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Chris Huhe commits to keep the lights on
When the current government took office in May 2010, Liberal Member and Energy Secretary Chris Huhne, (right) a British arch druid in the anti-nuclear movement, was widely quoted as calling nuclear energy as a "tried, tested, and failed technology." After less than a year of grappling with the crushing realities of having to replace the nation's aged fleet of nuclear and coal-fired power stations, Huhne has published a new market strategy that is a 180 degree reversal of this position.
The new strategy abandons Huhne's previous delusional obsession with renewable energy technologies. It adopts a cross-cutting energy strategy that focuses on the price of carbon emissions. The reason for the shift is that it became crystal clear to the government, with input from the major business association of heavy industry in the U.K., that wind and solar power would not, by themselves, meet the nation's future demand for electricity.
The result of limiting investment to "renewable" would have been brown outs or total loss of service. The new strategy reinstates a sense of urgency for build new, carbon emission free base load power generation capacity.
Huhne called it "a once in a generation chance to rebuild our electricity market."
The support for a rising price on carbon emissions is an action forcing mechanism that will shift investment from coal and natural gas to nuclear energy.
Victor de Rivaz, CEO of EDF in the U.K., which will build four of the nation's new reactors, said the new carbon price mechanism and electricity market reform are "two distinct steps" which will "encourage investment by putting values on decarbonization and security of supply
Government consultations will lead to policy in Spring 2011
The new coalition government has published proposed reforms to put a priority on new base load electricity generation and attracting investment in nuclear energy to build it. The government is seeking "fundamental reforms" to the electricity market to meet two long-term objectives
- meet climate goals, and
- develop a secure, reliable, and affordable supply of electricity.
A final white paper will be published in Spring 2011.
Unlocking investment for nuclear energy
The government said in its sweeping statement that market reform for electricity would lead to "unlocking" investment in low carbon energy sources including nuclear. Huhe said that investment of £110 billion ($171 billion) of investment is needed for new power stations and upgrades to smart grids over the next ten years.
“The UK was first to put binding carbon reduction targets into law. Now the coalition is taking the historic step of introducing, permanently, a level playing field for low carbon technologies in the UK’s electricity market,” Huhne said.
Under the proposed reforms, the competitive market will remain intact, but four new policies are proposed to change the returns generators can expect for the power plants they build and the electricity they generate:
- Greater long term certainty around the additional cost of running polluting plants through a carbon price floor.
- Long term contracts for low carbon generation that will make clean energy investment more attractive still.
- Additional payments to encourage the construction of reserve plants or demand reduction measures (energy efficiency)
- A back-stop to limit how much carbon the most dirty power stations – coal – can emit.
Eight reactors, 19 GWe of new nuclear power stations
In October 2010 the UK government confirmed eight potential sites for new nuclear power plants. The reactors are targeting production of 19 GWe of electricity by 2025. It could be a third higher as the government has stated the nation needs 60 GWe of new electricity production capacity by 2025.
The first two new units, for 3.3 GWe, could be online by 2018 and are estimated to cost £9 billion ($13.9 billion). These figures include the reactors and major upgrades to regional transmission and distribution infrastructure.
Carbon price and trades are key elements
Huhne said the key element of the new energy policy is a "low carbon support" plan which is a "bid to reassure investors about future returns ."
The primary mechanism is that the government plans to change the method the cost of carbon is assigned to emissions.
A key element is a minimum price on CO2 emissions. According to details of the plan, the price of CO2 emissions could rise from its current level of £20 ($31) a tonne to £70 ($109) a tonne by 2030. By 2018 significant increases in the price of carbon would produce a parallel shift to low carbon energy sources.
An "emissions performance standard" would place absolute limits on how much CO2 could be released by fossil plants. Unfortunately, it is a pointer to efforts to develop carbon capture technology, which remains a technology goal in the same class as perpetual motion machines.
A parallel effort is to stabilize market rates paid for electricity. What are called "long-term feed-in tarrifs" would provide guaranteed rates of return for new low carbon power plants including nuclear reactors. Under a mechanism called "contract for a difference," the government would subsidize revenues if wholesale prices fell below set strike levels. There would also be a recovery mechanism if prices rose too high. A subsidy for payments to solar and wind energy sites is also part of the plan.
Forgemasters loan may be back on track
The U.K,. government is revisiting its disastrous decision to cancel an £80 million loan to Sheffield Forgemasters to build a 15,000 tonne press to produce reactor pressure vessels. A committee of Members of Parliament said in a new report published Nov 30 the move made last June to cut the loan was made in haste.
The committee argues that the loan is needed to insure the U.K. has a press capable of producing the largest forgings for reactor pressure vessels. Otherwise, the U.K. will have to order them from Japan Steel Works with the significant delays that would occur as a result.
"The establishment of such a large press would enable the U.K. to take a significant lead in an important industry."
The committee said the government should invite Forgemasters to submit a new loan application for the press which is now estimated to cost £140 million ($207 million). The remainder of the funding would come from an equity stake in the firm by Westinghouse and by additional capital raised by the firm itself.
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