Uncertainty and delays surrounding EdF’s Hinkley Point C project is like ‘being in a slow moving car crash’, according to the former boss of energy rival RWE Npower.
Former chief executive of RWE Npower Paul Massara said that going down the route of building Hinkley Point C was phenomenally expensive and likened it to being in a slow moving car crash. “You know it’s going to happen because momentum is there, but absolutely it’s the wrong thing to do,” he said yesterday.
Speaking at a discussion around keeping the lights on after the closure of coal fired power stations, Massara said that the current price of energy was £35/MWh in the UK and £25/MWh in Europe and by signing up to the new nuclear power plant, the government was locking itself into a price up to four times the current price.
“Hinkley is [guaranteed to be able to charge] £92.5/MWh – and that’s 2012 prices – and that escalates up, so by the time it starts that price is going to be significantly higher.”
He said that one of the problems that led to such a focus on what happens with Hinkley stemmed from government failing to create a coherent strategy on future energy generation.
“We still haven’t gotten round to saying what we’re trying to do,” he said. “It’s partly because I think Treasury has taken over, dictating what we should be doing in energy policy and it’s partly because Decc [Department of Energy and Climate Change] hasn’t put forward a coherent strategy.”
Massara said that while he did not envisage a scenario that saw the UK’s ‘lights going out’, he said that the coming winter and possibly the following three years would be the tightest yet for maintaining electricity supply.
He raised concerns about what might bridge the gap between Hinkley coming online and coal power stations being decommissioned.
“Even if Hinkley goes ahead, it’s 2025 at the earliest [that it will be complete] and probably more like 2027,” he said. “What bridges us between the coal going off today and 2027?”
He said that at present a gas solution was difficult as interventions in the market, such as the capacity mechanism, made it difficult for new gas power plants to be built. The capacity mechanism offers rewards to existing providers, on top of income obtained by selling electricity on the market, in return for maintaining existing capacity or investing in new capacity.
“My prediction is that the government will have to come up with some new mechanism beyond the capacity mechanism, because it is not enough to build a new gas power plant to bridge the gap.
“All of these mechanisms are creating artificial environments where people cannot make really good commercial decisions.”
Norwegian risk and certification firm DNV GL senior consultant Andrew Garrad added: “We don’t really have a market at all, we have political decisions which are made and then we have markets which are rigged inside those political decisions.”