. See http://www.renewableenergymagazine.com/article/attractiveness-of-uk-for-renewable-energy-investors-20160511

Altogether the UK Government is developing a reputation of issuing press releases about fantasy power schemes. Maybe the Ministry should be renamed the 'Department of Fantasy Energy and Climate Change'. Of course Amber Rudd is only the monkey, with George Osborne being the organ grinder as far as the messages are concerned. The Treasury's determination about  ensuring renewable energy projects go ahead is about as strong as the alcohol content in orange juice.


See also references:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/407465/Breakdown_information_on_CFD_auctions.pdf

https://next.ft.com/content/d2f40934-1792-11e6-b8d5-4c1fcdbe169f

http://www.solar-uk.net/article/96930-Is-there-hope-for-solar-funding-beyond-Is-there-hope-for-solar-funding-beyond-Is-there-hope-for-solar-funding-beyond-CfD.php

Friday, 22 April 2016

EDF postpones Hinkley C decision until next year

A report in the Independent says that the EDF Board of Directors has agreed to undertake discussions with the company consultative council before taking a decision, a process which is likely to take a long time ie until next year. However this could well be a cover for the numerous problems facing the project, not least EDF's own parlous financial position and the fact that it needs the French Government to bail it out even without going ahead with the Hinkley C project.

There has been a game of 'pass the decision' to abandon a project that no independent financial consultant would come within a light year of recommending for the go-ahead. The French Government has been faced with what seems to many to be the ludicrous prospect of heavily subsidising a power station to supply the British with electricity. This is despite the fact that the British themselves have promised to pay EDF around £100 per MWh in current prices for 35 years with the British Treasury agreeing to guarantee a £17 billion loan for the project! It is not as if even such a project could be a 'loss leader' for the French. Two versions of the same (EPR) plant design have been spectacular construction disasters already in Finland and France. Various engineers and managers, company unions and employee shareholders have pleaded for the project to be abandoned or put in deep freeze, and last month the Chief Financial Officer of EDF resigned in protest at the apparent determination of the EDF leadership to proceed with the project.

Earlier today Greenpeace announced a legal opinion which said that the French Government would need to apply to the European Commission for state aid for the billions of euros of money that they would need to throw down a probable Hinkley black hole. The Commission consented to the British state aid request in 2013, but a further consent could not be taken for granted - indeed, under the circumstances it would seem a bizarre request. In any even such an application (if it was ever made) would take a year or more to be resolved.

Certainly many nuclear experts have, in any case, been scratching their heads wondering how on Earth EDF could take a 'final investment decision' before the results of the safety tests being conducted on dodgy-looking EPR reactor vessels by the French safety regulators, the ASN, were known (they will not be known until next year). The suspicion must be that the directors of EDF, the French Government and the British Government are just stringing out the death-knell of a project that they know is not going ahead in the hope that a different member of this troika than themselves will take the blame. Who knows, maybe the troika have decided that they can take the matter to the Commission in the hope that they will refuse the state aid request and everybody can blame the EU! - As often happens for decisions that other people do not want to take themselves!

Thanks to 'Bristolboy' for pointing out to me the Independent piece; See http://www.independent.co.uk/news/uk/18bn-hinkley-point-nuclear-power-station-plan-could-be-coming-to-a-grinding-halt-a6997131.html

Wednesday, 20 April 2016

French Government obfuscates on Hinkley C as EDF managers predict legal action if EDF goes ahead

The insanity of the Hinkley C project for the French nation in general and EDF in particular was underlined today by two events. First, the French Government found itself unable to solve the gordian-like knot of problems facing EDF. Second a group of EDF managers wrote a letter warning  the directors that they could face legal action to make them take responsibility for taking on the Hinkley C project if, as they fear, the project goes wrong. This follows an earlier letter from engineers doubting the wisdom of proceeding with Hinkley C and the resignation, last month, of EDF's Chief Financial Officer who feared Hinkley C would undermine EDF's finances.

http://www.ft.com/cms/s/0/d6d16bd0-0628-11e6-9b51-0fb5e65703ce.html

Yet again a high level political meeting of French ministers billed as giving a green light for the project has prevaricated. It is a wondrous testament to the trust we wrongly place in the press releases issued by EDF and its allies that we believe every one of the now dozens of times that the green light for the project is to be given for the project. Of course, if it is so certain, why the need for these repeatedly stated 'final investment decision' meetings that never resolve the issue? Why aren't they just building the damn thing!
See http://www.connaissancedesenergies.org/afp/edf-le-gouvernement-reaffirme-sa-vigilance-totale-apres-une-reunion-lelysee-160420

Now of course with any privately owned company the merest hint that there were serious internal doubts about a project would send the shareholders scattering and the project would not be implemented. Indeed the employee shareholders have opposed the project and EDF's share price has plummeted. But this matters not to the directors who try and browbeat the Government, who own 85 per cent of the shares, to go ahead with the self-destruction, mainly it seems, to have one last gasp attempt to rescue the pride of the EDF leadership. Any notion that this is a vaguely competitive project - even with offshore wind projects, is rendered nonsensical by all of this, with some made-up price that the British would have to pay being paraded as the 'cost'. Now it seems the cost includes the French Government injecting billions of euros in various types of support even if all goes well. The chances are it will not, and the French state will be on the hook to pick up the pieces of EDF which will effectively collapse as a result - indeed the company could well go under even without the added weight of Hinkley C.

Then Amber Rudd comes out and says that EDF is taking the risk of the project according to the contracts. Well, legally, some risk maybe. Except that we are on the hook for may £17 billion worth of loan guarantees. And we're protected from paying this out are we because of the legal paraphernalia? Think again about what happens in the nuclear business, which is really not a business at all despite the made-up fantasy costs (as high as they may be) that are bandied around in government press statements.

Ultimately whatever the contract terms actually say, the politics are that if EDF runs out of money half way through (they already have!) because of cost overruns and says 'we can't complete it', of course the British Government will step in. Just as they did with Sizewell B post privatisation and declare it was now economically necessary to pour even more cash in.....

Strange attitudes are developing. Increasingly many pro-nuclear supporters are hoping that the project is cancelled for fear that the coming disaster will ruin the prospects of nuclear power in Europe forever. On the other hand anti-nuclear advocates are hoping that the project is actually attempted on the grounds that will finally destroy EDF and its nuclear power mission.

see also my earlier comment on the bleak prospects facing EDF at http://realfeed-intariffs.blogspot.co.uk/2015/10/could-hinkley-c-spell-end-of-edf.html

Monday, 18 April 2016

Renewables 'too much power' problem is really nuclear's fault

Electricity nerds were getting excited (April 17th) as the national grid issued a 'negative reserve active power margin' notice, meaning that for North West Scotland there was too much power on the grid. According to the Daily Torygraph, who write for the renewable hating Tory hordes in darkest Surrey, this crisis is  the fault of renewable energy. The 'emergency' scenario is marked by the fact that the National Grid:
'could be forced to issue unprecedented emergency orders to power plants to switch off........Businesses will also be paid to shift their power demand to times when there is surplus electricity, as the UK energy system struggles to cope with the huge expansion in subsidised renewable power.'

Later on in the same article, there is an obscure mention to the fact that wind and solar farms may be encouraged to turn down their generation because of 'inflexible' generation, which of course is mainly nuclear power.

So let's get this right, the Torygraph is saying that nuclear power plant can't or won't turn down their power stations, so it's windfarms and solar farms that are the problem?

The strange thing is I often hear nuclear power industry representatives going on about how nuclear power is flexible and can turn up or down when required, except that in the UK it doesn't happen, not even with the newest station Sizewell B. There is confusion over whether future nuclear power stations will be able to vary their power, but I am pretty confident they won't.

Why will nuclear power stations never be turned down (voluntarily that is) in the UK? Well first, because nuclear are always given grid priority - that is the policy of the British state -  and renewables will get the blame as a result for any resulting 'emergency' measures. A few years ago EDF was busy arguing that renewables should be restricted to 25 per cent of electricity supply precisely because they didn't want or could get their nuclear power stations turned down. This is now more or less government policy is seems - fantasy nuclear will provide the rest of the required non-fossil generation. Second, of course, following on from this latter sentiment, I am confident that in future there is no chance of new nuclear power stations being flexible because there will probably be no new nuclear power stations (apart from some small failing 'smr' demonstration maybe) actually built!

A French Economy minister appeared on Andrew Marr's show recently to declare that a final investment decision for Hinkley C is only 'weeks or months' away - as it has been for the last 4 years! I suppose the delays in Hinkley C must be renewables fault somehow too!

See

http://www.telegraph.co.uk/news/2016/04/07/uk-will-have-too-much-electricity-this-summer-national-grid-fore/

http://www.bmreports.com/bwx_reporting.htm

NOTIFICATION OF INADEQUATE NEGATIVE RESERVE ACTIVE POWER MARGIN issued for the period from 13:35 hrs to 17:00 hrs on Sunday 17/04/2016 has been cancelled For North West Scotland 



Monday, 11 April 2016

Small Modular Reactors: wishful thinking on a grand scale


Take a large number of scientists who have grown up with the firm belief that nuclear power is the future of energy, face them with the fact that nuclear power is proving to be undeliverable in anything like the scale, time and cost that has been originally envisaged in UK Government plans, and what do you get? Wishful thinking about 'small modular reactors' or 'smrs'! You can see this in the article in the Times by Lady Judge at :
http://www.thetimes.co.uk/edition/business/when-it-comes-to-nuclears-future-its-time-to-think-small-ntnqhvnrr

She says that:
'The plan to focus on building large reactors was originally conceived before Fukushima, while I was chairwoman of the UK Atomic Energy Authority, and when fossil fuel prices were expected to keep going up. Large nuclear plants, however, are expensive and take a long time to build. In the interim, one answer is small modular nuclear reactors. Being small is useful because they can be built in one place and transported to another, such as the site of one of the coal plants that we are in the process of shutting down, or even an industrial park. Modular, in this context, means that more plants can be added easily on an existing site. The flexibility and lower cost of small reactors is a way of getting greater private sector involvement, without the more complex financing arrangements needed for a larger plant'

The impression you get from this is that the idea of large nuclear reactors is some sort of fairly recent deviation, and that somehow there was some golden era when (presumably) smrs were abandoned through some mistake. The advantages of smrs are stated as if there is evidence for this.
There is no evidence at all for this, and indeed the notion that smrs would ever be cheaper than large reactors flies in the face of engineering logic.

Nuclear reactors in the UK (and in the rest of the world) have been steadily scaled up from around 200 MWe in size to begin with, up to around 500 MWe in the 1960s, and then up to over 1000 MWe in the 1980s and 1990s. Contrary to the impression given in Lady Judge's article, this was not a recent decision or trend. And there are sound engineering reasons for this, including one very simple one: for complex machines with moving parts and the need to ensure (safe) functioning of each unit each unit needs much the same input for design as a much larger unit.

By way of comparison, if you want to build a gas fired power station to generate, say, 500MWe of power, people don't lash together dozens of small gas turbines - that would be financial madness. You have smaller gas turbines when the circumstances demand it, you do not do it out of choice because they generate much cheaper power at much bigger scales. To minimise costs developers will prefer to build one large unit, and they can take several years to build, although of course there is much more certainty about the costs and timescale of building gas fired power stations compared to nuclear power plant. Given that nuclear reactor sets will need much more safety care compared to gas fired power plant, there is no way in this universe that the principles applied to gas turbines are suddenly going to be reversed in the case of nuclear reactors - indeed the reverse is likely to be the case - ie there is even more pressure to upscale nuclear reactors compared to gas-fired power plant.

Sometimes we hear talk about the nuclear powered submarines built by Rolls Royce. But these generate no more than a few MWe of power and whilst we don't know how much they cost exactly, the submarines cost billions of pounds each. Rolls Royce may well be keen to get down to earning money through doing research in smrs, but will they be able to contribute to a project that is cheaper than Hinkley C? I think not.

There is of course no comparison to be made with solar pv cells. They are very small, passive items, with no unit specific design costs. They can be assembled along massive production lines allowing big economies of scale and where you can also get very big supply chain economies of scale - on the basis of just 250-300 watts each. You can, and solar pv companies do, produce hundreds of thousands of units a year. This is simply on a different dimension to nuclear reactors.

The moral of this story maybe that it doesn't matter how clever people are, they can still have unlikely beliefs. The fact that so many scientists appear to subscribe to the nonsense about smrs says something about how being clever doesn't protect you from believing in rubbish, not that smrs are somehow a cost-effective prospect. Never in the history of humankind, (so far as I am aware) have so many clever people subscribed to such an inherently ludicrous concept before!

Saturday, 26 March 2016

How Brexit could make UKIP the largest party in the UK

As the the prospects for the 'Leave' campaign winning on June 23rd rise comes the realisation that this result can only but strengthen UKIP perhaps making them, for a time at least, the largest party in the opinion polls. Parallel, to this, the attitude of some on the left in still wanting to leave, or being uninterested in the outcome, is likely to be its biggest strategic mistake since it supported the 'winter of discontent' strikes in 1979 that helped Mrs Thatcher gain power.

This ostensibly unlikely outcome seems much more likely if you consider one highly plausible scenario.

Directly after a vote to 'leave', there will then be a debate on what future relationship the UK should seek to negotiate with the EU,  outside of the EU. Essentially there are two options - do we stay within the Single Market (often also called the internal market) and be like Norway and Switzerland, or do we, as Boris Johnson appeared initially to suggest, be like Canada and merely seek a free trade deal.

These two different options have, unknown to perhaps the vast bulk of voters, much bigger implications for the life and future politics of British people than whether we actually stay in the EU or leave in a formal sense. Remaining in the single market is much closer to the status quo than leaving it.

If we 'remain' in the Single Market we are, as has been widely suggested, still going to be bound by a high proportion of the EU legislation as at present, and also we are quite likely to have to pay much the same net amount to the EU as we do now. The difference will be that we will have no direct say over the laws that bind us within the EU's democratic framework.

What perhaps is woefully misunderstood, and will lead to political problems later, the UK would have to accept the same labour market rules as we do now - our control over immigration from other parts of the EU would remain as it is at the moment. These are the conditions that face Norway and Switzerland, and a lot of the Swiss are wishfully thinking otherwise to their displeasure.

Any hopes that this might be loosened by a surge of euroscepticism in other EU countries is likely to be dampened by the fact that the Eastern European and southern European countries are likely to oppose this. They will identify it as Treaty change, thus effectively thwarting any prospects of the free movement principle being abandoned or seriously altered for the forseeable future. Such a Treaty change will not be approved this side of some political nightmare that we really should not wish for. It's not so much (as bad as it would be) that the break-up of the EU would be the nightmare, but rather it is the sort of hellish circumstances that could trigger this event.

So after the leave vote the UK Government (led by some Tory or other) would have to get Parliamentary approval for a 'leaving' package to be agreed with the EU. Inevitably, whatever happens, the Government will be bitterly attacked by UKIP (and Tory fellow travellers) for negotiating a bad deal. What seems to be likely is that there will be a majority in this UK Parliament for a deal which involves staying in the Single Market (internal market).  Labour, a small number of MPs apart, would support that, the SNP would certainly support that, and so would a substantial proportion of Conservatives. It would indeed be interesting if Boris Johnson or whoever else became leader tried to negotiate leaving the single market - a great split would appear within the Conservatives that may even produce an early general election.

But so long as the British Government negotiated a package involving staying in the internal market then UKIP would become an emboldened, much strengthened, focus of opposition to remaining in the Single Market. It would campaign vigorously that the so-called elite will have 'betrayed' Britons, who would discover that under the Single Market so little would change. They would probably  gain MPs at the next General Election, quite probably at by-elections before then.

For left wingers wanting to leave it would be turkeys voting for Xmas. Back in the 1970s the hard left fought hard to smash the social contract, an agreement between the then Labour Government and trade unions over wage levels. The tactic was successful, but only gave a powerful push to a strategic shift to the right in British politics. They helped to discredit the centre left thinking that they (the hard left) were the alternative. They were in cloud cuckoo land of course, because the hard right was the electorally favoured alternative to the centre-left.

And much the same today as George Galloway etc urges a vote to Leave. I am saddened by this disavowal of the politics of internationalism in a world that desperately needs more international cooperation, not less of it. The only bright spot in this campaign for me has been the approach of Caroline Lucas, to whose words people should listen carefully on this subject. See for example http://www.independent.co.uk/news/uk/politics/eu-referendum-celebrate-free-movement-in-europe-says-caroline-lucas-a6908021.html and also http://europe.newsweek.com/caroline-lucas-brexit-european-referendum-425066

Of course the large majority of the left don't want to leave the EU. But unfortunately many of them are not very strong-willed on the subject, and Labour has a leader who certainly gives the appearance of failing to understand that he is making a terrible strategic blunder by not giving the highest priority to fighting to stay in. Some on the left are beginning to realise that opting to leave might not be such a good idea after all. But just thinking that something is not such a good idea is not good enough. We need some stronger passion than that. Alas the momentum seems to be with UKIP, the arch-climate sceptics themselves.