Chief operating officer Hans Bünting believes collapse of Hitachi deal could spell good news for renewable power developers
The challenges currently afflicting the UK's nuclear strategy has left many in the energy sector fretting - not least the government officials who had staked the country's decarbonisation trajectory on the deployment of a combination of large-scale offshore wind and new nuclear plants.
But it seems the high-profile collapse of deals between the UK government and developers such as Hitachi and Toshiba in recent months has left some in the energy sector cheering - renewables developers.
Speaking to reporters in London yesterday, Innogy SE's chief operating officer Hans Bünting said Hitachi's decision last week to shelve work on nuclear development in the UK was "exciting news" for the green power sector.
"I'm not anti-nuclear, but I am trying to deliver carbon-free electricity at the lowest price possible," he said. "Comparing the cost of nuclear with cost of the proposed offshore projects and optimised onshore projects and solar, it comes down to half the cost in some cases."
"Personally I think the energy policy of Great Britain needs to be re-written in a way that can better support renewables," he added. "We are standing here to deliver."
Via its subsidiary Horizon Nuclear Power (HNP), Hitachi was slated to develop two new large scale nuclear plants in the UK - Wylfa Newydd and Oldbury - together providing 6.8GW of carbon-free electricity capacity. But last week it pressed pause on those developments, citing difficulties in agreeing funding for the scheme with the UK government. Meanwhile Toshiba, via its subsidiary NuGen, was set to develop the Moorside nuclear power plant, with a planned capacity of 3.4GW, but pulled out of the project in November.
The loss of these projects potentially leaves a major gap in the UK's low-carbon generation capacity from the late 2020s onwards - a gap renewables developers like Innogy think they are well-placed to fill. "There really isn't another answer," argued Michael Parker, head of business development in Europe for Innogy's onshore wind business, yesterday.
Paul Cowling, the firm's UK managing director, agreed. He said the Hitachi announcement "leaves a real opportunity for renewables - and wind in particular - to fill some of that gap".
Crucially, the government and its independent advisors seem to concur. Yesterday, Business Secretary Greg Clark wrote to the FT to reiterate his Commons statement of last week, insisting that while the government remains supportive of new nuclear in the UK the sector was in danger of being "outcompeted" by lower cost renewables that promise to deliver an "abundance" of clean power in the 2030s.
Separately, an analysis from the government's climate advisors the Committee on Climate Change (CCC) has found the UK could meet its power demands and climate commitments for 2030 without any new nuclear power beyond Hinkley Point C, which is already under construction.
But such a scenario would require a massive expansion of the government's renewables plans. A further offshore wind auction is scheduled to take place in May- which Innogy is preparing to bid into with its 1.2GW Sofia Offshore Wind Farm - but more funding rounds would need to be released in short order to ramp up the development pipeline.
Meanwhile, the stagnation in the UK's onshore wind and solar market would need to end. There is still no clear route to market for large onshore wind projects, after the government stopped onshore wind and solar farms from competing at auction for price support contracts known as Contracts for Difference (CfD). Most developers - even those building at subsidy-free prices - need the certainty of such long-term price contracts to make such projects work, they argue.
One of the only other options on the table for onshore wind is merchant projects, where the power generated is sold into the market without a long-term secured price. For that to be profitable, taller turbines are needed - up to 30 metres larger than commonly seen in the UK, Innogy's Parker said.
Planning officers, under the guidance of stricter rules from the UK government, are reluctant to approve projects with turbines boasting a taller "tip height" of more than 125 metres. But according to Parker, turbines would need to be at least 150 metres tall for viable merchant projects to be built in the UK.
"That's the balance - which is it that people want?" he said. "Do they want subsidies or do they want increased tip [height]? Because merchant projects are undoubtedly possible in the UK because of the wind resource we have, what we need to do now though is increase that tip height."
Innogy is currently working on a "test case" on this very issue,in the form of a proposed onshore wind farm in Wales. The Alwen Forest project would be built on land managed by Natural Resources Wales, a branch of the Welsh government, and developed on a merchant basis. Innogy is hoping its proposals for taller turbines will be approved, paving the way for more merchant projects. "It's designed in a way that can work," Parker said. "What we are now looking for is support through the planning process to allow that to happen."
There are also still lingering hopes the UK government may eventually shift its stance on onshore wind CfDs, particularly as the prospects of a full fleet of new nuclear plants ebb away. Late last year Innogy was one of a number of renewables developers to sign a letter to Clark urging him to re-think the current policy towards the technology, and Westminster insiders had hinted a rethink could be in the pipeline.
But with Brexit the major focus of government policy, Innogy is not expecting much movement on the issue until after March, Parker said, admitting encouragement from government on this issue has "diluted" since Christmas.
Large solar projects would also need a clearer route to market to deliver at large scale, according to developers. Research from Solar Media published earlier this month suggests 125 projects, worth around 1.5GW of capacity, are in the planning stages in the UK. Of these, around 573MW of capacity has been cleared for development. Some developers are seeking contracts with corporate buyers that could result in a number of projects moving forward, but industry insiders maintain that for the sector to deliver at scale the chance to bid for CfDs will prove critical.
With the UK's nuclear development plans facing significant challenges, this could indeed be an exciting time for renewables developers. Developers are working hard on a number of different avenues that would allow them to get new projects built. But the chance to bid for clean energy contracts could prove a gamechanger, and would likely save billpayers money while enabling the delivering of a huge chunk of new clean power capacity within a few of years. But with the same old political challenges still facing mature technologies such as onshore wind and solar, Innogy and its peers across the renewables sector are not celebrating just yet.
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