‘Strike price’ set out for renewables but not nuclear

28 June 2013
By Edd Gent
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Strike prices for renewable energy sources such as wind, solar, hydroelectric and geothermal have been set out

Strike prices for renewable energy sources such as wind, solar, hydroelectric and geothermal have been set out

The Government has set out guaranteed prices for electricity from renewable energy providers.

Ministers said the prices companies would be paid for the electricity from wind, wave, tidal, hydropower, solar and biomass would make the UK an attractive place to invest and lead to renewables supplying 30 per cent of the power sector mix by 2020.

But there is still no news on a deal between the Government and French energy giant EDF on the price it will be paid for low-carbon power from the proposed new nuclear reactor at Hinkley Point, with "intense" negotiations going on.

As part of Government plans for investment in infrastructure outlined yesterday, Energy Secretary Ed Davey said he was giving certainty to developers and investors.

“No other sector is equal in scale to the British power market, in terms of the opportunity that it offers to investors, and the scale of the infrastructure challenge,” he said.

“Developers and investors have been crying out for more details, sooner, and that is what we are giving them today.”

Davey set out draft details of the guaranteed "strike" price that will be paid to companies for power they generate from renewables, to help overcome the high initial costs of building offshore wind farms and other low-carbon power.

And he said more than 90 per cent of £7.6bn in subsidies raised on consumers’ energy bills which will go to support low-carbon power in 2020 would be paid to renewables such as offshore wind and hydropower.

The “strike price” for offshore wind farms will be £155 per MWh generated starting from next year, declining to £135 pounds by 2018, which the Government estimates will spur the construction of 8 to 16GW worth of wind turbines at sea.

Land based wind farms will get £100 per MWh, declining to £95 pounds from 2017, biomass plants £105, hydroelectric dams £95 and large solar installations £125, declining to £110 between 2016 and 2019.

Tidal and wave projects will receive £305 per MWh, plants using gas from landfill sites £65, energy from burning waste £90, geothermal power £125, dedicated biomass plants £120 and anaerobic digesters £145.

Most contracts will last 15 years, but those for current power plants being converted to biomass will get 20-year deals, according to the proposals.

Ministers had been warned that investors and companies needed more certainty about energy policy to invest the £110bn needed by 2020 to replace ageing power plants, cut emissions and keep the lights on.

Davey said: "The strike prices for renewable technologies announced today aim to make the UK market one of the most attractive for developers of wind, wave, tidal, solar and other renewable technologies, while minimising the costs to consumers.

"This will help boost home-grown sources of clean secure energy, and enable us to decarbonise the power sector with renewables contributing more than 30 per cent to our energy mix by the end of this decade.

"Our reforms will keep the lights on, emissions down, and will save consumers money on their bills. The result: low-carbon, affordable, reliable power for the long term."

Maria McCaffery, chief executive of industry body RenewableUK, says: "The confirmation of levels of the draft strike prices is a welcome step forward in setting out how the long-term market is going to work.

"However, more details do need to be set out. The most important ingredient remains investor confidence and that will take time to land. The secret is consistent long-term support and investors seeing that Government is behind renewables and low-carbon generation for the long term."

And she says it was up to the Government and industry to work together to help the supply chain for renewable technology gear up to create tens of thousands of jobs by the end of the decade.

Concerns have been raised about whether the Government was sending a strong signal on what would happen after 2020 to encourage investors to build factories in the UK that would supply renewable technology, bringing down costs and creating jobs.

And while Chief secretary to the Treasury Danny Alexander also announced a £10bn infrastructure guarantee for EDF’s new nuclear power station at Hinkley Point in Somerset today, the Government failed to set a "strike" price for nuclear power.

“While we welcome today’s announcement of proposed strike prices for renewable energy sources, which will be put out for consultation, it is worrying that no strike price has yet been set for nuclear,” says Dr Tim Fox, Head of Energy and Environment at the Institution of Mechanical Engineers.

“Setting a strike price in the contract for nuclear power is however a critical step yet to be taken if we are to meet this country’s future low-carbon power needs.”

Gary Smith, national officer of the GMB union, which represents workers in the nuclear industry, says: "There is no change and no progress on new nuclear in this statement.

"We believe a deal would have been done but for interventions by the Treasury. The Government has consistently talked about job creation in the energy sector; it just isn't happening."

Davey said there had never been any intention to publish a "strike" price for nuclear power from Hinkley Point yesterday and while he hoped and believed the "intense and constructive" negotiations would conclude, he could not give a timeframe for when an announcement could be expected.

Davey also announced that the Government will run the first Capacity Market, a mechanism designed to prevent predicted power shortages by ensuring there is enough generation capacity that can be brought online at times of peak demand, in 2014 for delivery in the winter of 2018.

Current power plants will receive one-year capacity market contracts, those that require refurbishment to remain operational will receive payments for as many as three years, and new generators will get longer agreements, according to the Government’s proposals.

“The Capacity Market will incentivise investment in new gas plant and other flexible capacity to maintain an adequate supply margin, the safety blanket over and above expected demand, for 2018 onwards,” said Davey.

“Ofgem and National Grid will consult on possible steps they could take to ensure that mothballed power plant or demand response is available if needed in the middle of the decade. This will mean the public can continue to enjoy a reliable supply of electricity.”

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