Wind will make Hinkley look even more costly
After a torrid on-off summer romance, the UK government finally declared its love affair with EDF’s Chinese-backed nuclear power station Hinkley Point C back ‘on’ last week.
On Thursday, Prime Minister Theresa May confirmed that French utility EDF would be able to proceed with the controversial £18bn Chinese-backed scheme. Some of EDF’s shareholders have warned that the project could put EDF’s survival at risk.
But no matter. EDF’s board gave the project the green light three months ago, and now the UK government has confirmed that it will pay £92.50/MWh for every unit of electricity the facility produces for the next 35 years.
This is around double the UK’s current wholesale electricity price and higher than prices for onshore wind. It is worth remembering that figure for when people bemoan subsidies for wind farms.
Now, we are not stridently anti-nuclear. We believe it can play a role in a balanced energy mix. But, even so, Hinkley Point C still looks like a very expensive option. ‘Ah,’ the critics say, ‘but at least nuclear power plants don’t face the same problems as wind farms, because they can generate power all of the time.’
That is true, but there are plenty of companies in the wind industry and beyond that are working on solving the lack of energy storage options. It could well be that this problem is fixed even before Hinkley Point C exports its first power, which is due to happen in 2023 but given EDF’s track record it could easily come in late.
And when it does that £92.50/MWh will look even more expensive than it does now.
If you want an indication of how this could play out then you can look at a survey by the Lawrence Berkeley National Laboratory in the US, which was published last week. The lab surveyed 163 wind energy experts from around the world to get their views on how the cost of power from onshore and offshore wind will fall in future.
This study reported that the experts expect the cost of wind power to fall by between 24% and 30% by 2030; and by between 35% and 41% by 2050. It said the figures are applicable to both onshore and offshore wind, but that the costs of offshore wind farms would fall by a higher absolute amount due to the higher starting point.
They added that there was even a 10% chance that reductions could be more than 40% by 2030 and more than 50% by 2050, assuming that fast growth in the market is backed by aggressive research and development.
Such reductions would continue the falls in the cost of wind energy from the last five years, which have been particularly driven by significant reductions in the up-front costs of wind farms and improvements in project performance. Experts expect to see further reductions in operating costs, longer project lives and lower costs of finance.
The growth of the wind sector means it keeps getting more cost-competitive. So, if you think Hinkley Point C looks expensive now, just wait until it’s finished.