Future Electricity Costs

I have been asking DECC via my MP how they justified the £92.5/MWh strike price for Hinkley C. Although it is difficult to project future energy prices it has been done by DECC1 and I have shown the various scenarios in the graphic below.

electricity price projections

Note that these prices are not adjusted for inflation. As you can see only the ‘High Price’ scenario (light blue) goes above the agreed strike price (red) and then only for a couple of years. All other scenarios are substantially below the strike price. It looks like even in the worse case the British electricity user is getting a bad deal.

It is not surprising that city analysis are ‘flabbergasted’ at the deal done for us by the government with EDF and the Chinese2.

The German push for renewables which make then less reliable on fossil fuel price fluctuations are predicting much lower price rises3. Despite higher retail electricity prices in Germany at the moment the UK prices are increasing at a greater rate and are likely to be much higher in the future.


 

1 Updated energy and emissions projections: 2012, Annex F: Price and growth assumptions, DECC 2012 (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/240320/Annex-f-price-growth-assumptions-2013.xls)

2 Flabbergasted – The Hinkley Point Contract, Liberum Capital,30 October 2013 (http://www.liberumcapital.com/pdf/ULkWtp00.pdf)

3 German Electricity Prices: Only Modest Increase Due to Renewable Energy expected, German Institute for Economic Research (http://www.diw.de/sixcms/media.php/73/diw_wr_2011-06.pdf)

 

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