Renew your energy: November 2010 Archives
The UK government has now dismissed three proposed sites for new nuclear power plants: first it dropped Dungeness in Kent and then Braystones and Kirksanton in the Lake District, so that now leaves eight locations, all of them at already established nuclear sites. The revised National Policy Statements, Regulatory Justification and Generic Design sign-offs are all done, more or less, or will be done soon, with, following consultation exercises, the Secretary of State deciding that 'it would not be expedient to the making of his decisions to hold a public inquiry or other hearing'.
What's not sorted is the money. It may be hard to reform the market and the EU-Emission Trading System enough to make nuclear viable without formal subsidy. Energy and climate change secretary Chris Huhne's shifting definition of subsidies has raised some eyebrows. While he still says 'there will be no levy, direct payment or market support for electricity supplied or capacity provided by a private sector new nuclear operator' he now adds 'unless similar support is also made available more widely to other types of generation'.
So Huhne seems to end up diluting his initial hard anti-subsidy line: 'Arguably, few economic activities can be absolutely free of subsidy in some respect, given the wide-ranging scope of state activity and the need to abide by international treaty obligations. Our "no subsidy" policy will therefore need to be applied having regard to proportionality and materiality.'
Letting developers duck the full potentially huge insurance liability is no doubt one such grey area. The government says that it 'has not ruled out the maintenance of a limit on operator liability set at an appropriate level provided that it is justifiable in the public interest, is the right way of ensuring that risk is appropriately managed'. Energy minister Charles Hendry has explained that DECC were 'not ruling out action by the government to take on financial risks or liabilities for which they are appropriately compensated or for which there are corresponding benefits'.
Hendry has also indicated that, in addition to the EU-ETS floor price, other forms of support might also be offered – a capacity payment for low-carbon electricity generation and an obligation on suppliers to provide a certain proportion of low-carbon power (i.e. something like the Renewables Obligation extended to include nuclear).
One way or another the government does seem desperate to provide support for nuclear companies . But the financial risks are large – and apparently growing. Stephen Thomas, professor of energy policy at the University of Greenwich, says that when the 'nuclear renaissance' was first talked about six years ago, the capital costs quoted were about $1,000 per kilowatt. Now they have risen to about $6,000 per kilowatt. The problems with the European Pressurised-water reactor – a candidate for the UK programme – have further weakened the case for nuclear. EDF-Avera's EPR construction projects in Finland and France are now years behind schedule and heavily over budget. And the loan guarantees for new plant construction on offer in the US were evidently not enough for Constellations EPR project – expected to cost $10 bn. It has now been abandoned, leaving EDF in an even more difficult financial situation: this was meant to be one of the follow-ups to the Finnish and French projects. In a new report on the EPR, Prof. Thomas says: 'From a business point of view, the right course for EDF and Areva seems clear. They must cut their losses and abandon the EPR now.'
Meanwhile, the other major contender for the UK programme, the Westinghouse AP1000, is also in trouble. Westinghouse has been told by the US Nuclear Regulatory Commission (NRC) to resubmit its assessment of aircraft impact on the AP1000 reactor. The NRC said that documents put to it did not include 'realistic' analysis.
The UK Health and Safety Executive the Environment Agency has been engaged with a 'Generic Design Assessment' (GDA) of the AP1000 and EPR and issued a statement of design acceptability (SODA) for each design in August, though they said that there were still a 'number of potential issues still to be resolved' and put their conclusion out for consultation. They noted that GDA is 'solely to decide the acceptability of a design for permitting in the UK, and will not be used to express a preference for any particular design'. Following the consultation they hope to come to a view about the acceptability of the designs in June.
Meanwhile opposition continues at the proposed UK sites, led by local groups, like BANNG at Bradwell, who are in particular concerned about the plan to keep highly active spent fuel on site for many decades, and are perturbed that the overall Justification Process has been completed before regulatory approval of the designs, and before we have any idea where the waste will ultimately go.
Opposition is even stronger elsewhere, notably in Germany, where in September yet another 100,000-strong protest in Berlin indicated the scale of resistance to the plan to delay the agreed nuclear phase out, and extend the operating lives of Germany's existing nuclear plants. More major demonstrations are likely, right up to the end of year deadline for the plan to become law, and beyond, with the government coalition's majority clearly being threatened. No-one in the government dares to even consider new replacement plants, much less a nuclear expansion.
A study by Engineering the Future (EtF), an alliance which includes the Institution of Civil Engineers (ICE) and the Royal Academy of Engineering (RAEng), brings together lessons learnt from past and current nuclear projects that, if adopted, should it says help to ensure the success of the future UK nuclear new build programme. The report, Nuclear Lessons Learnt, includes a look at what went wrong at Olkiluoto 3 (Finland) and Flamanville (France).
The government's spending review brought fears that the government would backtrack or water down the existing Feed-In Tariff (FiT) for electricity and also the proposed Renewable Heat Incentive (RHI). A coalition of 22 groups, including the Renewable Energy Association, the National Farmers Union and the Federation of Master Builders, warned energy secretary Chris Huhne that cutting schemes that subsidise household generation of renewable energy would jeopardize job creation, energy security and greenhouse-gas targets. An open letter to Vince Cable and Danny Alexander from 64 companies, including E.ON & British Gas, adopted a similar stance: 'premature adjustments to the tariff would have a profoundly damaging effect on long term investor confidence in the clean tech and renewable energy sectors, and may cause investors to flee altogether'.
Energy & climate change's minister, Charles Hendry, had said: 'We inherited a situation where we could see who was going to benefit commercially but we couldn't really see how it was going to be paid for and that it would create pretty substantial bills.'
Neither the existing FiT or the RHI cost the government anything directly, other than administrative effort – it's suppliers and then consumers who pay ultimately. But if the FiT leads to a take-up boom, these costs could grow faster than the prices falls due to the FiT, and overtake the built in price degression mechanism, as arguably happened in Germany and Spain. And the government may then wish to limit the cost to consumers. The electricity FiT levels are due for reassessment in 2012, but it was feared that this might be advanced prematurely.
One of the problems with the RHI is that, whereas it's relatively easy to identify who the suppliers are for grid electricity, and levy a FiT charge on them accordingly, heat is supplied by a range of companies in a range of forms – natural gas, propane, butane, oil, wood and other biomass and even direct heat. And the scale is much larger than just for electricity – heat is about 49% of UK energy end use. But it ought to be faced, and as the REA/NFU coalition argued: "Costs come down when the industry can plan and invest with confidence, and economies of scale are achieved- that is one of the simple aims of these policy mechanisms."
In the event, the campaigning seems to have paid off: the electricity FIT was left untouched for now, and the RHI will go ahead, although cut back to £860 m p.a. and with a two-month delayed start, until June 2011. The government said: 'This will drive a more-than-tenfold increase of renewable heat over the coming decade, shifting renewable heat from a fringe industry firmly into the mainstream.' However it added that it would 'not be taking forward the previous administration's plans of funding this scheme through an overly complex Renewable Heat levy'.
The government also noted that the existing Feed-In Tariffs will be refocused on the most cost-effective technologies, saving £40 m in 2014–15. 'The changes will be implemented at the first scheduled review of tariffs, unless higher than expected deployment requires an early review', presumably because of high cost PV solar.
There may be a case for changes, but it does seem sensible to leave the FiT system to bed in first to see how it goes. Friends of the Earth had commissioned Arup to review the current Feed-in Tariff. The report Small Scale Renewable Energy Study: FIT for the Future uses financial modelling of the performance of 20 generic renewable-energy schemes, and concluded that for some technologies, it could 'seriously damage investor confidence' to amend the tariff levels before the end of the previously announced review period in 2013.
Arup found that, while there were some perverse scale effects for wind and also PV project, due to the structure of the FiT price bands, in some cases, the FIT could work very well (e.g. a community co-operative that buys a 1.5 MW wind turbine could earn 15.9% return on investment annually for 20 years). This would mean the scheme would pay for itself in seven years. But micro-wind only had an Internal Rate of Return (IRR) of 7%. Micro hydro was in the range 10–13% IRR.
On the heat side, heat pumps had an IRR of 7%, unless used in off-gas grid contexts, when they were 12%. Domestic scale biomass boilers had very good returns: IRR 18%, but biomass fired micro-CHP was less attractive, with solid biomass micro- CHP coming in at under 5%. Individual domestic solar heating was also very poor, with an IRR of only 3%, although grouped schemes were better. The IRRs for AD biomass were even lower.
So coming up with a viable RHI system is obviously going to be tricky. That point was made strongly in a report The Renewable Heat Initiative: Risks and Remedies produced on behalf of Calor Gas Ltd by the Renewable Energy Foundation. It said that the government should scrap the proposed Renewable Heat Incentive (RHI) scheme and start again because it would be bad for the sector by encouraging technologies that 'are not quite ready'. RHI was 'an expensive leap into the dark', relying on a major deployment of technologies that are new to, and untested in, the UK context. REF also uses government data to estimate that the RHI could, in practice, consume around 2% of the annual income of the poorest households – funds that REF claims will go directly towards reducing bills of the richest households, who are able to put up the initial capital for installations and so benefit from the RHI subsidies.
Dr John Constable, REF research director, said: "It appears to be a severely regressive policy; I can't believe the previous government anticipated this impact as it is clearly an iniquitous policy. The only winners from this are those with initial capital to install the technologies in the first place." The same argument that has been used by some against the FiT.
Overall REF claimed that the cost of the RHI could potentially increase the average domestic gas bill by 14% p.a. by 2020. Constable commented: 'The simplest thing to do is to stop it. It is in the public interest to cross this one off and start again. Otherwise, significant changes will need to be made to avoid the risks we have identified.' In free market mode, he added: 'Left to its own devices, the market will learn. The RHI on the other hand would embed and shelter bad technologies and bad implementations,' pointing to the recent Energy Saving Trust's report on heat pumps as an example. That had found that about 87% of heat-pump systems tested in the UK didn't achieve a system efficiency (COP) of 3 ,which the Trust considers the level of a "well-performing" system. And 80% failed to meet 2.6. EST blamed the use of multiple contractors for fitting systems instead of a single contractor as used in Europe, wrongly sized systems, complicated controls and a lack of education for householders using them. Obviously there are some issues to be resolved before the RHI can be sorted but, although the government did say that it would scrap the RHI levy idea, it clearly did not take REF's advice and scrap the whole thing.
The FoE/Arup study: www.foe.co.uk/resource/reports/fit_for_future.pdf
As an interesting coda to the debate on the FiT and its possible amendment, energy minister Greg Barker seems to be worried about the recent boom it has created in solar farms – large ground-mounted PV arrays. He said that the government would not act retrospectivel, but 'large green field-based solar farms should not be allowed to distort the available funding for domestic solar technologies'. Roof-mounted PV is probably preferable aesthetically but what seems to be the issue here is a concern that the very limited FiT allocation will get used up rapidly by large commercial schemes.
It's been a long running saga – over the years there have been many reports and studies on the idea of building a tidal barrage across the Severn Estuary. Most have said it was technically possible, but economically and environmentally challenging – although no final conclusion emerged, just more studies. The most recent study looked not just at the large Cardiff to Weston barrage idea, but also at other options for exploiting the large tidal range in the estuary – smaller barrages and tidal lagoons. However this time a decision emerged – basically they were all too expensive. The government's 'Severn Tidal Power Feasibility Study: Conclusions and Summary Report' in October seems to have finished off tidal range projects in the UK, at least for the moment. Although it did say that the results for other locations around the UK might be different, it is hard to see how they could do better than the Severn – the best site by far in terms of tidal range. Given that most environmental groups strongly opposed large barrages, the government decision not to provide support did not lead to complaints from them about 'ignoring green options'.
The main conclusions were pretty clear. 'The Government has concluded that it does not see a strategic case to bring forward a tidal energy scheme in the Severn estuary at this time, but wishes to keep the option open for future consideration. The decision has been taken in the context of wider climate and energy goals, including consideration of the relative costs, benefits and impacts of a Severn tidal power scheme, as compared to other options for generating low carbon electricity. The Severn Tidal Power feasibility study showed that a tidal power scheme in the Estuary could cost in excess of £30bn, making it high cost and high risk in comparison to other ways of generating electricity.'
The report text is a little less abrupt. It says: 'The Cardiff-Weston barrage is the largest scheme considered by the study to be potentially feasible and has the lowest cost of energy of any of the schemes studied. As such it offers the best value for money, despite its high capital cost which the study estimated to be £34.3 bn including correction for optimism bias. However this option would also have the greatest impact on habitats and bird populations and the estuary ports.'
It went on: 'A lagoon across Bridgwater Bay (£17.7 bn estimated capital cost) is also considered potentially feasible, as is the smaller Shoots barrage (£7bn). The Bridgwater Bay lagoon could produce a substantial energy yield and has lower environmental impacts than barrage options. It also offers the larger net gains in terms of employment.' By contrast: 'The Beachley Barrage and Welsh Grounds Lagoon are no longer considered to be feasible. The estimated costs of these options have risen substantially on investigation over the course of the study' It added 'combinations of smaller schemes do not offer cost or energy yield advantages over a single larger scheme between Cardiff and Weston.'
It noted that, in addition, the study funded further work on three proposals using innovative and immature technologies (the Severn Embryonic Technologies study). It said: 'Of these, a tidal bar and a spectral marine energy converter showed promise for future deployment within the Severn estuary – with potentially lower costs and environmental impacts than either lagoons or barrages. However, these proposals are a long way from technical maturity and have much higher risks than the more conventional schemes the study has considered. Much more work would be required to develop them to the point where they could be properly assessed.'
The spectral marine energy converter (SMEC), which makes use of the venturi effect, tapping off tidal flows to drive a separate generator, certainly looks interesting for the Severn and also, in smaller versions, elsewhere.
DECC had previously indicated that if a scheme had been considered viable for the Severn, further consultation would have to continue up to maybe 2014 with construction then between 2015 to 2022, followed by operation perhaps in 2023. But all that is now wiped out. With DECC faced by spending cuts and the capital cost of the big barrage now put at £34.3 bn, it just wasn't viable as a public project and, with the generation costs of the other options put higher, private-sector interest would be unlikely. So tidal range seems to been written out of the story for some while. Which leaves tidal currents – a much less invasive and rapidly developing approach, with, it is claimed (in the DECC 2050 Pathways study and the PIRC Offshore Valuation), a larger overall UK energy resource than offered by tidal range projects.
Tidal-current turbines can be much more flexible and modular – although there are site limitations. It seems that the Severn estuary isn't suited to the pile driven support system needed. It does seem tragic to ignore the huge tidal energy potential of the Severn, so a tidal-range project or some other concept may yet be back there (e.g. SMEC), and also elsewhere (there are several proposals for smaller barrages (e.g for the Mersey, Duddon, Solway Firth) but maybe not a for while. A rearguard action is being fought by some of the original backers of the Severn Barrage (see www.corlanhafren.co.uk/. But it seems to be doomed in the current financial and political climate.
I'll be looking at the tidal-stream options shortly. See also www.natta-renew.org for regular updates.
Bonfire Night (5 November) came early this year with the government's 'Bonfire of the Quangos' in late October. It is to abolish or downgrade many quangos (quasi-autonomous non-departmental public bodies), notably the Sustainable Development Commission, and the long-established Royal Commission on Environmental Pollution, along (less worryingly) with the Infrastructure Planning Commission. The full list, of 200 or so, also includes British Nuclear Fuels Ltd, NESTA, the Design Council and, crucially, the Renewables Advisory Board, the Renewable Fuels Agency and even the Regional Development Agencies – who have been strong in backing renewables locally. Still evidently under review (although not necessarily for abolition, just reorganization) are the Environment Agency, the Carbon Trust, the Energy Saving Trust, and the UK Atomic Energy Authority.
Some of this was just sabre (or rather axe) rattling, and some of the agenciesa or organisations were pretty defunct shells (e.g. most of the UKAEAs work has been privatized, as has BNFLs). But some, like the SDC, the RCEP, the RAB, and the (so far untouched) EST and Carbon Trust, might be seen as crucial to the proper development of a sustainable future – although some rationalisation could be merited. The Regional Development Agencies will be sorely missed, but some of their work will be taken over by central government. And over the last few years the government has set up some new agencies and functions, which may in effect replace some of those now lost – notably the Climate Change Committee. Soon we may get more details of the proposed Green Investment Bank, which some see as eclipsing some of the Carbon Trust's functions. So far, all we've been told though is that the Department of Business Innovation and Skills will 'lead the creation of a UK-wide Green Investment Bank that will be capitalized initially with a £1bn spending allocation with additional significant proceeds from the sale of government-owned assets, to catalyse additional investment in green infrastructure'. That's less that the £3–4bn thought to be needed, and the £2bn initially proposed, but it's a start.
There has been some discussion about the future role of the Environment Agency. It's hard to imagine how it could be abolished. But actually these days, much of the running is being made by the Crown Estate, given that many new renewable-energy projects are offshore. And there are some interesting new issues emerging. For example, WWF recently highlighted an obscure legality in Crown Estate leases that continues to prioritize oil and gas exploration off the UK's coast to the detriment of renewables. Basically it seems, Crown Estates can terminate existing rights granted to offshore wind-farm operators whenever the government declares a license for oil and gas exploration in the same area. Not only can wind farm operators lose their lease, but they face premature decommissioning costs when their lease is revoked and are not entitled to any compensation to recover any expected financial returns.
WWF claims that such uncertainty over the financial viability of these leases could potentially detract investors, with knock-on effects for the renewables industry and the future growth of the green economy. This, it says, comes in a context that is already very favourable to the oil and gas industry.
WWF says that where there is a conflict between offshore renewables and oil and gas exploration, priority should clearly be given to renewable energy projects, in light of the UK's climate-change commitments and the sector's potential to create a substantial number of new jobs in the UK. But the lure of oil and gas revenues and taxes may dominate. We need agencies that resist this sort of thing and push effectively for more progressive approaches. Sadly we may have lost some of them.
Much of the skill and expertise base created by the offshore oil and gas industry is of course very relevant to the newly emerging offshore wind industry, as is some of the supply chain and servicing infrastructure. So there ought to be positive opportunities for collaboration. But there are clearly also conflicts. As a further example, looking to the future, Trade body Oil and Gas UK recently said that a number of planned wind farms around the UK potentially impinge on the operations of offshore oil rigs, and there needed to be clearer legislation to avoid legal ambiguities over rights. In its submission to a government consultation on the National Policy Statement on energy policy, Oil and Gas UK said that the policy statements did not take account of the way offshore wind farms could impede mobile drilling rigs, disrupt helicopter flights and get in the way of pipelines and underwater equipment. And it added: 'It would be most unfortunate if individual licensees were forced to resort to legal processes in order to defend the rights granted under their existing petroleum licences.' Although, according to Windpower Monthly, Oil and Gas UK has denied reports that it was actually planning legal action against wind developers, the potential for conflict is clearly there.
We have got used to stand-offs between oil and gas exploration companies and Greenpeace, especially these days in deepwater sites. Are we to expect a new version, with wind developers defending their patch – as they too move out to deepwater locations? Maybe at some point, in the absence of an appropriate Quango, the Navy will have to intervene!
No Bonfire of the Heretics
On 4 November a Channel 4 TV documentary assembled some environmental heretics in an attempt to demonstrate splits in the green movement over nuclear power and GM, but their views were met with polite, if somewhat bemused, reactions from representatives of green organizations in a subsequent studio discussion session. Stewart Brand's minority views on nuclear have any case been pretty much demolished in a un-hectoring analysis by Amory Lovins at www.rmi.org/images/PDFs/Energy/2009-09_FourNuclearMyths.pdf, while a conflict over their evidently very different views on climate change was avoided by not having Mark Lynas and Patrick Moore in the studio together.
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