The current practice whereby renewable energy schemes on old-style contracts earn excess profits from gas-led high electricity prices is to be reformed by the Government according to the Sunday Telegraph. Business Secretary Kwasi Kwarteng has announced that wind and solar farms will be offered secure fixed terms contracts to reduce excess profits currently being earned by them. This has been suggested by us earlier (see this post). But this still leaves nuclear power stations earning massive excess profits. Nuclear power plant in the UK are owned by EDF.
Consumer bills could be cut by an average of around £100 a year per household if the nuclear plants were stripped of their excess profits. That is if nuclear power plants were given a price similar to what they were being paid prior to the recent gas-led hikes in electricity prices. Currently nuclear power generates around 14 per cent of UK electricity supply.
Using estimates of power prices provided by Cornwall Insight, we can see that nuclear power plant will be earning in the next few years around £130 per MWh, which is roughly £80 per MWh higher than what they were earning before 2021. This £80 per MWh represents about £.3.6 billion a year in what must surely be regarded as excess profits. Recently power prices have been sometimes over £200 per MWh making excess profits from nuclear stations even larger.
The UK Government could remedy this problem by treating nuclear power on the same basis as renewable energy schemes by giving them fixed long term price contracts.
Admittedly EDF is suffering terrible losses from its failing nuclear fleet in France (see previous post by Jerome Guillet), but UK consumers should not be made to take responsibility for the failings of nuclear power in France.
Academics. thinks tanks and energy gurus like Michael Liebreich have favoured comprehensive re-fashioning of the wholesale power markets so that fossil and non-fossil power sources are sourced in different power markets. A cap could be placed on non-fossil power prices. Whilst such a change will be a good thing, this reform could take several years to implement. In the meantime, it is important that action be taken to save consumers money in the short term. EDF and its nuclear power plant must not be exempted from this effort.
by David Toke
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