By Owen O’Donnell
INEOS boss, Jim Ratcliffe has warned that nuclear power provided by the new Hinkley Point C plant will be unaffordable for UK manufacturers.
The owner of the Grangemouth complex, responsible for the production of 70% of Scotland’s fuel, said that the government’s guaranteed minimum price of £92.50 per megawatt hour (Mwh) from the Somerset plant, backed by French firm EDF and a consortium of Chinese investors, is “not competitive”.
Mr Ratcliffe said in an interview with the BBC: “Nobody in manufacturing is going to go near [that price].”
He added: “The UK probably has the most expensive energy in the world.
“It is much more expensive than Germany, it is more expensive than France, it is much much more expensive than America. It is not competitive at all, on the energy front, I’m afraid.”
Ineos has reportedly guaranteed a deal for nuclear energy in France at £37.94 per Mwh in a deal of an “unknown duration,” less than half the price in the UK which the coalition government has fixed for 35 years.
The Hinkley site, estimated to cost £16 billion to build, is expected to generate 7% of the UK’s energy supply when it is fully operational as the government finds itself under pressure to find an affordable source of energy.
A spokesperson for the Department of Energy and Climate Change said: “The UK Government has always been clear that EDF will only be offered an investment contract for the Hinkley Point C new nuclear power plant if it is fair, affordable, value for money and consistent with state aid rules.
“No consumer in the UK will pay anything for electricity from Hinkley until 2023.”
The UK government came under fire in October for agreeing to the building of the plant despite making a pledge that nuclear power would not be subsidised by the taxpayer. Household prices will be expected to increase as electricity was sold at double the current level of wholesale prices.
The guaranteed price, agreed after a year of talks with EDF, was seen as necessary for funding to be given to the nuclear capacity when held up against the price of building the complex.
As previously reported on Newsnet Scotland, the agreement came only months after the UK Treasury acknowledged it had underestimated the cost of decommissioning nuclear power plants by around £16 billion between 2007 and 2011.
The UK Government’s decision is in stark contrast to the direction of other European nations. In September, the French Government announced the introduction of a levy on nuclear energy and a tax on carbon emissions in a bid to raise the billions of pounds needed to fund renewable energy projects and improve energy efficiency.
In Germany, Chancellor Angela Merkel has detailed plans to phase out nuclear power by 2022 and instead invest in renewable energy.
MEANWHILE, Enterprise Minister Fergus Ewing has criticised energy watchdog Ofgem for delaying conclusion of a review of the framework for charging power companies for using the high voltage electricity network – Project Transmit.
Ofgem’s Project Transmit aims to ensure the charging regime promotes greener energy while also keeping transmission costs under control.
Currently, Scottish electricity generators face higher transmission charges than those levied in the South of England.
For example, the Wider Zonal Generation Tariff paid by generators in the North of Scotland is currently set at £25.42/kW for 2013-14. This compares with a subsidy of £5.17/kW in West Devon and Cornwall.
Even under Ofgem’s proposals Scottish generators would still face higher charges than generators south of the border.
Mr Ewing said:
“I am extremely disappointed in Ofgem’s announcement of a further year’s delay in introducing measures to the tackle the long term discrimination against Scottish electricity generators. I consider this to be unacceptable.
“After three years of exhaustive examination of electricity transmission charging and associated connection arrangements, Scottish generators are facing a further three months of uncertainty – and further 12 months before any new arrangements take effect – while the benefits for consumers risk being delayed.
“Since 2010 Ofgem has looked at the issue in a huge amount of detail and consulted at length with every interested party. It recognises that a new approach to transmission charges is in the best interest of consumers, is necessary to facilitate the move to a low carbon energy sector whilst boosting security of supply.
“The proposals that Ofgem published in the autumn would support the transition to a low carbon energy mix and deliver significant long-term benefits to consumers – cutting bills by around £8.30 a year from 2020 – and help keeping the lights on south of the border.
“Further delay in the implementation of new charging arrangements threatens vital investment Scotland’s renewable, clean thermal and pumped storage schemes – the latter being of particular importance in maintaining stability across the GB electricity grid.
“After today’s announcement, the benefits of Project Transmit will not now be realised until 2015 at the earliest. It is vital that this disappointment is offset by a positive decision in March 2014 which gives certainty to investors.”