Nuclear Strike Price and the ‘Open and Transparent’ Energy Market

I previously posted the response from Michael Fallon (Minister of State for Business & Energy) to a number of questions I asked my MP (Peter Aldous). The question was about how the strike price for nuclear (£92.5/MWh) was justified given DECC’s own analysis of future electricity prices (shown graphically here).

The response said that the DECC analysis I quoted was only a small part of the analysis carried out by DECC but the other analysis was not being released since it ‘could prejudice the ongoing negotiations’.

I have now written back to my MP asking him

If DECC are carrying out analysis about the costs and conditions necessary for future energy production then surely such information should be in the public domain. If not the a single company (i.e. EDF) has an unfair competitive advantage. For a proper competitive energy market to work correctly such price and contract indicators, given in the DECC analysis which is being withheld, must be available to all companies. I understand that it is in the interest of EDF to withhold such information since other nuclear (or non-nuclear) energy companies may undercut them. However, this would be of great advantage to the British electricity consumer.

I would like you to tell me how such restrictive practices are
compatible with a ‘transparent and open’ electricity market that you
government propose.

I have just had a ‘response’ from my MP. it seems to be the standard pro-nuclear letter:

Dear Mr Lux,

Thank you for contacting me about nuclear power.

As you know, the Government has reached a commercial agreement with energy company EDF on the key terms that pave the way for the first new nuclear power plant to be built in the UK for a generation. I support the Government’s efforts to secure the necessary private sector investment. The UK needs a lot of new power stations to deal with years of neglect and a legacy of underinvestment. This is the first time a nuclear power station in the UK will have been built without money from the British taxpayer.

It will provide a clean source of home-grown energy, powering nearly 6 million homes and help the country keep the lights on. It will also cut carbon emissions and reduce energy bills for households by £75 a year by 2030. To build enough onshore generation to match what the Hinkley Point C power station would generate, it would take around 6,000 onshore wind turbines. I strongly welcome this £16 billion worth of investment which will create 25,000 jobs, bring in billions in corporation tax and could see £100 million injected into the local economy every year during peak construction. A strategy published last year in partnership with industry establishes a long term approach for the sector to stimulate economic growth and create jobs in this country. I understand that the Government will ensure that the operator of Hinkley Point C will be responsible for the full costs of decommissioning and its share of the costs of waste management.

With regard to strike prices, I can say little beyond the Minister’s response. The deal is competitive with other large scale clean energy and with gas at a strike price of £89.50 for this first nuclear project compared with a £150 strike price for offshore wind. It is cheaper than onshore wind and will pave the way for a substantial fall in the cost of future nuclear plants as it is a clear signal to investors of Britain’s commitment to nuclear energy.

Whilst I appreciate that this is not the response you were hoping for, I am grateful to you for expressing your concerns on such an important issue.

Yours sincerely,

Peter Aldous

Member of Parliament for Waveney

I have now written back saying that it is not a response to my question.

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