Hinkley C vs Gigafactory 1

This morning I was surprised and rather pleased to learn that the government didn’t hit the go button on its new nuclear power station at Hinkley Point last night. That had been the plan. The French nuclear energy company EDF had given the green light, and contracts were going to be signed today. Instead, the British government said it needed to review the deal. Great – the deal is terrible, and it should have reviewed it a long time ago. Cancelling the whole project now would be embarrassing and expensive, but entirely justifiable.

The idea was hatched in 2006. At the time, it looked like a good one – here was one big power station, capable of providing 7% of Britain’s electricity. It would provide it relatively cheaply, and it would be low carbon. Importantly, it would provide the base load stability that we would need as more renewable energy came online. At this point, Hinkley Point C was controversial by virtue of being nuclear, but wasn’t actually a bad idea.

It became a bad idea for a number of reasons. For a start, the wrong sort of reactor was chosen. The ill-fated EPR reactor hasn’t yet been successfully built. The first EPR power station to begin construction, Olkiluoto in Finland, is running an estimated 9 years behind schedule. Another in France has seen the budget balloon to four times the initial estimate, with critical flaws found in construction. Even China hasn’t been able to build an EPR on time.

Since the EPR looks like a bad bet, it’s been hard to finance. As the most expensive building in the world, it’s the kind of project that only a state-backed industry would take on, safe in the knowledge that taxpayers will bail it out if it goes wrong. Since we claim to disapprove of state run industries in Britain, we’ve called on others to do it for us: the French state-owned EDF and Areva NP, and the nationalised China General Nuclear. British taxpayers have to contribute too, mind you. We’re on the hook for decommissioning and clean up costs later, loan guarantees, and the massive subsidies for that long awaited power.

That’s where Hinkley Point really loses the plot. In order to get the French and Chinese to invest, we’ve had to offer a guaranteed price for the electricity that is eventually generated. The government agreed a price of £92.50 per megawatt hour, fixed for 35 years. That’s double the current price for electricity today. It’s also well over double the price that Finland agreed for a Russian-built nuclear power station the very same year.

This combination of the wrong reactor, at the wrong price, turned a reasonable idea into a unreasonable idea – an idea that smacked of lobbyist influence, back-room deals, and a desire for prestige infrastructure projects. But perhaps the final undoing of the Hinkley Point power station lies elsewhere. A lot has happened in the ten years since it was proposed. Events, especially in the world of renewable energy, are the main reason we need to scrap it and walk away.

Let’s consider another fiendishly expensive, highly ambitious energy project: Tesla’s Gigafactory 1. When complete, it will be the biggest building in the world by footprint. It will be powered entirely by renewable energy, and it will cost an estimated $5 billion – less than a quarter of Hinkley’s current budget. Journalists got their first look around it this week.

Tesla’s factory is the most high profile project in a dramatically shifting energy landscape. In the last ten years, the price of renewable energy has nose-dived. Solar power in particular has gone from an expensive form of alternative energy to a strong contender for our main source of power in the 21st century – more on that next week. The trouble is, that wasn’t visible in 2006. Here’s a graph from BNEF.

price of solar

When Britain decided to build a new generation of nuclear power stations, the price of solar energy had hit a plateau. Costs had fallen and then leveled off. It looked like the technology had matured, and that it was doomed to be too expensive to ever play a big role in mainstream generation. As it happens, that was more down to bottlenecks in the supply of silicon. Once those were resolved, prices began a dramatic descent that very few people can claim to have seen coming.

In itself, this is no threat to nuclear power. Hinkley is about base load, after all, and the sun doesn’t shine at night. But that’s where Tesla and his friends come in. Their Gigafactory is building batteries, and they too have seen a dramatic fall in prices. When that factory goes into full scale production, it will turn out enough electric car batteries and household ‘Powerwall’ batteries to lower prices by an estimated further 30%. For the first time, we have an affordable and scaleable way of storing the energy from wind and solar. This goes a long way to solving the problem of intermittency.

Along with the improving economics of renewable energy and storage, the other big thing that has changed the landscape since 2006 is the ‘internet of things’. More and more devices and machines are connected and talking to each other, meaning the electricity grid is much more responsive. It’s worth a post in itself to explain how, but it is now possible to strategically and imperceptibly reduce demand in peak times. That wasn’t possible until fairly recently. The answer has always been to respond to demand with further supply, and increase power to the grid. Smart meters, smart devices, electric cars and the developing market for negawatts (the promise to reduce energy use on demand) allow the grid operators to respond to high demand by reducing demand instead. This is rapidly making the idea of base load obsolete. It’s not yet – but it could easily be a thing of the past by the time Hinkley C is completed.

uk energy demandOne last thing that we didn’t necessarily see from 2006: the peak and decline of UK electricity demand. After rising moderately for a decade, demand for electricity peaked in 2005. Electricity use, and energy consumption overall, has dropped and continued to fall even after the economic downturn. Government ministers don’t seem to have noticed this yet, and often frame the arguments for nuclear power or fracking around the assumption of ever growing energy demand. Since 2010, energy demand has fallen by more than the 7% of Britain’s energy that Hinkley is due to provide.

Taken together, I think the world is sufficiently different today that we can put Hinkley to bed without too much loss of pride. The government has bought itself more time by delaying the decision again. It should now bite the bullet and cancel the project. The change in leadership is a perfect opportunity, and the changing energy world can be the excuse. Instead of building a new generation of nuclear power stations, it should invest in a smart grid, create incentives for energy storage (including electric cars), retrofit homes to reduce demand through efficiency, and get behind renewable energy. We don’t need Hinkley Point C. And with smart energy policies now, we certainly won’t need it in 2025.


  1. Fantastic post! I was against the idea of Hinkley C purely because the money could be better spent on renewable energy projects and we don’t have a suitable way of dealing with the toxic waste – a problem for all nuclear.
    I didn’t know about these other factors you’ve raised… Very informative, and I liked the fact this post is a bit longer and more detailed than usual as well.
    I thought EDF would pull out of this post-Brexit vote… Seriously hope the government turns its cold feet into a U turn.

    1. I thought it might collapse post-Brexit too. I imagine the government stood by it in the immediate aftermath because they were afraid that it would send a bad signal if they dropped it, and dent investor confidence on other projects. They may even have been quietly hoping EDF would pull out, which is why they waited for them to confirm yesterday before making their announcement. By announcing another review, they can present a case for not building it rather than just pulling the plug.

      So I’m quite hopeful. And now is definitely the moment to come forward with positive alternatives.

  2. A big problem as I see it is failure to ‘look outside the box’. We have had over 100 years of centralised electricity generation and people cannot see how an intelligent distributed network would work. One thing that has occurred to me, linked to the Gigafactory: if everyone had an electric car plugged into the mains whilst in the garage at night, we would instantly have a gigantic distributed storage capacity. Demand can be met by taking a small amount of power from every car during the evening and then charging them in the middle of the night when we are all asleep. The sun is not shining? No problem – as well as wind, the Severn Barage could be using the tides – ironically just a few miles away from Hinckley Point.

    1. yes, and electric cars could be key in handling the base load question. If cars are connected to a smart grid, they can pause charging at periods of peak demand, or even reverse flow and feed into the grid – with the owner being paid for the service.

  3. The poor would bear the cost of Hinkley Point C. Those businesses and private individuals who could afford to invest in micro generation and local/home storage using battery technology (which is getting cheaper and more efficient year on year) will do so in order to avoid drawing power from the grid that would be forced to include a mix of contractually-agreed levels of expensive, nuclear-sourced electricity from Hinkley. People and businesses will vote with their wallets – at least those who have the economic means to do so.

    For example, HSBC is investing in its own wind turbines in the UK, and the power generated from these is expected to produce around 60% of its electricity for its entire UK operations when complete.

    As micro generation and storage becomes cheaper, more and more people will begin to adopt it, and this consumer-lead activity will drive the installation costs lower, thereby creating a virtuous circle of greater affordability to more and more people. The economic argument for micro generation becomes even more compelling if the surplus is used to charge up electric vehicles, which are also getting better and cheaper year on year. In fact, it may be that the electric-car revolution (which could be just around the corner) might be the driving factor to a greater take up of micro generation rather than the other way round. The Mitsubishi Outlander PHEV, which is a hybrid plug-in family SUV, is one of the most popular company cars in the UK because its fuel economy and CO2 emissions figures means that it attracts a benefit-in-kind tax rate of 7% as opposed to 27% for a BMW 5 series. People are already voting with their wallets.

    However, there will always be people and businesses who will not be able to afford micro generation technologies now or at any point in the future, and there will always be people who live in rented accommodation or social housing who will not be able to install this technology; these people have no alternative but to draw all of their power from the grid when Hinkley is eventually switched on in, let’s be generous, 2028. (Note that Hinkley won’t even be able to power a single set of domestic Christmas tree lights until it has been built, tested and fully approved by the regulators!)

    So why would we invest in a nuclear technology that a) would be subsidized by those who could least afford it in this country, and b) could not be exported to most developed countries and none of the third-world countries because of the prohibitive costs? We would be ‘tooling up’ our economy for a world that wouldn’t be interested in our skills!

    We could and should become world leaders of renewable technology because easily installable micro generation would make a great export commodity in a post-Brexit world. We could even sell our renewable technology to ‘dangerous’ regimes like North Korea (sanctions permitting), which is something we’d never ever contemplate with nuclear!

    The money invested so far at Hinkley does not need to be wasted. The foundations that are currently being built at the site could be converted into a world-class technology park that would provide jobs for the Somerset economy. But it would be a wonderful irony if, for example, the Tesla company could be incentivised to build its next ‘Gigafactory’ at this location.

    1. All good points, and it’s certainly occurred to me that if it goes ahead, plenty of people who can afford it will want shot of the grid and avoid paying those subsidies.

      I think we may have already missed the opportunity to be world leaders in renewable technology. I suspect our antipathy towards wind power has held us back.

  4. Thanks for the write up Jeremy. I have been working with Solar City which will most likely soon be Tesla. I am excited to see the energy independence and storage that will be able to be generated through the gigafactory production of batteries. Combining the energy storage with Solar and the continual efficiency of electronics, I only forsee the use of conventional power generation continuing to diminish.

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