Renewable Energies versus Nuclear Power: Comparison of Financial Support. Gustav Resch, Demet Suna (e-think)

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1 Renewable Energies versus Nuclear Power: Comparison of Financial Support Gustav Resch, Demet Suna (e-think) Vienna, 16 April 2015 NURIS a study done on behalf of the Vienna Ombuds Office for Environment, conducted by e-think and Austrian Institute of Ecology - accessible at:

2 e-think energy systems for the future e-think is a private non-profit research institution based in Vienna. Its aim is to advance research in the field of energy economics at its interface with environment and human society. Through technical, economic and environmental assessments e-think contributes to the transition towards sustainable energy systems. e-think s main areas of competence are: Analyse socio-economic aspects of energy use Model energy systems and develop scenarios Assess impacts of energy policies Develop effective and efficient deployment strategies for RES in electricity, heat and transport Promote energy efficiency in buildings, mobility, electrical and industrial applications e-think s activities encompass (i) research in interdisciplinary cooperation, (ii) implementation and (iii) communication of research results. e-think is a spin-off of the Energy Economics Group of Vienna University of Technology and, thus, practises strong cooperation in energy economics and modelling

3 Content (1) Motivation and key research question (2) Method of approach (3) Factsheet: Hinkley Point C (4) Comparing financial support Static approach Dynamic approach (5) Conclusions 24/04/2015 3

4 (1) Motivation and key research question Motivation and key research question The European Union is divided on the issue of electricity production While there is consensus that generation technologies need to be low on greenhouse gas emissions, the question of whether to use renewables or nuclear to meet this power demand is highly controversial. Both options still require financial support and this is not going to change in the near future. This raises the question of where our money should be invested in order to achieve greater economic efficiency: into support for renewable energies (RE) or support for nuclear power plants? 4

5 (2) Method of approach Method of approach: 5 countries in focus Renewable energies were compared with the nuclear option by looking at the quantities of power they can both generate and the level of financial support this requires. This mirrors the extra costs which must be borne by the end consumer or society. Analysed countries: United Kingdom, Germany, France, Czech Republic, Poland (and EU28 ) 5

6 (2) Method of approach Method of approach: 5 countries in focus Renewable energies were compared with the nuclear option by looking at the quantities of power they can both generate and the level of financial support this requires. This mirrors the extra costs which must be borne by the end consumer or society. Analysed renewable energy technologies: Biomass, Wind energy (onshore and offshore), Hydropower, and Photovoltaics Photography: Gustav Resch, Demet Suna 6

7 (2) Method of approach Method of approach: Static and dynamic comparison The static approach compares the current (as of 2013) level of incentives for renewables with the state support mechanism for Hinkley Point. The dynamic approach, in contrast, also considers additional factors including future cost reductions achieved through increasing technological experience and aspects of market integration of variable renewables like solar and wind power. Distinct scenarios have been calculated up to 2050; the nuclear option is added from 2023 onwards (planned start-up for Hinkley Point C). The dynamic calculation applies a detailed model-based analysis using the Green-X-model ( This model takes into account a multitude of factors including costs, potentials, regulatory frameworks, diffusion constraints like non-cost barriers, electricity prices and energy demand, all of which have a strong impact on the economics of power generation. 7

8 (3) Factsheet: Hinkley Point C New milestone in nuclear state aid: Hinkley Point It is planned to construct two additional reactors at Hinkley Point. The EU estimates the total capital needed for construction at 43 billion. The UK government intends to grant state aid for this project; in accordance with EU state aid rules, the suggested state aid scheme was submitted to the EU Commission for approval as public funds would be used for a company. Central part of the state aid scheme: Contract for Difference, running for 35 years. The state commits to compensating any difference between the electricity market price (reference price) and the negotiated Strike Price. a long term price guarantee which, in principle, is analogous to the feed-in tariffs commonly used to support renewable energies. The Strike Price for the first unit to be constructed has been set at 108 per MWh (with each subsequent unit receiving 104 per MWh), plus an index adjustment. Calculated over 35 years, the duration of the Contract for Difference, this adds up to a Strike Price in 2058 of approximately 329 per MWh (in nominal terms). On top of this, the plant operator will be granted a state loan guarantee for all loans the company takes out on the financial markets to construct the nuclear power plant. 8

9 (3) Factsheet Hinkley Point C Hinkley Point C: Main characterisitics at a glance Total capacity (two units) MW e 3,260 Electricity generation TWh/a 26 Planned start of operation 2023 Financial support (gross) (Contract for difference / Feed-in tariff) /MWh 108 Duration of support Years 35 Table: Main characteristics of Hinkley Point C (Source: based on European Commission (2013): State aid SA (2013/C) (ex 2013/N) United Kingdom Investment Contract (early Contract for Difference) for the Hinkley Point C New Nuclear Power Station; Brussels, European Commission (2014): State aid: Commission concludes modified UK measures for Hinkley Point nuclear power plant are compatible with EU rules. Press Release, Brussels, 8 Oct 2014.) 9

10 (4) Comparison of financial support Static approach: Nuclear power (Hinkley Point C) vs. Wind onshore (new installations as of 2013) Comparison of remuneration levels (gross support) /MWh UK FR DE PL, CZ 79.9 Net support range of remuneration average remuneration average wholesale electricity price 0 Hinkley Point C (UK) Wind onshore UK Wind onshore CZ Wind onshore FR Wind onshore DE Wind onshore PL Figure: Comparison of planned (nuclear power, Hinkley Point) and actual (wind onshore, new installations as of 2013) remuneration levels (and wholesale electricity prices) for nuclear power and wind onshore in analysed countries (Source: Own calculations based on Steinhilber et al. (2011) und Held et al. (2014)) 10

11 (4) Comparison of financial support Static approach: Nuclear power (Hinkley Point C) vs. Wind onshore (new installations as of 2013) Comparison of required yearly net support for producing the same amount of electricity as expected for Hinkley Point C M /a 1,400 1,200 1, Required annual net support in the case of nuclear power* Required annual net support in the case of wind onshore* UK CZ FR DE PL Note: *for producing the same amount of electricity as expected to be generated in Hinkley Point C Figure: Comparison of required annual net support for nuclear power and for wind onshore in analysed countries (Source: own calculations) 11

12 (4) Comparison of financial support Static approach: Nuclear power (Hinkley Point C) vs. renewable energies (new installations as of 2013) Comparison of yearly electricity generation under similar budgetary constraints (net support as for Hinkley Point C) Higher electricity generation compared to Hinkley Point C Figure: Comparison of expected annual electricity generation of Hinkley Point C with feasible volumes from wind onshore in analysed countries (Source: Own calculations) Lower electricity generation compared to Hinkley Point C 12

13 (4) Comparison of financial support Static approach: key findings Under the same budgetary conditions it is almost always possible to generate more electricity from renewable sources today (2013) than from nuclear power in the future (from 2023 onwards). Small hydropower and onshore wind plants are the least expensive methods of generating electricity Offshore wind farms and photovoltaics*, however, are the least economic options under current circumstances (as of 2013) within the assessed countries * PV used as centralised generation option, assuming that electricity is sold at wholesale markets 13

14 (4) Comparison of financial support Dynamic approach: Nuclear power (Hinkley Point C) vs. renewable energies Scenarios of future electricity supply in United Kingdom TWh/a Biomass Hydro small-scale Photovoltaics Wind onshore Wind offshore Other RES-E RES-E demand share % % % % % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Comparison of future electricity generation from renewables and from nuclear power (Hinkley Point C) in the United Kingdom (Source: own assessment (Green-X)) Technology breakdown of future electricity generation from renewables in the United Kingdom according to the Green-X scenario of dedicated RE support (Source: own assessment (Green-X)) 14

15 (4) Comparison of financial support Dynamic approach: Nuclear power (Hinkley Point C) vs. renewable energies Scenarios of future electricity supply in the European Union 2500 Electricity generation from selected new RES-E (installed 2011 to 2050) Electricity generation from Nuclear (Hinkley Point C) Electricity generation in the period 2023 to Biomass Hydro small-scale Photovoltaics Wind onshore Wind offshore Other RES-E RES-E demand share 90% TWh/a TWh/a % 36.2% 52.1% 66.0% 78.4% 80% 70% 60% 50% 40% 30% % 10% 0 0 0% Comparison of future electricity generation from renewables and from nuclear power (Hinkley Point C) in the European Union (EU28) (Source: own assessment (Green-X)) Technology breakdown of future electricity generation from renewables in the European Union (EU28) according to the Green-X scenario of dedicated RE support (Source: own assessment (Green-X)) 15

16 (4) Comparison of financial support Dynamic approach: Comparing the future development of remuneration and wholesale electricity prices / market values schematic illustration... /MWh Net support for renewables Average remuneration for renewables Net support for nuclear power (Hinkley Point C) Average remuneration for nuclear power (Hinkley Point C) Wholesale electricity prices Average market value of renewables Years 16

17 /MWh (4) Comparison of financial support Dynamic approach: Comparing the future development of remuneration and wholesale electricity prices / market values Net support in the case of RE Net support in the case of Nuclear Range across assessed countries Average remuneration for selected RES-E Average market value for selected RES-E Average remuneration for Nuclear (Hinkley Point C) Wholesale electricity price (Market value for other RES-E and Nuclear) Future development of remuneration levels and corresponding market values of the assessed RE technologies (as aggregate) and of nuclear power across assessed countries and at EU28 level according to the Green-X scenario of dedicated RE support (Source: Own assessment (Green-X)) Two conflicting trends: Remuneration (gross support) for renewables is below the one for nuclear power (Hinkley Point C). Expected market values for renewables are below those for nuclear power and this gap increases over time 17

18 (4) Comparison of financial support Dynamic approach: Nuclear power (Hinkley Point C) vs. renewable energies Comparison of cumulative ( ) electricity generation and net support in the United Kingdom Cummulative (2023 to 2050) electricity generation TWh/a Nuclear (Hinkley Point C) Wind offshore Wind onshore Photovoltaics Hydro small-scale Biomass 606% more electricity 702 Nuclear 4920 RES-E (selected) Cumulative electricity generation (left) vs. cumulative net support (right) in the United Kingdom from 2023 to 2050 (Source: Own assessment (Green-X)) Cummulative (2023 to 2050) support expenditures billion / a Nuclear (Hinkley Point C) Wind offshore Wind onshore Photovoltaics Hydro small-scale Biomass 547% higher support expenditures 10.7 Nuclear 69.3 RES-E (selected) 18

19 (4) Comparison of financial support Dynamic approach: Comparison of cost-effectiveness: (specific) net support Specific net support for Nuclear (Hinkley Point C) Specific net support for selected RES-E /MWh United Kingdom Germany France Poland Czech Republic EU28 Comparison of overall cost-effectiveness: Specific net support for assessed RE technologies and nuclear power by assessed countries and at EU28 level according to the Green-X scenario of dedicated RE support (Source: Own assessment (Green-X)) 19

20 (4) Comparison of financial support Dynamic approach: Comparison of cost-effectiveness: Cost savings (%) due to renewables % - cost savings compared to nuclear power 0% -10% -20% -30% -40% -50% -60% -70% United Kingdom Germany France Poland -8.4% -39.1% Cost savings due to RE -24.8% -74.5% Czech Republic -51.6% -37.1% -80% Comparison of overall cost-effectiveness: Cost savings due to renewables compared to nuclear power by assessed country and at EU28 level according to the Green-X scenario of dedicated RE support (Source: Own assessment (Green-X)) EU28 20

21 (5) Conclusions Key findings Generating electricity from a variety of renewable sources is more economical than using nuclear power Across the EU end consumers can save up to 37% on their electricity costs in some Member States even up to 74% - when plans to build nuclear power plants are shelved in favour of renewables In order to achieve these goals it is vital that we act quickly, but with care, to create the infrastructure and regulatory framework this requires, or to adapt that which already exists

22 THANKS FOR YOUR ATTENTION! Contact: Dr. Gustav Resch, e: w: The study Renewable Energies versus Nuclear Power Comparing Financial Support can be accessed at (Summary & comprehensive final report)

23 References: Held, A. et al. (2014): Indicators on RES support in Europe. Intelligent Energy Europe Project DIACORE (Policy Dialogue on the assessment and convergence of RES policy in EU Member States), Fraunhofer ISI, Karlsruhe, Germany. Steinhilber, S., Ragwitz, M., Rathmann, M., Klessmann, C., Noothout, P. (2011): Indicators assessing the performance of renewable energy support policies in 27 Member States (Intelligent Energy Europe Project RE-Shaping (Shaping an effective and efficient European renewable energy market), Fraunhofer ISI, Karlsruhe, Germany.