Today’s market report from the Competition and Markets Authority raises concerns over the way that the Department of Energy and Climate Change (Decc) negotiated so-called “final investment decision (Fid)-enabling contracts” in its Contracts for Difference (CfD) support scheme for low carbon power.
It says, “The experience of FIDeR shows that any proposal not to use a competitive process in the future needs to be considered carefully, transparently and in full recognition of the likely costs. Without this, there is a risk that future contracts may be awarded that do not deliver value for money for customers.”
That raises important questions for two nuclear new-build plants currently in development and due to follow Hinkley Point C into construction.
Speakers at the NIA’s recent Nuclear New Build conference were keen to stress that the Moorside and Wylfa Newydd reactor designs were both familiar and would be well-tested by the time construction begins in the UK. Tom Samson said eight reactors of Moorside’s AP1000 design were already under construction and Moorside would be “number 17 in the pipeline”. Alan Raymant also said Horozon’s ABWR, due to be built at Wylfa, was a well-known design.
Both projects are expected to be ready to take final investment decisions within a year of each other (Moorside in 2018 and Wylfa now in early 2019) and deliver their projects in the mid 2020s.
Both are planning a period of “price discovery” and a negotiated CfD with Decc.
What does that mean for State Aid clearance? The European Commission has placed increasing stress on using competitive processes to award subsidies like the CfDs.
Leave aside the existing Hinkley Point C agreement. If two reactor projects come forward using well-proven technology in a similar timeframe, seeking CfDs – and, as with Hinkley Point C, credit guarantees – it is hard to see how they will pass State Aid – or value for money – tests without some element of competition, between reactor projects if not against other low-carbon technologies.