The GWPF points out an inconvenient truth – that as more and more subsidised and prioritised renewables are injected into the UK’s electricity grid system, the tougher it must get for competing methods of power generation to turn a profit worth the cost and effort involved.
The UK government has, after some delays, given approval to Hinkley C nuclear power station. However, and in spite of subsidies intended to offset risks arising from renewables policy, it is still not clear that the project can actually make money. It remains to be seen whether EDF has the courage to proceed.
The British government has now given fair warning both to EDF and the Chinese government that it is only lukewarm about this project, and is unlikely to consider augmenting the fixed price, of £92.50/MWh, which will almost certainly be a large subsidy since wholesale prices are expected to be much lower than this for the majority of the project’s lifetime.
If EDF were gambling on being able to obtain a little more support from the British consumer at a later date, from capacity payments perhaps, they should now realise that this is unlikely to happen. Is the deal as it stands sufficient to allow EDF and its partners to invest? Perhaps not.
British Final Electricity Consumption (FEC) has been falling since approximately 2005, when it peaked at 349 TWh per year, and it has now returned to levels not seen since the early 1990s, and continues to fall.
The question therefore, is whether EDF can be confident that the UK’s consumption of electricity will recover sufficiently to give Hinkley a market large enough to turn the strike price into the required cash flow.
Scandalous though the subsidy for Hinkley genuinely is, the truth is that it may not be remotely sufficient to make this power station viable in the policy-distorted market that is already a reality and is set to get worse.
If they thought electric cars would boost demand, they won’t want to see this…
ELECTRIC CAR SALES DROP AFTER UK GOVERNMENT CUTS SUBSIDIES | The Global Warming Policy Forum (GWPF)