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Topic Title: Can the Energy Bill, act to Reduce Consumer Energy Bills as the Government Say?
Topic Summary: DECC's recent press release 19th December
Created On: 07 January 2014 04:08 PM
Status: Read Only
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 07 January 2014 04:08 PM
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jarathoon

Posts: 1032
Joined: 05 September 2004

"New energy reforms to support 250,000 jobs, keep bills down and produce cleaner energy"

Electricity Market Reform Delivery Plan published

I've been doing some calculations as to how the government can claim that [cummulative] energy bills will be lower following their plans for new fleet of Generation III nuclear plants, rather than say following the natural gas route.

If the new third generation nuclear power stations are built then the first of them are expected to start delivering electricity to the grid around 2025. With CPI inflation at 2.5% in the intervening years the strike price paid for wholesale nuclear energy at that point will be £128 per MWh guaranteed. At the end of the 35 year agreement (2059) the price paid will be around £295 per MWh guaranteed. [to calculate the equivalent retail electricity prices to a first level approximation, triple these values]

In order for gas to be as expensive as new third gen nuclear [from a cummulative cost point of view], gas prices must on average increase at just under double the rate of CPI inflation rate from now to 2059 (around 4.7% per year for the next 45 years under my assumptions). This would seem to imply that the government thinks that there will be little or no production of natural gas from fracking here in the UK and Europe, between now and 2059, to constrain future gas price increases.

If you make similar estimates for yourself (using a spreadsheet) you will find that the price of electricity from gas will only start exceeding the price of electricity from third generation nuclear in around 2046 (in 32 years time). That is 7 governments away from now.

Do hard headed engineers and business people really this daft policy will survive one new government let alone another 6 after that?



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James Arathoon
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