Often a big news event is the time people try to bury bad news. Here’s a few you might have missed. However another story that some may have missed is that the DECC has raised its estimate for the cost of Hinkley C to be just short of £37 billion. This is more than double their previous estimate. Hinkley C is in fact now on course to become the most expensive object on earth.
It means that the installed kW cost of Hinkley C is now likely to exceed £11,000 per kW against £1,250 for solar. Yes Hinkley is now 9 times more expensive than a similar installed capacity of solar (and yes the capacity factor of solar is lower, but its not going to be 9 times lower!). Hinkley is now almost certainly going to be more expensive than the Severn Barrage, which was estimated would have cost between £10 – 34 billion….yet it would have provided a peak power output of 8-10 GW’s of electricity (i.e. Hinkley is between 8 to 2.5 times more expensive per installed kW). And the official reason for cancelling the Severn barrage was cost. And it is also more expensive than the three Gorges dam (which supplies about 20 GW’s!) and was generally seen as an example of the sort of wasteful government spending we often associate with communist regimes (yes the Chinese communist party is more careful with its money than the UK under the Tories!).
In terms of LCOE, its not clear what those costs will now be. Suffice to say, a lot more than the agreed strike price of £92.5/MWh (in 2011 money). Recall EDF were originally looking for closer to £140/MWh and the ICEPT report (Harris et al 2012) estimated a figure closer to £164-174/MWh. Certainly any power from Hinkley is going to be much more expensive than any the other alternatives. Assuming a 2025 start up the estimated costs are £110/MWh for solar, onshore wind at £88/MWh and offshore wind at £100/MWh.
So clearly the government subsidy (beyond the strike price, which already represents a far more generous subsidy than offered to renewables) is going to have to go up (yes we are now paying a subsidy on top of a subsidy….which now also needs a further subsidy!). And the punch line is they are probably going to pinch the money for that from other renewable energy projects. At this rate they’ll probably be no money left for renewables. What’s the bet they start taxing wind farms (rather than fossil fuel plants) to fund Hinkley? Already the expectation is that the UK will now miss its renewable energy targets as a result of Brexit. I wonder what Monbiot, who originally backed Hinkley C, has to say for himself now?
Furthermore, as this latest cost estimate was released just after the Brexit vote, its not clear if they’ve fully accounted for the costs of Brexit in this latest estimate. The falling value of the pound is making everything more expensive, an important factor given how much of the hardware for Hinkley will have to be bought in from overseas. One could argue for delaying the project and re-issuing tenders (which could see some British firms get in on more of the action) but that would delay an already overly delaying project even more.
Such a large project, the like of which the UK has not seen since the channel tunnel (which was also largely a French led project), will mean bringing in expertise from overseas. So what do they plan on doing if the UK brings in all sorts of immigration restrictions and quotas? I’m guessing EDF could probably smuggle them over in the back of lorries (I’m doubtful any customs officer is going to feel the need to search a truck labelled “nuclear” to verify its contents). But jokes aside, this will delay the project and push up costs. So all in all, don’t be surprised if the cost of Hinkley rises again…..and again….and again! And as I mentioned in a prior post its only after the plant is build that the real fun and games will likely start (well if you define fun as sitting in the dark surrounded by candles eating cold canned food).
And speaking of power cuts there are warnings (yet again) that the UK could be vulnerable to power cuts this winter. Now yes, this is sort of an annual prediction. But it is based on the fact that the UK has a creeky, ageing and dilapidated energy infrastructure with a wafer thin margin of spare capacity. The UK is increasingly dependant on supplies of electricity from abroad, particular during winter. And most of that power comes the EU, whom the country gave a two fingered salute to the other month. And buying power off them just got a lot more expensive. And it becomes less likely that the 20 billion/year the UK needs to spend on new energy infrastructure will materialise. Already Siemens has pulled back from a flagship wind power manufacturing facility in the UK.
So Hinkley C is finished then, surely now it will be cancelled as a result of Brexit? .………………………….sorry I laughed so hard there I had to pick myself up off the floor. No, Hinkley C is not going to be cancelled. It is the beast that will not die. There’s too much political capital, too many vested interests riding on it. If EDF told Osborne that to finish Hinkley C they needed to sacrifice all of Britain’s first born babies to Beelzebub, without batting an eyelid, he’d pick up the phone and start making the arrangements.
Indeed the chances of Hinkley C being cancelled become less likely now due to Brexit. If such a large project, enjoying such an unprecedented level of political support, a project we were assured would go ahead, leave or remain, was to now be cancelled that would send out a very worrying message. Basically no other large infrastructure project could then be guaranteed not HS2, Heathrow expansion, that £20 billion/year in energy projects I mentioned earlier, all would be put under threat. It would be a Lehman Brothers moment for the post-Brexit UK economy, likely resulting in another round of market panic and capital flight.
So my guess is that they will proceed with this project regardless, until someone is elected to a position to stop it. And btw, the labour party is in favour of Hinkley, as are both the main parties in France. So while Hinkley is Brexit proof, it is for all of the wrong reasons. About the only thing I can suggest is putting the word “Hinkley” into the dictionary as being a term to describe an unstoppable train wreck of a project that proves to be so poisonous and soul destroying that it kills off the entire industry it was meant to save.