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.
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.
One 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.