* Explanation of awful bilingual pun at end
While my American readers settle down on Tuesday night to enjoy the end of the political ambitions of Ken Cuccinelli at the hands of a Democratic party hack with zero experience in government, I’m settling in for a long comedy serial: Sir Humphrey Appleby vs. European Commission in re Hinkley Point C.
The dying nuclear industry (my take on the economics, politics, mascot) has just scored an extraordinary win in Britain. The government will commission EDF and its Chinese partners to build the £16bn, 3.3Gw, two-reactor Hinkley C plant. It’s a fixed-price contract: but to get this protection from the high construction risks, it has had to guarantee an FIT of £92.50 ($147.9, €109.3) per megawatt-hour for no less than 35 years from the supposed completion date of 2023, indexed for inflation. And EDF will be compensated for any curtailment from wind and solar.
The FIT is double the current British wholesale price, twice the current onshore wind FIT, and considerably higher than current German non-indexed FITs for on-and offshore wind and solar. The price of both wind and solar is bound to fall; the British government accepts this, but it lowballs the trend rates. It thinks the price of solar will only decline by 3% a year, far lower than experience and typical industry forecasts.
Whatever were they thinking of? I thought this was bizarre, but nevertheless a done deal. Not in fact. Continue Reading…