Exclusive: Will wind farms pick up the tab for new nuclear?

James Murray, BusinessGreen, 24 Aug 2010

Wind farm developers fear National Grid proposals designed to accommodate nuclear power plants will lead to a huge increase in backup costs. Wind farm operators could see their overheads increase by millions of pounds a year as a direct result of plans to upgrade and reinforce the grid to cope with a new fleet of nuclear reactors.

A number of renewable energy developers are angry at National Grid’s decision to retain the current charging regime it operates for providing backup power, despite the fact costs are expected to soar when new nuclear power plants come online towards the end of the decade.

National Grid released a consultation document in June detailing how the proposed development of six nuclear power stations would require the grid operator to increase the amount of backup power, known as “spinning reserve”, that it has available to call on in the event of a large power plant failing, from 1,320MW to 1,800MW.

The company estimated that as a result, the annual cost of providing so-called Large Loss Response will rise from £160m a year to £319m.

The consultation looked at a number of approaches to charging energy firms to cover the increased cost, but in a letter to Ofgem National Grid commercial director for transmission Alison Kay said the company had decided to retain the current regime, whereby generators are charged an equal amount per megawatt they provide to the grid.

Wind farm operators are known to be furious at the decision, which they claim will see them face an unfair doubling in charges from National Grid, despite the fact the company concluded in its consultation that generators with less than 350MW of capacity, including all operational wind farms in the UK, “pose no additional loss risk to the system”.

In contrast, nuclear developers, who argued that targeting the increased charges at larger power plants would jeopardise plans for a new fleet of reactors, are delighted at a decision that will see the increased cost of backup spread right across the energy industry.

Writing in her letter to Ofgem, Kay revealed that the decision to retain the current charging regime was driven in part by fears that changes would delay the new nuclear build programme.

“Information received through the recent consultation indicates that increasing costs on larger users could delay the commissioning of a large nuclear plant by a number of years, with any shortfall in generation capacity likely to be made up through a new CCGT [combined cycle gas turbines] plant,” she said. “This eventuality would increase the difficulty in meeting European and governmental environmental targets by delaying essential investment in lower-carbon technologies.”

Speaking to BusinessGreen.com, a spokesman for National Grid admitted some wind farm operators were frustrated by the decision. But he argued that developers working on larger offshore wind farms that will generate more than 350MW were pleased that they would not now face additional charges.

However, wind industry insiders insist support for National Grid’s proposals among offshore wind farm developers is in fact very low. They argue that even the largest proposed offshore wind farm sites are likely to use a number of different cables to connect them to the mainland, meaning any one connection is unlikely to exceed the 350MW mark that would mean they pose an additional risk to the grid.

Some wind farm operators are now urging Ofgem to challenge National Grid’s decision, arguing that the proposed charging regime will result in wind farms and other renewable energy projects effectively picking up a sizable chunk of the bill for the nuclear industry. They are insisting that Ofgem should adhere to the “polluter pays” principle and make sure nuclear operators pay for the additional backup capacity that they will require.

There are also suspicions within the industry that National Grid has been ” leaned on” by the nuclear lobby in order to ensure the increased cost of backup is shared by all generators – a charge rejected by National Grid.

See post here.

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