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Cool wind or hot air?

Image: London Permaculture

The revolution is here at last!  That was the message from John Sauven, Director of Greenpeace, in the Guardian last week.  Following a meeting with the CEO of Dong (Danish oil and natural gas) Energy, Sauven gushed:

“This isn’t just a hymn to the glory of an oil and gas company, it’s also a paean to the UK’s “greenest government ever”. Thanks to its support, the price of offshore wind energy has dropped by half in less than two years. By the 2020s, it will be as cheap or cheaper than any other form of power generation. It’s just become much cheaper than nuclear, even taking into account the additional costs associated with the wind’s intermittency. And in any case, this is less of an issue at sea where the winds are more constant.”

That Dong Energy might have an agenda of its own seems not to have been considered by Sauven, who was merely reacting in the same manner as almost every other green virtue signaller in response to the spurious claim that wind is now cheaper than nuclear.  Roger Harrabin at the BBC, for example, reported that:

“Energy from offshore wind in the UK will be cheaper than electricity from new nuclear power for the first time…

“Two firms said they were willing to build offshore wind farms for a guaranteed price of £57.50 per megawatt hour for 2022-23.  This compares with the new Hinkley Point C nuclear plant securing subsidies of £92.50 per megawatt hour.”

This is where some of the sleight of hand can be witnessed.  The Hinkley Point C development is such a bad deal that only an idiot would have signed up to it.  Even the climate change denying former Energy Minister Lord Lawson referred to it as a ‘lousy deal.’  Despite EDF’s claims that the Hinkley Point reactor is some kind of leading-edge technology, the reality is that it is an expensive attempt to refine a primitive technology that has no place in our future energy mix.  In technology terms it is like the 125mph steam engines that were introduced on British railways just at the point that the rest of the world was switching to electric trains.  Pressurised water reactors are unsafe (because of the high pressures involved) inefficient (burning less than 5 percent of the uranium fuel) and polluting (the remaining 95 percent of the radioactive spent fuel has to be safely stored for thousands of years).

Real leading-edge nuclear power plants are another matter.  On the same day that wind enthusiasts announced that they had beaten nuclear on price, a consortium led by British engineering company Rolls Royce announced that they would be building a new generation of Small Modular Reactors that are expected to generate electricity at for a similar (£60 per Mw/h) price to the new wind contracts.  The UK government has also expressed interest in proof of concept projects to test liquid salt and liquid metal reactors that have the potential to re-use radioactive waste as fuel.  The additional efficiency and smaller volumes of waste has the potential to make these reactors even cheaper (assuming they can be scaled up from the laboratory).

Whatever your views on nuclear power, basing your claims solely on the inevitable high costs and long delays at EDF’s Hinkley Point C development (and its sister plants in Finland and Normandy) is fundamentally dishonest.  Whether Rolls Royce can deliver nuclear power for £60 per Mw/h is another question.  But less ambitious nuclear power plants can be built at a lower price than Hinkley Point C.  And there again, there is no guarantee that anyone can deliver wind power at £60 per Mw/h either.

This is the second sleight of hand in the story.  Dong Energy is less concerned with cost efficiency and more interested in market share.  This is the Amazon business model in which profits will arrive one day in the future, but for now, just make sure that you have an industry monopoly.  Dong is running high debts to finance its transition from fossil fuels to becoming (it hopes) the world’s largest offshore wind corporation.  There is nothing wrong with this in and of itself, but as Jonathan Ford in the Financial Times points out, there is a lot more to the story than meets the eye:

“When prices tumble for a product or service, there is generally an observable reason. It might be a cunning technological fix that dramatically boosts productivity, for instance, or the sudden slide in a key input cost. But nothing so obvious can convincingly explain why it is suddenly much cheaper to produce electricity from offshore wind turbines…

“Most studies do not yet point to projects breaking even at £57.50. According to a recent review by the UK’s Offshore Wind Programme Board, so-called levelised costs for new wind projects at the point of commitment (ie not yet built, but button decisively pressed) declined by 7 per cent annually from £142/MWh in 2010-11 to just £97 in 2015-16, driven by factors such as the use of larger turbines and better siting. But while these are impressive figures even they cannot explain a further £40 drop in such a short space of time.”

The media narrative of wind energy cheaper than nuclear is simply wrong.  Dong Energy is gambling that as fossil fuel subsidies collapse and electricity capacity is curtailed, there are long term profits to be made from anyone brave enough to create a near monopoly on wind power today.  As Ford points out:

“Just three giant wind farms have taken all the capacity in the current auction, which at 3.2GW is equivalent to 60 per cent of Britain’s current offshore fleet. That means the competition is in effect shut out.”

As Ford reminds us, the contracts themselves are not binding.  If Dong cannot supply wind energy for the promised £57.50, it can pay a relatively small penalty and walk away.  If, however, it can effectively shut out the competition, the question this has to raise is what happens when a country like the UK becomes dependent upon a monopoly, duopoly or global cartel of wind energy suppliers (similar to the big oil companies today) for its energy?  Only a fool would believe that an offshore wind monopoly is going to provide clean ‘energy too cheap to meter’.

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