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UK Nuclear Analysis: Hinkley Point C

Not all industry observers believe that CCS is a necessity; not all believe that new nuclear is required; and some believe both should be left alone. Electricity systems operating with 100% renewables without CCS have been modelled in both the US and Germany.

Many environmental groups see CCS advocacy as an ill-advised and unnecessary attempt to lock fossil fuel use into national power generation systems long term, but equally object to nuclear as a dangerous and expensive technology that crowds out other more viable forms of low carbon electricity generation.

The report by the UK parliamentary group takes the view that fossil fuels are needed in particular to meet the huge seasonal variation in UK heat demand. This, the group says, requires the decarbonization of heat at the point of consumption, a route towards electrification, or at the point of energy production, which would mean replacing natural gas with hydrogen, which would be piped to gas boilers in peoples’ homes.

Either way, fossil fuels will be needed to generate the amount of electricity or hydrogen this would require, making CCS a necessity, the report argues.

Analysis continues below...

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Tough choices

The Hinkley Point C decision throws into sharp relief the difficult and risky choices facing not just the UK energy sector, but other countries around the world seeking to decarbonize electricity generation.

It is clear that a big gamble on one technology has profound implications for other forms of generation and their ancillary decarbonization technologies, as well as for the future operation and relevance of wholesale electricity markets.

Bernstein concludes that there is no need for new nuclear now and that it would be much less risky to pursue the alternate scenario until new nuclear is proven and costs fall – if they ever do.

The alternate scenario also retains more flexibility in terms of technological innovation. Gains in both renewable energy technologies and electricity storage suggest that a 100% renewable energy system might indeed by possible. Tidal power in the UK remains completely unexploited.

In committing to such a large project with such high and uncertain costs in a country that has not built a new reactor in decades, the risk is that these alternatives are crowded out.

The government will have less funds to commit to other technologies, while investors will see subsidized nuclear playing a large role, leaving less market share for them to pursue, an outlook that could drain investor confidence.

However, first, EDF has to prove that it can build an EPR in the UK on time and to budget. It then has to show that the cost of further reactors will fall. If it fails in this endeavor, Hinkley Point C could herald not the rejuvenation of the UK’s new nuclear future but its end.

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