Are We Missing the (Hinkley) Point?

It’s been a tense time in the energy sector recently, with the furore over rising energy bills and accusations of profiteering taking over national headlines. Each successive announcement of price hikes has further soured consumer feeling, and eyes have turned to the government in search of some decisive response. Ed Miliband has made his position clear, restating his pledge to freeze prices should the Labour party win the next General Election and denouncing the increases made so far. Meanwhile, the Conservative perspective appears to slink off in the other direction, as evinced by this week’s agreement with EDF for the construction of the two Hinkley Point nuclear reactors.

 

By setting a strike price of £92.50 per MWhr, fixed for 35 years after operation begins, what Osborne has actually done is admit that there is very little that can be done to stop the upwards trajectory of fuel costs, which is a far cry from his claims that the deal will provide affordable power for families. Instead, what this agreement cements is the fact that consumers have ahead of them another decade of year-on-year price rises that far outstrip their means, either because energy companies will have an excuse to raise bills to meet the estimation or because Osborne et al. have been misrepresenting their ability to keep prices down.

 

The nuclear strike price is another cause for concern, because although it is competitive with other low-carbon technologies in today’s market, it doesn’t kick into action until 2023. This means that as support for other sources drops over time, it will come in at a comparatively high rate and stay fixed there for the contract period of 35 years. Nuclear will therefore be the most expensive subsidy for the end-user and does not represent the affordability Osborne is at pains to try to demonstrate.

 

This leaves me with the unsatisfactory conclusion that either the Chancellor doesn’t understand his maths, which I can only hope is an unlikely possibility, or that he isn’t coming clean about the deal’s long term implications. As the UK’s current flock of nuclear reactors shuffle towards retirement within the next decade or so, many grow increasingly nervous about what is to replace them. A collective sigh of relief wouldn’t have been a surprising reaction when the Hinkley Point deal was made, but it would be foolish to celebrate too soon before properly evaluating the facts.

 

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As Chairman of the Rolton Group, Peter provides high-level strategic advice to a range of governmental, public sector and commercial clients. He is an acknowledged specialist in the renewable energy sector, and there is good reason for this: when it comes to energy, Peter is clear about the issues we face and the need for a cohesive strategy to tackle them. He is a passionate advocate of informed debate, and has consistently brought clarity to this complex situation."If the UK is united on one thing about energy it is that, on an individual basis, the public knows what it’s not in favour of. When it comes to offering up solutions, it’s not that confident. Pointing at single solutions like wind farms and saying that they are too expensive is missing the point. Carbon-based forms of energy like oil and gas are running out. Energy is going to be more expensive and a portfolio of renewable energies will necessarily be part of our solution in the future." Peter holds particular expertise in the areas of site-wide energy planning, zero carbon power generation, low carbon design, carbon offsetting and the application of renewable technology. He has acted as a Government advisor on numerous consultations and white papers, presenting to the Secretary of State on a number of occasions on the subject of renewable planning and public sector engagement. He has worked as a strategic partner with some of the world’s largest and most successful blue-chip companies, and is a Director of Renewables East, the renewable energy agency for the east of England.Peter is both a chartered building services engineer and a chartered member of the Institute of Energy, and has gained accreditation under the Carbon Trust Consultant Accreditation Scheme for solution development, with particular expertise in the establishment of energy strategies. He founded his first business, Rolton Services Consultants Limited, in 1989, and founded Cool Planet Technologies, a specialist renewable energy delivery partner which was sold to British Gas in 2010. He has been the architect of the path through which Rolton Group has addressed the challenges of renewables, carbon and the built environment."We need to see the bigger picture and not become hung up on individual technologies and individual costs. We need a completely different technology mix and not a reliance on one form of energy supply. We need all forms of technology to be applied – and we need it to happen quickly."

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