The premises of tomorrow’s Energy Bill are fundamentally wrong

The Energy Bill whose second reading is tomorrow has been presented by the Government and the press as a bitterly fought compromise between the Tories and LibDems in which the latter have secured an extra £7.6bn at today’s prices to support nuclear and renewables up to 2020, while the former have secured the dropping of the target to decarbonise the electricity supply by 2030.   That is the picture presented to the public.     It is however a profound misrepresentation both of the bill’s contents and of the nature of Britain’s current energy problems.   There are two key mechanisms in the bill which are not even mentioned, but which contain  the essence of what this bill is in reality all about.

The first is the awkwardly titled Contracts for Difference.   Under this the government would agree a ‘strike price’ with an electricity generator (EDF) , offering a guaranteed payment for each MWh of electricity.   If the market price is below this, the government commits to make up the difference.   This gives nuclear generators a built-in guarantee that they will get the necessary return on their investment – and nuclear plants don’t come cheap at £8bn a time – courtesy of the taxpayer.    Government answers (Hansard 8 March 2011) have stated that the cost of generating new electricity will be up to £98/MWh.   Even EDF Energy’s chief executive has estimated the strik price will be £140/MWh, which implies public subsidy costs of over £4bn.   What DECC is keeping very quiet about is that nuclear costs are on an ever-rising spiral, while renewable costs are set to fall dramatically – offshore wind to under £100/MWh by 2020, domestic solar tariffs to £77/MWh by 2015, while large-scale solar will reach grid parity prices within the coming year.   The whole bill therefore is designed to subsidise at public expense (contrary to constant government promises) an uncompetitive nuclear.

Then there is the ‘capacity mechanism’.   Whilst Contracts for Difference bail out nuclear, this mechanism bails out the old fossil fuels.   As more renewables come on to the system, they drive down the profitabiolity of fossil fuel generation since wind, waves and sun are free, unlike gas.   The obvious policy therefore is to give renewables priority in meeting grid requirements, leaving the more expensive and polluting fossil fuels to fill in the gaps.   That is exactly what is done in Germany which has reduced the price of electricity at peak demand by 25-40%.   If that were done in the UK, it is estimated it would generate 7,700 jobs and remove 9 out of 10 families from fuel poverty.   But the ‘capacity markets’ proposed in the bill will perversely reward the bulk of market incentives to fossil fuels.

There is a further absurdity in this bill.   DECC’s own Demand Reduction Project destroys the case for any new nuclear power stations at all.   It says “We have identified approx. 155 TWh of demand reduction potential, which is actually substantially more than the electricity which the 8 new nuclear power stations are expected to generate (about 102 TWh per year).   So is it not far, far better to save 155 TWh of electricity rather than generate much less at colossally greater expense and hugely more damage to the environment? 


3 thoughts on “The premises of tomorrow’s Energy Bill are fundamentally wrong

  1. since wind, waves and sun are free,

    Sun don`t shine much in the UK,

    Wind makes up 1-2 percent of UK energy,

    Waves zero.

    You talk utter rubbish.

  2. Thank you for all these financial reasons not to subsidise EDF to build two EPR reactors at Hinkley Point.
    There is also the overriding fact that if we subsidise two more reactors at Hinkley, discharges of poisonous radioactive gases will double the exposure of Somerset coastal communities which have already had 45 years of premature cancer deaths. We are currently experiencing additional exposure from the uncontrolled decommissioning discharges from the two Magnox reactors. The regulators do not enforce safety requirements. Marine samples show a tenfold increase in radiation since 2006; perinatal mortality is higher than ever before; premature deaths from central nervous system illnesses are now rocketing. Where are the prosecutions for corporate manslaughter???

  3. Dear Sir

    Your post is very biased and in a subject area where misinformation is rife this does not help very much.
    You statement that the nuclear power stations will be built courtesy of the tax payer is misleading.
    This implies that all other power stations are not, in fact all power stations are built with private money. Currently on a MW basis offshore wind gets more tax payer subsidies than any other form of generation, receiving 1.9 ROCs per MW at a cost of around £40 per ROC.
    Wave power will get 5 ROC or around £200 per MW produced, on top of the sale of electricity produced.
    Your post also implies that this country could run on renewable power sources, looking at graphs of electricity produced by wind shows how ridiculous such a belief is.
    Today wind power fell from 4,000 MW to less than a 1,000, What would you suggest makes up the shortfall? Imported gas or imported coal?
    Nuclear is in fact the cheapest option of a secure energy source. A war in the gulf could cut supplies of gas not just to us but many other countries.
    Your government left us in this terrible situation where foreign turmoil could leave us unable to keep warm and with sufficient electrical production.
    Just shows some people never learn.

  4. The problem with our so-called energy policy in this country is that so often it does not seem to be about what’s best for either the country or the environment but just a way for private companies to get very rich at our expense.

    We pay (non-tax paying) private equity companies millions in subsidy to build wind farms – and then in places like Scotland, we pay the power companies to switch them off because the grid can’t take the electricity they generate. That’s a massive win win for private companies while the rest of us end up paying twice for absolutely nothing.

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