Offshore wind threatening nuclear’s future in the UK - BVG

Source: Heren

2017/06/16

The declining costs of building offshore wind could force the UK government to revisit its strategy on new nuclear, according to renewable consultancy BVG.

The new minority conservative government committed to maintaining the UK’s position as a global leader in offshore wind in its manifesto for the recent election.

Previous administrations with majority conservative representation made new nuclear construction in the 2020s a key pillar of energy policy.

Just one new nuclear plant – EDF’s 3.2GW Hinkley Point power station – is under construction and on course to be built by the second half of the 2020s. However, offshore wind projects that are competing for subsidy in the upcoming contracts for difference (CfD) auction are expected to undercut the £92.50/MWh strike price awarded to Hinkley for 35 years ( click here to see story ).

“How does the political class react when offshore wind becomes cheaper than nuclear?” BVG associate director Chris Willow said.

“You’ve got a nuclear sector facing major supply chain problems, project delays all over the place and it’s more expensive,” he added. “The only argument is that it provides baseload power and we’re seeing the whole industry putting forward really strong arguments that the need for baseload power is changing. That’s not how the system needs to work anymore.

“The threat that offshore wind poses to nuclear is that there’s less of an argument for politicians to say it’s more expensive.”

Offshore wind targets

A commitment by the previous conservative government to hold three CfD auctions subsidising new renewables before 2020 will also be maintained according to Willow. Preparations for the first of those auctions have been ongoing for the last couple of months, with the results likely to be known by the end of the summer.

“There will be another two,” Willow said. “The idea needs to be that this is predictable.”

Amber Rudd’s energy policy reset speech in 2015 committed to supporting 10GW of new offshore wind in the 2020s if costs for the technology fell. Willow said it is possible the government will revise its target upwards.

“Since then, we’ve had the Danish auctions, Dutch auctions, German auctions – all this evidence showing that cost reduction in offshore wind is going to be much greater than expected,” he said. “Suddenly the budget is stretching that much further.”

However, he warned that the government could ‘decide to pocket the benefit’ and stick with its target to ensure a budget surplus remains.

“Realistically I think it’s going to be a compromise. We’re going to increase our ambition but we’ll make sure we don’t spend quite as much.”

Willow also questioned whether battery storage will be compatible with offshore wind in the long term.

Danish utility DONG Energy unveiled plans to connect a 2MW battery system to its Burbo Bank offshore wind farm last week in order to offer National Grid frequency response capability.

“Battery storage isn’t the automatic great fit for offshore wind,” Willow said. “You’re not necessarily going to get a 500MW wind farm that can then put in a battery station that just fills in the gaps in between a day’s worth of generation.” henry.evans@icis.com