The UK’s ambitious program to build more nuclear generating stations will begin with the massive Hinkley Point units. Yet, in a recent paper, Prof. Steve Thomas, a well-known energy economist in the UK, asked a question that had been on our minds, namely is it “Time to cancel Hinckley?” The timing of the paper and ensuing editorials coincided with record low prices for off-shore wind, £57.50 per MWh to be exact. The Guardian newspaper editorialized that this figure should “blow away the UK’s nuclear plans.”
First, let’s put the Hinkley Point C nuclear power station in context. The UK government first announced its nuclear power expansion program in 2006. The plan was to build five new nuclear generating stations, producing 16 GWs, to be on-line by 2030. The units planned are at Sizewell, Wylfa, Moorside, Oldbury and Hinkley.
At the time the government cited two concerns with respect to the adequacy of national electric power generation. First, that “security of supply (was) jeopardized” and second, that by 2025 there would be a need to replace aging coal-fired and nuclear power generating plants. The ensuing decade was not kind to the assumptions of UK energy planners.
The price of both renewables and natural gas dropped significantly. License extensions could keep most existing nuclear power stations running. And demand for power has fallen below expectations due to moderating economic trends and the dampening impact of conservation measures. Related: 54 Things You Didn’t Know About Natural Gas
From a UK power generation perspective, the big winners in recent years have been natural gas and renewables. Coal burn has dropped drastically and nuclear has remained stable.
On a price competition basis, the future looks like a race to the bottom between natural gas and the ever-declining costs of wind and solar technology. On a cost basis, the Hinkley guarantee of £92.50 per MWh looks rather steep compared with the £57.50 recent price for off-shore wind.
We can already hear the harrumphing from the pro nuclear contingent. But this to us is the problem of making commercial nuclear technology the Zelig of the energy world. In a world eager for low carbon, base load capacity, nuclear has attempted to re-brand itself as the low carbon option. But in countries facing stagnant or declining electrical demand, the need for new, non-intermittent base load power generating resources is diminishing as well.
And the other low carbon generating resources, renewables, intermittent though they may be, are now much cheaper than new nuclear construction (£57.50 vs £92.50).
At another level, electricity is a commodity. A commodity that we can’t store, but still. And in a commodity business, where the product is wholly undifferentiated, price is the only consideration. Taken in this context, new nuclear is a non-starter.
By Leonard Hyman and Bill Tilles for Oilprice.com
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