Originally posted by: poo
If we still have to throw shedloads of taxpayers money at EDF to get them to build a new nuclear power station, why did we sell the power stations? We are no better off. All you can say is the true cost of nuclear power has been exposed.
Cost is a difficult cost concept because there are budgetary costs, estimated costs, actual costs, opportunity costs and political costs. There are wholesale costs and retail costs. There are capital costs, running costs, maintenance costs, waste costs and decommissioning costs.
In terms of the new contracts for difference subsidy system the government is trying to foist on us, there are some significant complexities to the cost calculations (especially when the system is viewed from a consumer perspective).
On top of the market price of electricity there will be the intermittent reference price, the baseload reference price and the strike price.
The government has yet to decide how the baseload reference price will be calculated.
Some prices paid in the week vary on short time scales and some are agreed a long time in advance. Presumably the weekly baseload reference price must bear some relation to the weighted mean market price paid over the course of a week taking account of all the wholesale contracts for electricity purchase whatever their timescale.
The CFD counterparty must note how much electricity the Nuclear generator has sold in the last week as well as calculating the reference price (the mean market price paid over that period) that applies. It then makes a calculation
Energy Cost Difference = (Strike Price - Reference Price) * Energy Sold into Grid in the Accounting period chosen
If the Reference Price is less than the Strike Price then the CFD Counterparty needs to pay the generator the Energy Cost Difference.
If the Reference Price is greater than the Strike Price then the generator needs to pay the CFD Counterparty the Energy Cost Difference.
The normal situation will be that the strike price is greater than the reference price, so levy payments will generally flow towards the generator.
Now the CFD counterparty needs to add on its costs and the taxes and charges the Treasury makes for services rendered. So the Levy to be collected for the week for that particular generator will be
Levy to be Collected = [(Strike Price - Reference Price) * Energy Sold into Grid] + CFD Counterparty Costs + Treasury Financing Charges and Taxes
The CFD counterparty now repeats this for all the remaining generators with CFD agreements (baseload and intermittent).
The CFD counterparty now has to collect this total sum from the Energy Retailers, who sell the generators electricity minus the grid losses.
Lets just consider a simplified system of just six retailers and simplified system of cost allocation, that ignores the costs that are not proportional to the energy transferred through the network.
Now at the end of each energy accounting period (e.g. weekly) all the retailers have to determine how much electricity they have sold.
This figure will be part estimated and part based on actual meter readings. They also need to supply corrections relating to previous accounting periods.
Each of the Retailers sends in the figures for the amount of electricity it has sold in the accounting period to the CFD counterparty. The CFD counterparty then calculates the proportion of electricity sold by each retailer in that accounting period.
Levy Bill (Retailer A) = Total Levy to be Collected for the Quarter * Proportion of Total Electricity Sold by Retailer A
The retailer pays this Levy, adding on a handing charge or profit marging. It also pays a CFD administrative charge to National Grid (and possibly DECC and the regulator as well). All these costs can then be charged on to the consumer. If VAT is due on the levy it will be added on at the bottom of the Consumers Energy Bill.
The retailer then bills the energy customer somehow and pays the aggregate Levy that they owe to the CFD counterparty at some point.
Thus from the consumers point of view
the Levy paid on the bill very complicated and not easy to calculate, even for the most simple model I can imagine. (see below)
For each quarter (13 weeks) the variables at the very least consist of
- Strike Prices for all the generator
- 13 weekly Baseload Reference Prices (2184 hourly day ahead Intermittent Reference Prices will be calculated apparently, but lets ignore the added complexities involved there)
- 13 weekly figures for the electricity sold into the grid by each generator
- 13 weekly figures for the Total Energy Sold into the Grid
- 13 weekly figures for the proportion of energy bought by the consumers energy supplier
- correction figures for previous accounting periods (this is going to be really complex I expect)
- CFD Counterparty handling charges
- Treasury financing charges and taxes
- National Grid handling charges
- Electricity supplier handing charges
- Possibly the VAT rate
- Grid loss Accounting Figures (Remember the customer pays the levy for electricity lost in the grid as well)
- If Scotland vote for independence and withdraw from the system the levies will then just be spread across English and Welsh consumers.
In practice it is going to be a lot more complicated than this, and they may choose a shorter accounting period for baseload energy supply.
To write a computer program to account for how the actual levy figure on a consumer's quarterly bill is actually broken down would probably require several thousand lines of code and tons of data.
On top of all this someone has to regulate and verify that the system is working correctly.
All I can say is my brain hurts....and that I have no idea what the eventual costs of third generation nuclear to the consumer will be.