Saturday, January 4, 2014

Does Europe really want to block UK wind farm subsidies?

Here is my response to James Kirkup and Bruno Waterfield
writing in the UK Telegraph on 2 January 2014 at

No taxpayer money is involved (since 2004 or so) in the policies in Germany and elsewhere granting renewable energy priority access to the grid (and the market) and rewarding the successful operation of renewable power plants through "feed-in tariffs".  The funds come from electricity users, not taxes.  That is a safe option also for the UK.  So far, the European Commission has not objected to this policy instrument in principle.  As on-shore wind, solar, and biomass-to-power become competitive at the wholesale price point, such support is being phased down and will eventually stop.  In fact, just over half of all renewable power in Germany already survives "on the market".

The UK debate is marred by the "strike price" support to new nuclear power plants being planned.  It is a similar sort of mechanism, but granted via a governmental body (an "emanation of the state") to the very mature but still not competitive nuclear industry.  Even if the funds can be raised from electricity bills, UK taxpayers will still guarantee the very large payments to nuclear power plant operators for decades to come.  The EU state-aid assessment will most likely address that, and may find the UK at fault of EU state-aid rules.

There are additional complications with new nuclear, of course.  The "Generic Design Assessment" (GDA) for Hinkley Point C flagged 724(!) concerns that have yet to be addressed and for the most part are not yet reflected in the "strike price".  The regulatory homework in the UK being thus flawed, the environmental impact assessment (EIA) required under EU law may not stand up to scrutiny, and may have to be redone (once the open concerns from the GDA have been settled).  This will most likely add to the requirements to make new nuclear plants less unsafe, and raise the costs.  Then there are the "Lessons from Fukushima", which have not yet been taken into account in the design of the new nuclear plants planned in the UK, even if the Office of Nuclear Regulation says otherwise.  (Just look at the timing of the regulatory process.)

The GDA concerns, the EU EIA findings, and the Fukushima lessons will all add to the cost of nuclear plants, which in spite of subsidies and privileges (such as liability caps and waivers) are not competitive as they are today.  Meanwhile, the cost of renewable energies and their integration into a smart grid will fall further.

Thanks are due to the European Commission for focusing on the virtuous dynamics in renewable energy and the possibility of ending support as well as the dismal economics of nuclear power and the flawed regulatory process for licensing new nuclear plants in the UK.

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